All agree falls in motor rates ‘make no sense’ and mentoring is the way towards board-level diversity
What with motor price crashes, storms, commercial rate hikes and deafness claims, 2013 has been an eventful year in the UK general insurance industry.
So insurance chief executives had much to discuss when they gathered with representatives from sponsor Ordnance Survey for the final Insurer 50 event of 2013. Not only did they get stuck into the year’s thorniest issues, they also tackled big subjects such as the availability of high-quality underwriting data, professionalism and boardroom diversity.
A broad range of insurer types was represented around the table, but there was unanimous agreement on one point: the recent falls in personal lines motor rates make no sense.
The AA reported on 23 October that motor rates fell 12.4% over the 12 months to 30 September, which has mainly been attributed to the legal reforms enacted in April to cut spurious bodily injury claims.
But there is little hard evidence that bodily injury claims are on a sustained downward trend. The volume of such claims has fallen since April, but this is compared with the flurry of claims that were put through in March ahead of the reforms. There is also a feeling that enterprising companies will find loopholes in the Legal Aid, Sentencing and Punishment of Offenders Act (2012) to allow them to continue earning referral fees by processing bodily injury claims while sticking to the letter of the law.
Commercial motor has been a different story in 2013. Many firms were able to put through big rate rises to stave off rising bodily injury claims trends, particularly in fleet motor.
Commercial lines overall have had a better year. This area of the business has produced poor results for insurers over the past few years, but this now appears to have steeled insurers to get tough on underwriting.
Usually when rates are too low, the hard core of insurers will push for higher prices, but rogue elements will either cut rates or raise them at a slower pace to try to grab market share.
But this does not appear to have happened in 2013 in commercial lines, as pretty much the whole market moved in the same direction at the same time.
One continuing worry in commercial lines is the rise of workplace deafness claims on employers’ liability policies. Several insurers have had to boost reserves to compensate.
A big theme for 2013 has been the increasing amount of data available to insurers.
The problem for insurers is not so much a lack of data but the lack of ability to use it. Some have old computer systems that are unable to take in all the information. Once they have the data, there is then the challenge of how to incorporate it into underwriting decisions. While data is becoming more abundant and detailed, it may be a while before the whole industry is able to use it effectively.
Professional and ethical
Ensuring professionalism in the insurance industry has been a hot topic in 2013, with a number of high-profile fines and the FCA’s stated determination to rebuild customer trust in the industry.
Premium rates are a tiny fraction of sums insured, meaning that customers get a lot of bang for their buck. But mis-selling scandals show that some firms have put profits before their customers’ needs and it would be hard to describe the industry as fault-free. Some contend that ethics is the key to treating customers fairly and ensuring that insurers do not try to take advantage of them.
There was broad agreement that insurance industry boards are still dominated by white men. It was felt that setting gender/ethnicity quotas was not necessarily the answer and that more tailored mentoring and encouragement was the way to make boards more representative of society.
The discourse showed that the industry is making positive steps in areas such as commercial lines, but has lots on its plate for 2014.