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George Stobbart

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Standard & Poor’s Ratings Services lowered its long-term counterparty credit and insurer financial strength ratings on French protection institution AG2R Prevoyance and its subsidiary PRIMA to ‘BBB+’ from ‘A-‘. The outlook is stable.

The downgrade reflects the increased claims on health and disability business and high costs related to the change in legal retirement age in France are hampering AG2R’s efforts to improve its underwriting performance. Higher claims have prevented AG2R from meeting its underwriting earnings targets and will likely remain constraints on operating performance over the next two years. However, AG2R is expected to benefit from what S&P views as a strong and well-entrenched competitive position in its niches, allowing it to gradually improve its operating performance over the next two years.

AG2R has sound positioning nationwide and in various economic sectors as a leading group protection and health insurer. Together, AG2R and La Mondiale form one of the leading life, accident, and health insurance group in France. Consequently, the base-case scenario factors in the forecast that AG2R will post a non-life combined (loss and expense) ratio in the 112%-115% range in 2012, improving to less than 112% in 2013. AG2R’s non-life business comprises health, accident, accidental death, disability, and worker’s compensation. The group’s term-life business is also expected to boast a combined ratio of less than 70% over the same period. The expense ratio should continue to average 20%. These figures should translate into operating earnings of €25 million to €40 million yearly, all other factors remaining equal.

Increasing risks related to the investment portfolio are also weighing on AG2R’s financial profile. The rating agency still considers the average credit quality of AG2R’s investment portfolio to be strong, but at the lower end of the range according to agency’s criteria. Credit risk increased during 2011 and 2012, dampening the quality of AG2R investments. The proportion of equities in the portfolio remains below the French market average, but still adds to earnings volatility.

A more subdued earnings outlook also constrains the company’s financial flexibility, which in S&P’s view is the main cause of AG2R’s funding future needs.

Risk-adjusted capital adequacy is viewed as good. Despite a significant proportion of soft forms of capital, like the present value of future profits, it is consider that AG2R’s level of capital compares well with that of peers in the French market. A conservative quota-share reinsurance program relieves AG2R from a substantial portion of its capital requirements. S&P also views reserving as prudent.

The stable outlook reflects the anticipation that AG2R’s strong competitive position should help gradually improve its underwriting performance. It also factors in the belief that good capital adequacy will likely support the group’s overall credit profile over the next one to two years.

The ratings could be lowered if, over that period, AG2R’s operating performance did not meet S&P’s underlying base-case assumptions. The rating could also be lowered if capital adequacy weakened as a result of deteriorating investments, exceptional losses, or unfunded growth, or if AG2R’s business profile were to weaken.

Standard & Poor’s could raise the ratings if the group’s operating performance materially and sustainably exceeded the base-case forecasts, with equally prudent reserving, and if capital adequacy improved to levels more supportive of the ratings.

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According to the latest Adviser Barometer research from Aviva, in the final quarter before the Retail Distribution Review (RDR) is implemented in January 2013, over a third of advisers (34%) say they are contemplating changing their main platform in the next 12 months.

Cost and choice of funds

Of those advisers who say they are definitely changing platform, cost and investment scope are the most cited reasons for making the switch. In fact, choice of funds under management is the second most influential factor for selecting a platform, mentioned by about half of respondents. However, although cost may be the main reason that some advisers are switching platforms, it does not come high on the list of reasons for initially selecting a platform, with just 7% referring to cost in their selection process.

The top factors influencing the selection of a platform are: functionality of online services (70%), followed by choice of funds under management (49%), research capabilities (42%), compliance and risk management support (39%) and integration with back office systems (36%).

Decisions vary by firm size

The Barometer found that larger firms are more likely than smaller firms to consider switching their main platform in the next 12 months. 11% of respondents from firms with more than 25 advisers will definitely change their platform and another 26% are considering it compared to just 3% of sole traders who say they are definitely switching and another 28% considering it.

There is also difference in the reasons behind platform selection. Sole traders place greater emphasis on research capabilities, compliance and risk management support and the brand of the platform. Respondents from large firms point to functionality of online services and integration with back office systems.

Andy Beswick, intermediary director at Aviva, says

“A lot of advisers have already looked at, and refined, their business models and client propositions in light of RDR, so it isn’t surprising that a large number of them are considering new platforms based on a new set of requirements and expectations from their clients.

