Smith pushes for a focus on products and process

Price hikes will not be enough to tackle the continuing trend of winter freeze losses in UK household business, Ageas UK chief executive Barry Smith has claimed.

“Part of it is ratings, but there is more that needs to be done by the Ageas Insurance Limited team [the general insurance unit of Ageas UK] in terms of product and process,” Smith said.

His comments come as winter freeze claims and one-off costs resulted in Ageas UK posting a loss before tax of £24.8m for 2010, compared with a profit of £17.3m in 2009. The combined ratio deteriorated to 109.5% in 2010 from 108.1% in 2009.

Without the winter freeze claims and one-off costs, the company would have made a profit before tax of £51.5m and posted a combined ratio of 103.8%.

The main cause of household claims inflation during the cold snaps has been escape of water, Smith said.

He added: “I think there needs to be a more focused view on what can be done to manage that risk effectively.”

In addition to rate changes, Smith advocates changing policy terms and encouraging homeowners to manage risk to help deal with the freeze claims burden. “If you can’t improve the product in the sense of what is covered, and you can’t improve the process by the ability to detect and take action when there is water leakage, rates will go up even more,” he said.

Ageas increased household rates by 10% in March and Smith said: “We will continue to adjust the rates as we think we need to in order to reflect those risks.”

Along with freeze claims, Ageas was hit by one-off set up costs of £8.7m for its underwriting partnership with Tesco Bank, £4.3m acquisition costs from the takeover of broker Kwik-Fit Insurance Services and a £5.6m impairment charge in its life protection business caused by a commercial partner going into liquidation.

Smith believes the absence of these costs in 2011, coupled with an improving private motor book (the combined ratio dropped by 6.3 percentage points to 105.4%) and the investments it has made in new business will stand the company in good stead for the current financial year.

“We are quietly optimistic about 2011,” he said.