Barry Smith sees need to tackle market ‘excesses’

Ageas UK’s chief executive says a ban on referral fees is unlikely, although a cap may be on its way.

Speaking to Insurance Times after the insurer released its first-quarter results, Barry Smith said: “There are significant excesses in the market that need to be brought down to a normal level. The likelihood of a ban on referral fees seems remote, but evidence highlights that it has gone way beyond what is reasonable.”

Smith’s comments come as Ageas UK returned to profit in the first quarter of 2011. The firm’s profit before tax came in at £3.8m, compared with a £3.2m loss in the corresponding period of 2010 and £25m for the whole year.

In addition to an improving non-life combined ratio, which dropped from 110.2% to 106%, the result was helped by a slight rise in profit from the retail broking operation to £4.7m in the first quarter of 2011, from £4.4m the same period last year.

A curb on referral fees could affect Ageas’ broking division. Kwik-Fit, in particular, derives part of its income from referral fees.

Smith played down the impact. “It may be that there are changes in relation to referral income, but there are changes in many areas,” he said. “The issue for any business is to understand the environment it is competing in and be flexible enough to respond.”

In addition to improving profitability, Ageas UK saw strong revenue growth. Total non-life gross premiums written, including business from its alliance with Tesco Bank, rose 75% to £402.2m.

But Smith said there was still work to do. The firm’s combined ratio is still in loss-making territory, largely owing to claims from the 2010 freeze.

“Motor has improved significantly, but there is still more action to be taken on household,” he said.