“Advisers know what they need from platforms and have their own individual priorities. What’s important is that platform providers understand that these needs and priorities are not universal. Advisers from different sized firms have different expectations, which must be met if they are to stay with a platform.

“It’s unlikely a single platform will meet the needs for all clients or all advisers, providers will therefore need to be clear about what they stand for and back this up with appropriate propositions.”

Aviva offers a range of RDR support for advisers. For more information and to see video clips from the RDR Barometer roundtable event, please visit www.aviva.co.uk/adviser/rdr

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Scottish Power and nPower customers who signed up to fixed price tariffs last year could see their energy bills rocket in the next week by up to a staggering £210 a year.

Fixed price deals are a good way of protecting yourself from price rises however if you fail to act when your deal comes to an end, you could quickly see your bills increase dramatically as many of the suppliers automatically transfer you to their more expensive standard tariffs.

The Government have recently announced plans to ensure suppliers transfer customers to the cheapest tariffs however these plans are still at consultation stage and therefore could take until 2014 to be implemented.

Between 30 November and 4 December, the following tariffs will come to an end and the implications of not shopping around could add £131 to £210 to consumer bills:

Supplier Tariff End Date Average increase**
Scottish Power Capped Price Energy December 2012 30th November 2012 £147.09
Capped Price Energy December 2012 (Paperless Billing) £162.84
Online Energy Saver 15 (Paperless Billing) £210.38
Online Fixed Price Energy December 2012(Paperless Billing) £154.90
Online Fixed Saver December 2012(Paperless Billing) £132.55
nPower Go Fix 7 4th December 2012 £131.21

Consumers on one of the above ending deals, could save by using a comparison site such as Confused.com, who compare the whole of the market and are completely free to use.

Kate Rose, head of energy at Confused.com commented “We regularly recommend that consumers look at fixed and capped tariffs as a way of protecting themselves against price rises, however these figures clearly highlight the need for consumers to make a note of when their fixed price deals come to an end or they could soon see the savings they may have made quickly eroded by budget busting increases.”

“Consumers need to remember to regularly shop around and use a comparison site to continue to get the best deals.”

“Many consumers know not to accept their insurance renewal prices and in the same way as you would shop around annually for your car insurance, we recommend consumers take a similar approach with their energy bills.”

“Look for tariffs that offer discounts for dual fuel, online account management and payment by Direct Debit but also make sure you look at whether there are any exit fees, so should you wish to switch again you know whether you could incur a charge.”

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Xchanging, the business process, procurement and technology services provider and integrator, has won the 2012 Insurance Day London Market Awards Technological Initiative of the Year in recognition of its implementation of ECF2.  The award acknowledges initiatives that ‘redefine the industry’s competitive landscape and raises the bar for customers’ or partners’ expectations. The award may be for a system developed in-house or purchased, a business process outsourcing solution or a combination of these elements.’

Geoff Kennard, Electronic Services Director at Xchanging said, “Xchanging has worked tirelessly over the last year to update the ECF system and implement a newer, more efficient version across the London market. ECF2 has resulted in better quality, consistency, and efficiency of service, placing Xchanging at the forefront of the London market’s modernization strategy. We are very pleased that our efforts have been recognized.”

ECF2 was designed in conjunction with 25 leading market claims experts and has helped customers deliver more effective claims management; improving productivity and thus further reducing processing times. The London Market Association notes that as a result of the ECF improvements, end-to-end transaction times saw an average improvement of 15% during 2011.

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In another first for the insurance world, specialist lines underwriting agency, CFC, has introduced a fully combined modular policy designed exclusively for online retailers.

Underwriting Director, Andrew Holmes, comments: “Online shopping has become part and parcel of everyday life over recent years. Back in August, the Office for National Statistics estimated that the average weekly spend online in the UK was £466.1 million with online shopping representing 8.1% of all retail spending. With Christmas on the horizon, online retailing giant Amazon has predicted that Monday 3rd December will be the UK’s busiest day of the year for internet sales.”

