As our investigation this week reveals, many major insurers’ commercial books are running at a loss. So how can they claw back a profit?
If we didn’t know this already, we certainly do now: insurers’ commercial books are in dire condition. In the last couple of years, insurers relied on an explosion in motor rates to boost overall income, but now rates are levelling off. It means insurers will have to repair their commercial books. But how?
One option is to ramp up rates, but with competition so fierce, that would be suicide on market share. Gradual rate rises in commercial are more likely, combined with a careful retraction from unprofitable lines.
Then there’s always the expense base. RSA and Aviva have slashed jobs and closed offices to reduce costs, but with the expense ratios approaching single digits, room for manoeuvre is tight.
However, there is one final frontier for them to attack: the consolidators and commissions. Instead of a full-blown assault, insurers seem to be nibbling away. Giles chief executive Brendan McManus, a canny operator, has vowed to provide evidence that his firm produces profitable business for insurer partners. Credit to him for seizing the initiative.
But what of Towergate chief executive Mark Hodges? How will he handle potential pressure from insurers? He was the golden boy at Aviva and, indeed, proved to be a skilled negotiator when dealing with the consolidators. We may now find out what he’s like when the shoe is on the other foot.
● Barbon’s been bashed up of late, taking the spotlight for all the wrong reasons. In fairness, the property broker is doing everything it can to make amends for bungling the sales of contents insurance.
Most importantly, it looks like there was no intention to deceive the customer: it was a procedural mistake. That’s a lot more than can be said of some of the banks that mis-sold payment protection insurance.