As the bank decides to shed its general insurance arm, we chart a difficult five years for HSBC’s insurance business
HSBC’s decision to sell its general insurance business finally ends its presence in the UK and puts an end to a pretty miserable five years in the UK.
Banker profile
A view in the market is that bank bosses in the UK, more interested in their lucrative banking arms, see their general insurance businesses as a smaller sideshow that pretty much runs itself. That is, until there’s a problem. And then the bank has to stump up cash from its vast resources to solve the problem.
Poor track record
The story of HSBC would give some credibility to that. From the payment protection mis-selling scandal to the decline of its motor insurance business, Insurance Times charts a timeline of how HSBC finally crashed out of the UK:
December 2007: HSBC announces it will no longer sell payment protection insurance in its branches following rising complaints. The bank had been a formidable seller on range of insurance PPI products covering personal loans, cardholder repayment, mortgage repayment and small business loan.
December 2008: HSBC decides to sell its motor insurance arm.
The bank had bought the business in 1997, when it was a stable Lloyd’s underwriter, Corinthians, dealing with a selected and trusted handful of brokers. Keen to expand, HSBC widened its distribution to larger brokers and made a play on the aggregators, which meant the business wrote £180m in gross written premium at the end of 2007.
However, the motor underwriter was hit by bodily injury and credit hire claims, leaving it nursing loss ratios way above the industry average. Insurance entrepreneur Neil Utley eyes up the wounded business for a deal, but eventually backs away.
September 2009: The true shocking extent of the motor arm’s problems are revealed as £110m is pumped into the business before it’s put into run-off.
April 2010: A rare bright spot for HSBC as it sells its successful HSBC Insurance Brokers to Marsh for £135m.
August 2010: More bad news as it emerges that HSBC has to cough up another £103.5m to inject into the motor unit while it is still in run-off. The overall loss in 2009 hits £178m. The bank says the cash injection will draw a line in the sand for the debilitated motor unit.
May 2011: HSBC reveals that it has set aside £270m to compensate customers for mis-sold PPI.
July 2011: The final chapter arrives for the motor business as it is sold to Syndicate Holding Corp for £68.5m. HSBC continues to sell motor insurance through its First Direct and M&S Money brands, using chosen third-party insurers.
Sept 2011: It emerges that HSBC plans to sell its global non-life operations for around $1bn, with private equity making the running. The UK GI arm, which continues to sell through third-party providers, will be sold with the global operations. The remaining UK general insurance business is a fraction of the once great empire that sold payment protection, motor insurance and white label products. In total, HSBC set aside nearly £500m to cover its failures in PPI and motor insurance policies.
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