The state-backed lender has written to insurance brokers promising to lower the premiums commercial customers pay by 5pc and increase the commission intermediaries receive by 3pc – rising to 5pc, if the value of the premium exceeds £5,000.
The “Guaranteed to Beat” deal is offered under the company’s NIG brand, which sells insurance protection through brokers. The offer runs throughout March and April and promises to beat quotes from 15 rivals including Ageas, Aviva and RSA, while offering other incentives to brokers such as M&S vouchers and Apple iPads.
Rivals have attacked the move as a ploy by RBS to increase revenues in its insurance business, which also includes brands such as Churchill and Direct Line, ahead of an expected stock market listing in 2013.
The banking group, which is 84pc owned by the state after receiving billions of pounds of taxpayer’s money at the height of the financial crisis, has been ordered to sell or float the assets by European regulators.
Other insurers say the complex nature of commercial insurance products could effect the sale by lumbering RBS with underpriced long-term liabilities. The bank’s insurance business saw profits tumble heavily last year on the back of mounting personal injury claims on motor policies.
Steve Langan, managing director at RBS rival Hiscox, said: “This is over-the-cliff madness from a taxpayer-owned company. The liability cover that they are proposing to sell can have up to a forty-year tail.
It’s got a horrible ‘here we go again’ feel about it. It’s fine if you’re selling tins of beans, but this is long-term liability insurance. It can be very toxic for a very long time if you underprice it.”
In response, NIG admitted that the offer it has made is a “bold” one.
Dave Parry, NIG’s Director of Sales and Distribution, said: “We’ve made no secret of our desire to grow our share of the SME market and this offer reaffirms our appetite to write more package business.
This is a bold move, but we know already that our new range of package products is popular with brokers and the profitability and pricing within our preferred trades gives us the scope to do this and provide brokers with even more reasons to partner [with] NIG.
“We plan to continue using initiatives like this to reinforce our position as a leading package provider.”
RBS will announce its full-year results this week, with analysts predicting a pre-tax loss of £613m and bad debts of £9bn. That compares with 2009 bad debts of £13.9bn and a loss of £3.6bn.
Lloyds Banking Group will also reveal its results, with analysts forecasting a pre-tax profit of £1bn and bad debts of £14.3bn.
In 2009 the bank, which is more than 40pc owned by the state, suffered a loss of £6.3bn and had bad debts totalling £24bn.
Analysts Nomura said of the results: “We think profitability of traditional UK banking is likely to continue to recover, with margins rising and impairments falling.”
Nomura also said both banks were “relatively well positioned” to see continuing recovery in profitability.
Any future profits will face headwinds from the Government’s austerity measures, but will also be helped by continued cost cutting.
RBS has lost more than 20,000 UK-based staff since its nationalisation and Lloyds has cut thousands of jobs in Britain, as well as several hundred more in Ireland.
Source : The Telegraph
