Daily briefing: Wednesday – Swinton fat cats’ last stand

Just when you thought 2011 could throw up no more surprises, the year delivers a final twist with the shock news that the entire Swinton executive board team had been dismissed.

Such a wholesale clear out is extremely rare across the corporate world, let alone in insurance broking. 

There weren’t many signs of the impending exits at last week’s Swinton bash, although the now ex-chief executive Peter Halpin didn’t seem quite his usual relaxed self.

Covea, Swinton’s parent company, told Insurance Times yesterday that its concerns relate to the board’s performance-incentive scheme, which was due to pay out in the first quarter of next year.

But a rifle through the personal lines giant’s books shows that next year’s planned pay day wouldn’t have been the Swinton top team’s first big one.

In 2009, Swinton’s accounts show that its directors awarded themselves a colossal £16.4m, with the highest paid director netting £4.9m. To put these figures into context, the Swinton directors received more than those of the ‘Big Three’ global brokers’ UK head honchos combined, according to figures in the Insurance Times Top 50 brokers table for the year in question. The remuneration sums went back down in the following year.

But, as Britain enters a harsh new era of at-best low growth, the spotlight is on lavish remuneration throughout society. Covea’s tough action sends out a powerful message that in the insurance world, the directors’ gravy train has ground to a halt.

The OFT is watching you

2011 has been a year of unprecedented focus on private motor insurance: and now 2012 looks like it will be no different following today’s announcement by the Office of Fair Trading that it will carry out a wide-ranging probe into the market.

For the last three months, the consumer watchdog has been taking a close look at motor insurance to see whether the big hikes that have taken place over the last two years stem from lack of competition.

Judging by the report published by the OFT this morning, the industry has been able to demonstrate that it offers a competitive market place for consumers, which has intensified over the past few years thanks to the price comparison sites. This makes a full-blown referral to the Competition Commission, the ultimate arbiter of whether markets work fairly and freely, less likely.

But the OFT has found out enough to warrant further investigation into the industry’s various murky practices surrounding credit hire and third-party vehicle repairs. The spotlight has already begun to turn on insurers’ repair arrangements following the recent damning RSA court verdict.

And last month, an Insurance Times investigation lifted the lid on the deals between paint companies and insurance companies that some claim are pushing up the cost of products.

The OFT says that there are incentives for rival private motor insurers, brokers and credit hire providers to carry out practices which allow them to generate revenues through referral fees, with the knock on impact of inflating costs for third party insurers. As revealed by Insurance Times last week, the OFT also has concerns about the sale of motor legal protection cover to car owners.

Ex-justice secretary Jack Straw made a splash earlier this year with his comments about referral fees being the insurance industry’s “dirty little secret”. As the OFT investigation ramps up over the next few months, expect more to emerge.