He continues: “While consumers have embraced the concept, insurance policies have struggled to get to grips with the distinct needs of online retailers. Some include product liability, others provide stock cover, a fair few will cover cyber exposures but none combine all these elements into a simple integrated package – until now. Our new Esurance WEB product is the world’s first fully combined modular policy designed exclusively for online retailers. Unlike any other policy available on the market right now, it covers their cyber exposures as well as the more traditional general liabilities such as product, public and employer’s liability. We’ve made it as easy for brokers to buy comprehensive cover for their online retail clients as the retailers themselves make it for their customers to buy their products online.”

Esurance WEB includes all the cyber exposures such as network security, privacy breach notification and cyber liability. It includes cover for media and advertising exposures with a fully comprehensive multi-media liability insuring clause. Uniquely, it also covers the traditional exposures of product liability, public liability, employers’ liability and property including stock. Cover is provided on a full worldwide basis.

Designed for all web retailers ranging from individual sellers through to global brands, package prices start from as little as £500 and, as with all CFC policies, Esurance WEB is simple to arrange and supported by fast service from CFC’s specialist underwriting teams.

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Insurance Australia Group Limited (IAG) Chairman Mr Brian Schwartz today announced that Ms Alison Deans had been appointed to the IAG Board as a non-executive director.

Ms Deans has specialised knowledge of digital environments having established eBay in Australia, as well as having taken a portfolio of businesses including Ninemsn and Ticketek, from significant loss to profitability as Chief Executive Officer of eCorp. She is currently Chief Executive Officer of Netus, a private company that invests in and supports the growth of digital businesses.

She has also held non-executive director positions with Starlight Children’s Foundation and The Griffin Theatre Company, and is a director of Social Ventures Australia.

Prior to her career in digital businesses, Ms Deans was a senior consultant with McKinsey and Company, where she specialised in advising clients on strategy and developing organisational capability for growth.

Mr Schwartz said Ms Deans brings to IAG’s Board an enormous wealth of experience in understanding the dynamics and potential of the digital economy, and building businesses to capture that potential.

“Alison has impressive experience in leading significant digital businesses. This combined with her broader strategy and general business experience, gained through senior roles with organisations including Hoyts Corporation and McKinsey and Company, will make Alison a valuable addition to the Board,” he said.

Mr Schwartz said IAG continued to review the structure of its Board to ensure it complements the evolving geographical scope of the Group’s operations and any further announcement will be made at the appropriate time.

Ms Deans will commence in the role from 1 February 2013.

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Aviva plc has announced that Phil Pavitt is to join the company as IT transformation director. Joining on 7 January 2013, he will report into Aviva’s chief operations officer Cathryn Riley.

In this newly created role, Pavitt will direct the significant IT change programme across the group. He will be responsible for rationalising and simplifying Aviva’s IT, adopting a modern digital architecture, improving service to customers and reducing IT revenue and capital expense costs.

Phil Pavitt joins Aviva from his current position as general director of change at HMRC. Prior to this he held CIO positions in organisations such as Centrica, Virgin Media and BT. More recently, Phil Pavitt held a number of transformation positions across Government, latterly leading the successful ‘One HMRC’ change programme.

Cathryn Riley said: “IT is central to our business and, like the transformation we are going through across Aviva, requires a step change (in what and how we deliver) in order to meet the needs of our customers. I am delighted to confirm the appointment of Phil Pavitt in this pivotal role as we simplify and modernise our IT estate.”

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With fewer than five weeks to go until major changes to the way people pay for and access financial advice, the Association of British Insurers (ABI) has stressed that insurers are well prepared to implement the reforms that will increase transparency for consumers buying investment products, such as pensions.

The insurance industry has always supported the changes, known as the Retail Distribution Review (RDR), which will ban financial advisers from receiving commission from providers, like insurance companies, require them to give customers an upfront quote for their service and also set higher adviser qualification standards. At an ABI conference on Tuesday (27 November), Maggie Craig, Director of Financial Conduct Regulation at the ABI, will highlight the need to make the RDR changes a success to help improve consumer confidence.

Maggie Craig will say: “The changes to financial advice are a major step in the right direction to give people more clarity and transparency around where their money is going and increase confidence that they are getting good advice from professional advisers. Insurers have done a lot of work to prepare for the changes and the industry is committed to making the reforms a success.

“Financial advice plays a crucial role in helping people make good financial decisions, so we remain concerned that an unintended consequence of the reforms is that the existing consumer advice gap may widen. The regulator must keep this front of mind and be prepared to work with the industry to improve consumer access to appropriate financial advice.”

