www.broking.co.uk AOP Digital Business Publisher of the Year 2010 September 2010 Serving the broker community for over 30 years Motor insurers’ excuses forpoorresultsrejected a $365m (£236m) charge in costs as a key reason for the By Louise Meeson FY10, mainly related to claims worsening results, its claims reserve strengthening, due to a experience over the past 18 nsurer claims that increases “significantdeteriorationinUK months had not included any Iin bodily injury costs are to claim experience”, in particular unusual trends in bodily injury blame for poor performance in bodily injury claims (www.bro- or damage claims. the private motor market may king.co.uk/1652038). It said that claims frequency be misleading, according to in- The report said the Work- had continued on a long-term dustry experts. ing Group of the Institute of downward trend so although David Vine, business develop- Actuaries warned other insur- bodily injury was relatively flat, ment manager at Allianz Legal ers “may still face pain similar it now constituted a larger pro- Protection, said it was “dis- to Equity Red Star”. portion of the total. appointing” to see that some Royal Bank of Scotland On the market in general, motor insurers were “blam- Insurance (RBSI) chief exec- Mr Vine said: “Some insurers ing their poor half-year results utive, Paul Geddes, said its need to take responsibility and largely on the increase in bodily results were heavily impacted account for their own inad- injury claims” and the “pariah by the need to boost its reserves equate pricing and reserving of the industry” claims man- for bodily injury claims after mechanisms, and the inability agement companies (CMCs), reporting a £253m operating of some players in the motor adding that the problem lay in loss for H1 2010 (H1 2009: market to move away from the the market’s desire to write for £217m profit). vanity of growth, rather than growth rather than profit. A spokeswoman for RBSI the sanity of profit. His comments follow explained that the company “This is not to defend the the publication of a report had recognised the need to claims management industry. by financial services firm JP change its business to meet However, it is disappoint- Morgan, which has slammed the changing industry and was ing that they appear to be Insurance Australia Group’s progressing well with its plans. a convenient excuse for poor (IAG) UK business, Equity However, in its 2010 financial performance. Until Red Star, for under-reserving H1 results (www.broking. motor insurers price their busi- (see p3). As reported on Insur- co.uk/1729561), Admiral ness to account for all relevant ance Age’s website Broking. said while a number of insur- factors, including damage co.uk, IAG announced earlier ers had cited an unexpected and claims inflation, they will this year that it anticipated surge in bodily injury claims remain unprofitable.” Tony Cornell discusses activity in Expo introduces clinics theretailbrokingsectorandasksif consolidation will pick up again he Broker Expo has ex- latory risks, hone their web Tpanded its workshop pro- offering and how to get the Agenda p24 gramme for 2010. Building on best out of social media. the practical aspect of the suc- Brokers who secure a spot cessful workshop programme, will be given an exclusive 20 Thismonth’sdebateheldin new focused broker clinics have minute slot to discuss their par- Newcastle discusses the level of been developed to give brokers ticular business needs. talentintheindustry the opportunity to delve deep- Steve White, head of compli- er into the issues that matter ance and training at the British Power hour p28 most to their businesses. Insurance Brokers’ Association, Liability The clinics, which are avail- will be giving straightforward able by appointment only, and confidential advice on all This month’s Reportage Liz McMahon reports on how will allow brokers one-to-one regulatory matters whether asks whether Quinn’s insurers are increasingly getting contact with industry experts they are wider general issues theirriskpricingonthenose who will offer confidential and or whether it is a business spe- exit from the solicitors’ PI market will have long- Risk pricing p41 impartial advice on how to cific▲ query. start a business, mitigate regu- Story continues on p6 term effects on the sector How about Guaranteed ethical practices Ai enforces a ‘claims footprint’ across all its services, Ai resolves claims and settles payments swiftly. effectively stamping down on unethical practices By actively managing the claims process, our aim throughout the industry. We target areas where is to get your clients back on the road as quickly as costs can escalate unnecessarily and also focus on possible. No fuss and minimal cost. avoiding common causes of extended hire periods. Any questions? Ethical claims solutions for brokers 01253 441413 [email protected] News Insurance Age Editor Martin Friel Equity Red Star slammed for 020 7316 9732 [email