Creeping claims ratio pushed COR to 103%

Robin Spencer Aviva

Aviva is seeking to improve the profitability of its commercial property book – the only blemish on an otherwise strong first half for the insurer’s UK GI business.

While other commercial lines improved compared with the first half of 2011, the commercial property book’s combined ratio deteriorated to a loss-making 103% from a profitable 98%.

Aviva UK and Ireland general insurance chief executive Robin Spencer told Insurance Times: “The class of business we would like to have seen more progress on in terms of profitability was the commercial property account, and that is one we continue to manage very carefully across the board in terms of risk selection and pricing.”

He added: “We are very focused on turning around any businesses which are not generating the profitability that we desire.”

While the June flooding accounted for some of the deterioration, some was down to inadequacy of pricing as the current economic climate makes it difficult to raise insurance prices for cash-strapped businesses.

Spencer said: “Brokers are coming under pressure to make sure rates are flat because businessmen are really struggling. What we are finding is that it is very difficult to get the rate increases that we require.”

Aviva achieved commercial property rate rises of 2% in the first half, compared with 6% in commercial motor and 3% in liability.  

Spencer said commercial property needed more rate increases, but said these would be made on an account-by-account basis.

One area where Aviva did not achieve rate increases was personal motor. This line of business in general  has been subject to large rate increases over the past two years as insurers sought to combat bodily injury claims inflation.

Spencer said that thanks to the rate increases in previous years, Aviva’s UK personal motor book is now profitable, and rates are flat as a result.

He said the company is still happy to grow its personal motor book despite the lack of further rate increases. However, he added that the company was being cautious.

“We have got to keep our eye on it,” he said. “Inflation is probably coming through at around 5% and we know how quickly that can catch up with us. We are comfortable with the growth and what we’re seeing at the moment.”

Aviva’s personal motor combined ratio deteriorated by two percentage points to 96% in the first half of 2012 (H1 2011: 94%).