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The ABI has called for the Government to commit to a joint solution to ensure long term affordable flood insurance for high-risk households, describing the current state of talks aimed at reaching an agreement as being at an impasse.

This follows the Government’s refusal to consider providing a temporary overdraft facility to a proposed not-for-profit special insurance fund for 200,000 high-risk households which will otherwise struggle to get affordable household insurance when the current arrangements come to an end next year. The temporary overdraft facility would be used to pay claims if there were 2007-style floods in the early years of the scheme before it had built up its reserves.

Nick Starling, Director of General Insurance at the ABI says, “The Government has indicated it will not provide any temporary overdraft facility for the insurance industry’s not for profit scheme, which makes it very difficult for it to go ahead. As a result, negotiations have hit an impasse. Insurers know their customers are increasingly worried about flood cover and we will therefore continue talks with Government to try and find a way forward.

“The severe floods experienced by many areas of the UK this year are a reminder of the rising flood risk facing the UK. It is therefore vital that insurers and Government tackle this issue together – this is not just a problem for insurers. No country in the world has a free market for flood insurance with high levels of affordable cover without some form of Government involvement.”

Contrary to some media reports, the industry is not asking the Government for support funding of any kind.

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    Chinese insurer PICC has attracted strong interest from investors for its $3.6 billion initial public offering in Hong Kong next month a day after it began taking orders, cent of the IPO — one of the world’s biggest share sales this year — has been fully sold after it was launched to institutional investors Thursday, Dow Jones Newswires reported quoting unnamed sources. 

    The Beijing-based People’s Insurance Company, the nation’s fourth largest insurance company, will be selling the remaining 5 per cent of its 6.898 billion new shares to retail investors from early next week.

    State-owned PICC had secured 16 so-called cornerstone investors ahead of its order-taking Thursday — including US insurer AIG — which have promised to invest a combined total of $1.72 billion in shares, according to Dow Jones.

    Cornerstone investors are given the option to buy vast portions of stock in an IPO if they agree to hold the shares for a certain length of time.

    The IPO, scheduled for December 7, could mark a reversal from a stagnant IPO market in Hong Kong, the top such market for the past three years which took a hit after Chinese companies grew worried about slow economic growth.  AIG said Thursday it would invest $500 million in PICC’s IPO and will be forming a joint venture with the Chinese insurer, in a move to boost its presence in China.

    The tie-up puts AIG in competition with its former Asian unit AIA, in which it owns about a 13.7 per cent stake, as it tries to break into a market where domestic players dominate.

    Hong Kong, Nov 23, 2012 (AFP)

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    ‘Crash for Cash’ fraudsters are “gambling with the lives of UK motorists” and costing honest policyholders nearly £400 million every year, according to a new report published today by the Insurance Fraud Bureau (IFB).

    – 1 in 7 personal injury claims linked to ‘Crash for Cash’ scams

    – 1 in 12 people would consider taking part in ‘Crash for Cash’ – Ipsos MORI research

    – 5 men standing trial for first fatality linked to ‘Crash for Cash’

    – 40 ‘Crash for Cash’ gangs currently under investigation across UK.

    The ‘Crash for Cash’ phenomenon sees criminal gangs deliberately causing crashes with innocent motorists and faking accidents across the UK to make fraudulent insurance claims.

    Fraudsters make money from the crashes by submitting exaggerated claims including personal injury and loss of earnings, car hire and damage repair, even claims for bogus passengers. The financial consequence is that every honest policyholder picks up the collective bill for the fraud through increased premiums.

    Established to clamp down on criminal gangs masterminding ‘Crash for Cash’ scams, the IFB links one in seven personal injury claims (69,500) to organised fraud in its new report, ‘Crash for Cash – putting the brakes on fraud’. The report urges members of the public to blow the whistle on ‘Crash for Cash’ fraudsters by calling the Cheatline – powered by Crimestoppers – anonymously, on 0800 422 0421.

    David Neave, Chairman of the IFB, said: “Fraudsters don’t just scam the insurance industry; they pick the pocket of every honest policyholder whose premiums increase to cover the costs of fraud. But in ‘Crash for Cash’, insurance fraud poses even starker risks to society. Fraudsters motivated by greed are gambling with the lives of innocent motorists by deliberately causing crashes up and down the country.