protected] News editor Louise Meeson being too slow to adjust reserves 020 7316 9867 [email protected] Senior reporter Liz McMahon an earlier version issued to the market, to profitability despite proposed rate 020 7316 9115 By Martin Friel suggest action could have and should increases of 10-20%. [email protected] have been taken earlier. “The key in restoring adequate prof- Group editor-in-chief Anthony Gould quity Red Star should have taken “In 2009, we believe there were itability in Equity Red Star will be 020 7316 9374 [email protected] Equicker and more decisive action enough warning signs that should have whether large rate rises can be pushed Production editor Ruth Ganthony in reserving for increasing bodily injury prompted earlier action on reserves, through. While we believe rate rises 020 7316 9717 claims according to a report produced and ultimately on premium rates and are coming through in the UK, his- [email protected] by JP Morgan. claims management options by IAG/ tory suggests that this market has been Online sub editor, insurance Tracey Jones The damning review of the UK arm Equity Red Star,” the report stated. excessively competitive and as such it 020 7316 9795 [email protected] of Insurance Australia Group (IAG), It continued: “Equity Red Star has paid to be cautious.” Sales manager James Murray which is under investigation by the appears to have been slower than some However, the authors make clear they 020 7316 9296 Financial Services Authority, said there peers in recognising the trends.” believe IAG has taken appropriate action [email protected] were enough warning signs for the The report suggested that the insur- with the company taking a conservative Sales executive Chris Finnegan 020 7316 9632 insurer to act earlier and to reserve ance margin – the contribution to stance with a reserves to earned premi- [email protected] adequately for deteriorating claims, a profit from underwriting and invest- ums ratio of 87.6%, a full 12% higher Commercial director Phil Davison trend that was noted and acted upon ment income – which had been than the authors thought adequate. 020 7316 9215 by others in the market. estimated at approximately 10% was, Equity Red Star referred all queries [email protected] IAG has recently pumped $365m in light of the reserving shortfall, more relating to the report to IAG Group Head of key accounts Sajeeda Merali 020 7316 9765 (£237m) into the company to shore likely to be closer to 1%. In addition, Corporate Affairs in Australia. No one [email protected] up its position but the authors of the the report predicted it will take Equity was available for comment at the time Group production manager Lorna Graham revised JP Morgan report, replacing Red Star some 18 months to return of going to press. 020 7316 9707 Digital production manager Rebecca Yegliss 020 7316 9228 [email protected] Potential Aviva sale to shape outlook for composites Art director Nicky Brown Head of events Simone Broadhurst he future of the composite model Aviva’s returns on equity had been 020 7316 9055 remains uncertain as the industry behind those of certain other UK [email protected] T Audience development manager Sarah Smith waits to see if another insurance giant will insurers in the past three years and that 020 7968 4648 swoop on Aviva’s general insurance arm. under Solvency I there was no capital [email protected] RSA said it remained “open to dis- advantage for writing general and life Principal, Insurance 360 Peter Joy cussions” after Aviva rejected its £5bn insurance together and under Solvency 020 7316 9814 offer for its general insurance busi- II it was too early to determine the net [email protected] Research assistant, Insurance 360 Chris Wade nesses in the UK, Ireland and Canada, benefits which regulators may allow for 020 7316 9106 excluding RAC and health. Axa has composite insurers. [email protected] also reportedly expressed an interest in In response, Aviva issued a statement Publisher Alex Broad Aviva’s UK general insurance business. arguing that the general insurance mar- 020 7316 9382 The RSA bid was made on the 28 ket was presently at a cyclical low and [email protected] Director of content, PSD Lem Bingley July via a letter from chairman John therefore the offer did not reflect the Group publishing director Derek Peck Napier. Aviva took 10 days to respond the rejection had occurred “without insurer’s full earnings potential. Managing director Graham Harman and Lord Sharman, chairman of Aviva, any discussion taking place”. “The combination of the life and For subscription enquiries, contact: Incisive Media said the board’s decision was unani- It added that its business was the non-life businesses allows Aviva to (c/o CDS Global),Tower House, Sovereign Park, Market mous and focused on “maximising “optimal model” for writing general operate with substantially less capital Harborough, Leicestershire, LE16 9EF Tel: 01858 438 421 Email: [email protected] value for Aviva shareholders”.