As we move into a new cycle of car registrations, Insurance Times talks to Bridget McIntyre, Norwich Union's Director of Marketing & Underwriting about the new world of motor insurance.
Motor rates appear to be reaching a peak, according to the AA. Will there now be a price war?
Our key goal is to maintain profitability. The underlying reasons for motor premium increases are well known:
Last year premiums rose by 16-18 % - the biggest increase since 1996. A further rise of 10-12% is anticipated this year. However, these factors affect all insurers, making a price war unlikely.
What is more probable is a change in approach by insurers to customer needs. Customers are increasingly aware of what they pay for. They want a more tailored approach to pricing, where insurers assess personal circumstances rather than making sweeping judgements about women drivers or under 25s. Norwich Union's new rating structure reflects this, providing more accurate risk assessment and consistent rating across all distribution channels. From our seven million records we have developed a more scientific approach to underwriting. We have increased the number and combination of rating factors and the number of available cover options, giving customers greater control over their insurance costs and ultimately greater choice.
What will happen to motorbike rates now that Independent Insurance is no longer in the market?
Motorbike rates are likely to go up by more than claims inflation, but the reasons are those associated with premium increases in the motor market in general rather than a reaction to the collapse of Independent. In particular, the payments associated with personal injury claims are generally larger for motorbike claims than for cars.
Customers are looking for stability and reliability from their insurance companies. Brand, heritage and longevity of a company is playing a growing role in a customer's choice of insurer.
What impact has direct selling through the web had on the market?
It is customers who drive our distribution channels and it is important we make maximum use of the new technology available to us and them. The web is used predominantly for research - according to Datamonitor 1% of customers currently buy from the internet and this is expected to rise to only 3% by 2003. The key developers of web-enabled motor insurance are direct writers and their churn of customers is largely from existing direct customers. However, the internet is a medium with huge potential and we are continuing to develop our web-enabled solutions to improve our service to brokers and customers.
Are brokers doing enough to promote risk management measures to their brokers? What are the most important measures to include?
Promoting risk management is a vital part of a broker's role and plays an important part in keeping premiums down across all insurance products. Norwich Union Risk Services provides the largest risk management support network in the insurance industry.
Packages such as our Roadsense programme provide brokers with tools to enable fleet managers to take a more comprehensive approach to reducing risk, controlling costs and improving fleet performance. Within the next 12 months it is forecast that 50% of company vehicles will be involved in road accidents and the true cost of an accident is many times more than the cost of repairing the vehicle. Roadsense will help fleet managers reduce this statistic.
However, all drivers, be they company drivers or private individuals, can benefit from risk management. From advanced driving courses to ensuring that children are adequately strapped in and luggage is well packed, we all have a responsibility to encourage risk management and, in the motor market, safer driving at all levels.
Has the growth of foreign imports had an effect on premiums and exclusions?
There are two types of foreign import making up a small part of the market; parallel imports and grey imports. Parallel imports are built to European specifications but bought more cheaply overseas. For insurance purposes these are treated the same as any UK car.
Grey imports, however, are cars which have not been specifically built for the European market. They may be up to 30% cheaper to purchase but are treated as non-standard when calculating insurance premiums and usually attract compulsory security and a higher excess.
Spare parts can cost more and repair work can be delayed if parts are not readily available. Although initially a cheaper purchase, the owners of these cars potentially face higher maintenance costs, increased premiums and reduced resale value.
As insurers of one in four vehicles on the road and experts in the motor market , Norwich Union is developing propositions which will meet customer needs, provide more choice and effect a more scientific assessment of risk with the tools to manage it. Exploiting technology through internet solutions both for policyholders and brokers will also create a more efficient business in the future.