    “Criminal gangs organising multi-million pound ‘Crash for Cash’ scams are also using the profits of their fraud to fund other crimes plaguing our society, including illegal firearms, drug dealing and people trafficking. Far from being a victimless crime, insurance fraud is serious and something we all need to be wary of.”

    At this time five men are standing trial accused of causing the death of an innocent young female driver in a suspected ‘Crash for Cash’ incident.

    The IFB is currently coordinating 40 live police operations across the UK, investigating and dismantling criminal gangs organising ‘Crash for Cash’ scams worth £66.6 million in potential loses to insurers.

    The ‘Crash for Cash’ report exposes the methods of those criminal gangs who actively recruit and coerce people from local communities to stage and induce crashes for cash payments. The gangs’ webs of deceit run deep, with recovery and storage companies, motor engineers, car repair body shops, doctors and lawyers amongst the professionals being corrupted or duped into helping present genuine-looking claims to insurers.

    DCI Dave Wood, Head of the Insurance Fraud Enforcement Department (IFED) – a dedicated police unit tackling insurance fraudsters across the UK – said:

    “‘Crash for Cash’ is a crime this country can ill-afford, putting innocent drivers at risk on our roads and leaving honest policyholders out of pocket.

    “IFED’s first year in operation has found that although methods can vary, the objective remains the same, with organised crime groups stopping at nothing in their attempts to con insurers out of tens of thousands of pounds per incident.

    “The IFB’s report sheds light on the murky world of ‘Crash for Cash’, spelling out the clear threats it continues to pose to the public and assisting the work IFED are doing to bring those responsible to justice.”

    New research – 1 in 12 would take part in ‘Crash for Cash’

    As part of the IFB’s report, independent research by Ipsos MORI canvassed public opinion on the ‘Crash for Cash’ phenomenon. Three-quarters of the population (74%) think ‘Crash for Cash’ is a very big or fairly big problem in the UK today.

    Financial threats posed by ‘Crash for Cash’ was of particular concern amongst motorists, with 84% of UK road users worried about their insurance premiums rising to cover the costs of fraud. Public safety was also a worry, with eight out of 10 motorists (78%) expressing concern about sustaining injuries in a deliberately-caused crash.

    Despite this concern, the research unveiled that one in 12 people (8%) would consider taking part in a ‘Crash for Cash’ scam for financial gain. Based on current UK population figures, this could equate to almost four million adult recruits for criminal gangs organising scams across the UK. The research also reveals that more than half the population (53%) think it is unlikely a ‘Crash for Cash’ fraudster would be caught.

    David Neave, Chairman of the IFB, added:“The findings of this research serve as a reminder to the insurance industry to continue tightening the grip on fraudsters and dispelling the myth that insurance fraud is a victimless crime. ‘Crash for Cash’ fraudsters are being caught and jailed every week and the public need to know that the risk far outweighs any potential reward.”

    “Awareness about the consequences of committing fraud needs to be increased so that everyone, in particular those vulnerable groups in our society, turn their back on insurance fraudsters organising ‘Crash for Cash’ scams.”

    ‘Crash for Cash’ is a menace to society and members of the public should not tolerate the serious financial and safety risks posed by fraudsters.

    To read the IFB’s report, ‘Crash for Cash – putting the brakes on fraud’, visit www.insurancefraudbureau.org.

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    The IFB Board has announced they are now looking to appoint a permanent Director to steer the organisation into the next stage of its growth and development.  The search is underway for a candidate to take on the role of leading the industry’s body set up to tackle organised fraud and continue the delivery of the three year strategy which was introduced in from January 2012. 

    David Neave, Chairman of the IFB said: “The next phase of the IFB’s strategy involves enhancing the existing analytical services and detection products for customers, attracting new customers and building upon intelligence sharing agreements.  The recruitment of a permanent Director is now underway. We believe this is an exciting role and offers the right candidate the chance to step into a high profile position and shape the industry’s response to one of its key priorities.”

    Phil Bird has been undertaking this on an interim basis and will continue to play a full and active role before he departs. Phil has managed the implementation of the first phase of the plan to increase capacity within the IFB in order to provide improved services and greater value to customers. He has also successfully managed a move to new premises and the integration into the wider organisational structure within which it operates. This now enables the IFB to move into delivering the next stage of the strategy.

    Early in 2012, the IFB introduced two new Board structures; giving strategic direction, governance and financial responsibilities to a Supervisory Board and a separate Technical Board was established to oversee enhancements to delivery of services and operations.  During the year the Boards have overseen the delivery of major work programmes including:

    – Increasing staff capacity to analyse and handle more fraud investigations and operations;

    – Forging strong strategic partnerships with IFED, Crimestoppers and Government agencies to increase arrests and prosecutions;

    – Implementing fraud detection services to support customers; and

    – Supporting the introduction of the Insurance Fraud Register (IFR).

    A recent customer survey shows growing satisfaction with the IFB’s services and products and increasing reliance on it to tackle insurance fraud.

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    Specialist lines underwriting agency, CFC announces that it has launched an innovative standalone terrorism policy, available across the US.

    Underwriting Director, Andrew Holmes, comments: “We now live in a world where the risk of a terrorist attack is a reality for every business.  Despite this very real threat, most property insurance policies still exclude cover for terrorist attacks.  In addition, the cover provided by the US Government backed TRIPRA program is limited and prohibitively expensive for many businesses”.

    “CFC has identified a gap in the market for a comprehensive terrorism and sabotage product that is underwritten according to the true exposure rather than simply rated as a percentage of the property premium. In this way we can provide broad cover at an affordable price and our innovative systems mean that quotes and policy documents can be issued within 24 hours.”

    Underwritten 100% by Lloyd’s of London, CFC’s stand-alone T&S policy provides broad cover for property damage, loss of income and business interruption directly as a result of sabotage or terrorism.  With premiums starting from as little as $100, CFC’s T&S policy provides maximum total insurance limits of up to $100 million for properties with total insured values up to $2bn, covering single or multiple locations.

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    Protection specialist LV= outlines how it will deal with amendments to protection policies after the EU gender directive becomes law on 21 December 2012.

    LV=’s protection policies will remain on gender specific rates for the vast majority of amendments including exercising a guaranteed insurability option or a change in the amount of cover. Clients with reviewable or inflation-linked cover will also remain on gender specific rates if their premium changes.

    If a new type of cover is added to a policy, for example, adding life cover to a standalone critical illness plan, a new contract will be formed and LV= will offer a gender neutral premium. See below for a full list of how LV= will deal with amendments.

    Mark Jones, LV= Head of Protection said: “We are adopting a fair and sensible approach to how we treat policy amendments once the gender directive is in force. We want to assure advisers that a policy won’t revert to neutral rates further down the line if a simple change needs to be made. This will help avoid the possibility of policies lapsing, or cover not keeping pace with people’s needs, by not increasing premiums for reasons an adviser will find difficult to justify to clients.”

    In the lead up to G Day LV= is guaranteeing protection applications received on or before 9 December will be processed on gender specific rates. The company will underwrite applications based on the medical information provided by the client at application, and using normal underwriting standards will offer them a premium and terms.

    LV= recently launched a website dedicated to helping protection advisers ahead of the gender directive and I minus E tax changes. www.LV.com/nomoreguesswork

    Amendments to existing LV= protection policies that would remain on gender specific premiums

    – Exercising a contractual guaranteed insurability option (GIO) or increasing benefit option*. For example increasing cover following a pay rise, birth of a child or moving house.

    – Premiums that change as a result of regular inflation or premium reviews will continue on gender specific rates

    – If a policy is reinstated within the grace period (following, for example, missed premiums), it can continue on gender specific rates.  If it is reinstated more than six months after the first missed premium, we will set up a new policy and this will be on gender neutral terms.

    – Increasing or decreasing the amount of cover

    – Extending the term, changing cover to an older age or later end date

    – Shortening the term, changing cover to a younger age or earlier end date

    – Changing from inflation-linked cover to level cover

    – Changing from level cover to inflation-linked cover

    – Notifying a change in smoker status – usually from smoker to non-smoker

    – Removing a waiver of premium option

    – Changing from single life to joint life cover

    – Removing one of the lives assured from a joint life policy

    – Notifying a change of occupation – increasing or decreasing, where relevant, their occupation risk rate class

    – Extending or shortening the benefit waiting (deferred) period

    – ‘Buying back’ life cover following a critical illness claim

    * except ‘joint life separation

    Amendments to existing LV= protection policies that would result in a change to gender neutral premiums

    – Adding life cover, critical illness, life & critical illness, income protection, waiver of premium or total permanent disability benefit to an existing policy

    – Changing from standalone critical illness to combined critical illness and life cover

    – Changing from reviewable to guaranteed premiums, or guaranteed to reviewable premiums

    – Changing from budget to full income protection, or full to budget income protection

    – Splitting a joint life policy into two separate plans (following, for example, a separation or divorce)

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    With one month to go until gender-neutral pricing, the Association of British Insurers (ABI) has today stressed that the insurance market will remain competitive despite the ruling and has published keyconsideration points for consumers set to be affected by the changes. 

    Adeola Ajayi, spokesperson at the Association of British Insurers, said: “We lobbied against this ruling for nearly a decade. Insurance is all about matching price to risk and we wanted to retain the right to offer customers fair premiums and benefits based on risks linked to different genders.

    “Insurers are now busy working hard to adjust their systems and remain committed to offering premiums and benefits that reflect risk as accurately as possible, despite having to ignore decades worth of data. The UK insurance market is competitive, with customers able to shop around many insurers, and it will remain competitive, gender or no gender.”

    The ABI has produced guidance for consumers at www.abi.org.uk/genderruling

    Key consumer consideration points

    – Policies set to be affected are motor insurance, life, critical illness and income protection insurance and retirement products, such as annuities.

    – Remember, gender is only one factor of many that insurers use to price premiums and benefits.

    – Customers, should not focus on price alone, but make sure they take out policies that are suitable for their needs.

    – It is important to shop around. Shopping around for an annuity, including seeing whether you qualify for an enhanced annuity for example, could have a much bigger difference on your benefit. An ABI initiative will make it much easier for customers to do this.

    – Seek advice from your insurer, broker or an independent financial adviser to better understand your options.

    – Customers considering cancelling current policies to renew early should consider this carefully as it may well become a false economy once cancellation and other transactional costs are factored in.

    – The purchase of insurance products, especially retirement products, which are a once in a lifetime purchase, should never be rushed. Speak to a broker or independent financial adviser to fully understand your options.

    Gender has always been one factor in assessing risk in insurance, with different risks linked to gender being taken into consideration to calculate premiums and benefits. Women, for example, have typically benefited from lower car insurance premiums because of their lower accident rates, and men have tended to receive higher annuity rates because of their shorter life expectancy. But a ruling from the European Court of Justice in March 2011 means this will all change by 21st December 2012 as insurance pricing becomes ‘gender-neutral’.

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    Fitch Ratings has affirmed France-based companies Prevoir Vie and Prevoir Risques Divers’ Insurer Financial Strength (IFS) ratings at ‘A’. The agency has also affirmed Societe Centrale Prevoir’s (the group’s holding company) Long-term Issuer Default Rating (IDR) at ‘A-‘. The Outlook on all ratings is Stable.

    Prevoir’s ratings reflect its solid capital adequacy, resilient earnings capacity and the steady strategy pursued by its conservative management. Offsetting factors include its limited business size, the current and prospective lack of geographical diversification and relatively high exposure to equities and real estate investments. In particular, its limited size and lack of geographical diversification leaves the group exposed to potential industry-wide changes in the French insurance sector.

    Fitch expects 2012 technical and financial results to be in line with previous years’. At end-2011, Prevoir Vie, the group’s largest insurance company, had a regulatory solvency ratio of 1.3x the minimum requirement, excluding unrealised gains (3.9x including unrealised gains). Based on this and on the agency’s own risk-adjusted assessment, Fitch considers Prevoir group’s capital adequacy to be commensurate with its current rating levels and expects it to remain so.

    Societe Centrale Prevoir’s IDR is one notch higher than it would be under Fitch’s standard notching methodology, reflecting both the lack of any financial debt and the fact that the company directly holds significant financial assets (including cash) in addition to its ownership of the two insurance operating companies.

    The company’s relatively low overall risk profile reflects its focus on individual risks and its limited exposure to longevity risk. Fitch views positively that the majority of the group’s premiums are recurrent, which helps to generate stable cash flows.

    Prevoir maintains a conservative financial profile in order to continue self-financing growth with its own capital, although the proportion of investments invested in “risky” assets (namely, equities and real estate) is relatively high.

    Prevoir Vie (90% of gross written premiums (GWP)) distributes life and protection insurance products. Prevoir Risques Divers (10% of GWP) distributes protection and health insurance products. Societe Centrale Prevoir is a privately-owned holding company; 70% of the capital is held by the descendants of the founding family and 30% by current and former employees.

    Prevoir’s core business is to insure individuals and families against death, disability and sickness. It has traditionally focused its franchise on individuals from the middle-income bracket and distributes its products almost exclusively in France through a dedicated network of 850 sales employees. Since 1996, Prevoir group has expanded its insurance operations abroad, although premiums from international activities remain small (2%).

    An upgrade of the ratings is unlikely in the near term, given the limited scale and geographical diversification of the group. However, over the longer term, growth in terms of GWP and new business volume along with profitable financial performance and solid capital adequacy could lead to an upgrade.

    The key rating triggers that could result in a downgrade include a prolonged period of poor financial performance leading to a depleted capital position. Fitch would also view negatively any significant unexpected change in the group’s conservative risk appetite and management.

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    The Government needs to get itself into gear and publish its consultation on tackling the UK’s whiplash epidemic the ABI warns. Earlier this year the Government committed to consult on proposals to increase the small claims track limit for personal injury claims and introduce more independent medical experts to assess whiplash claims. To date, nothing has been issued. For every week of delay in the Government implementing these changes, over 10,000 whiplash claims are made, leading to unnecessarily high premiums for honest motorists.

    Despite safer roads, whiplash claims have risen by over a quarter in the last four years. Last year, there were over 550,000 claims for whiplash injuries – enough to fill Wembley Stadium six times over. The £2 billion cost these claims now represents over 20% over the average premium.

    Speaking at the Motor Accident Solicitors Society’s annual conference, James Dalton, the ABI’s Head of Motor Insurance, said: “For too many people a car crash automatically means a whiplash claim. Government reforms will tackle the ‘have a go’ compensation culture. But when it comes to whiplash, the Ministry of Justice have had their foot on the brake for too long and it is time to get on with consulting if we are to help genuine whiplash claimants and drive the whiplash cheats from our roads.”

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    Equinox Global, the Lloyd’s coverholder specialising in trade credit insurance, is pleased to announce the appointment of Lars-Erik Granqvist as a new Senior Underwriter.

    Lars-Erik joins Equinox Global from Coface where he was Global Deals Executive. Lars-Erik has been working with credit insurance since 1984 – active in both the London and Stockholm markets. Previous roles have included head of IRMG Nordic, the risk consultancy arm of Aon, and Head of Atradius Financial Solutions.

    Lars-Erik will be based in Sweden where he will support the growing Equinox Global client base in the Scandinavian region.

    Mike Holley, Chief Executive Officer of Equinox Global commented: “We are very pleased that Lars-Erik has joined the team. His experience covers all key roles, including credit analyst, policy underwriting and sales. During his time in the industry he has specialised in multi-national accounts with a strong client focus. He also has extensive knowledge and experience of special products and structures. Equinox Global is an international business and with Lars-Erik based in Sweden we are better positioned to support and expand our client base in Scandinavia and across Europe.”

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    Fitch Ratings, the global rating agency has affirmed Sterling Insurance and Sterling Life Insurer Financial Strength (IFS) ratings at ‘BBB+’ with a stable outlook. The companies are the underwriting members of the UK-based Sterling Insurance Group Limited (Sterling).

    The affirmation reflects Fitch’s expectation that the capital position of Sterling will remain stable and supportive of the ratings and also reflects strong profitability in 2011, driven by continuous improvement in its underwriting performance.

    John Blundell MD for Sterling Insurance Group comments: “Achieving this outlook is very satisfying and is a vindication of our strategy to provide market leading client and customer service in our chosen markets. The positive factors highlighted by Fitch are our continued capital strength, improved profitability and the growth in our administration business. The ratings agency also recognised our strong reputation in the distribution market as a positive. We approach 2013 with real optimism as well as all the challenges it will bring.”

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