With the implementation of the Jackson reforms and the start of twin peaks regulation, reform and regulation dominated a mixed 2013 for the general insurance sector
With the implementation of the Jackson Reforms, the stratospheric rise of technology such as telematics and increasing concerns around new forms of fraud such as cyber, it is fair to say that 2013 has been a mixed bag for the general insurance industry.
The Jackson reforms, which came into force via the Legal Aid, Sentencing and Punishment of Offenders Act in April, have been broadly positive. But it has also raised a number of issues for insurers, with certain cases dropping out of the claims portal and problems around costs. However, the news that Solvency II is confirmed to go ahead in 2016 was met with a positive reaction.
2013 also saw unprecedented levels of job cuts in the GI market, with both Direct Line and Aviva axing 2000 jobs, with Aviva moving 200 offshore. All this led to heightened uncertainty in a sector already rocked by increasingly omnipresent regulation in the form of the new twin-peaks structure.
On the trade side of things, the Association of British Insurers’ move to merge its GI, life and pensions arm led many insurers to question how well they would be represented going forward.
Post spoke to key figures in the GI market to get their views on the year that was 2013 and their predictions for what 2014 will have in store.
What was the most important development for insurers in 2013?
John O’Roarke, managing director, LV GI: The first would have to be the Legal Aid, Sentencing and Punishment of Offenders Act, which promised so much but has yet to deliver. The second is the resurrection of Solvency II, which I hope will restore some sanity to risk pricing in the market.
Amanda Blanc, chief executive, Axa Commercial Lines and Personal Intermediary: So much has happened this year that it’s hard to select just one, so I’m going for two – Laspo and Flood Re. It’s never easy when government is involved, so as an industry we should be proud of what we have achieved in both these areas, however imperfect.
Jon Dye, CEO, Allianz: I want to choose two – the introduction of Laspo and the agreement reached with government that Flood Re is the viable alternative to the Statement of Principles. These are significant and positive steps forward, and they demonstrate how collaboration across the industry can achieve a powerful force for change.
Maurice Tulloch CEO, Aviva UK & Ireland GI: The new regulatory environment and the need to work collaboratively with both the Financial Conduct Authority and the Prudential Regulation Authority.
Huw Evans, director of policy and deputy director general, ABI: Three things: getting the fixed costs for low-value road traffic accident personal injury claims down from £1200 to £500 was a critical step forward in reducing unnecessary costs for motor customers; reaching a deal on Flood Re – despite all the compromises involved – which will provide affordable, available insurance for high-risk households; and, finally, reaching agreement
on Solvency II.
What was the biggest market disappointment in 2013?
O'Roarke: Once again, it has to be Laspo. While legal costs have fallen, the claimant community has redoubled its efforts in farming claims, and we have seen only minor benefits to PI claims frequency.
Blanc: The biggest disappointment has to be the hideous condition of the motor market. To make matters worse, the past year has shown us that household insurance is heading in the same direction.
Dye: The rush by some insurers to decrease private motor premiums post-Laspo before any considered underwriting-led decision could be made about the true
level of savings.
Tulloch: It's really early days for me and, to be honest, I've liked most of what
I've seen so far. Come back to me in 12 months!
Evans: Not getting far enough on young driver reforms. We have successfully got the issue up the political agenda, but ministers remain nervous about signing up to major reforms this close to an election - despite evidence that graduated driving licences will save lives.
What were insurers’ main problem areas in 2013?
O’Roarke: The fact that motor rates fell so far, based largely on a mistaken belief that claims farming would go away.
Blanc: Overall, I would say underwriting discipline is still a problem. There is a lot of talk in public about the need for it, but what some players say in public and what they do in private are very, very different things, which makes it hard for us all.
Dye: Apart from private motor rates, the commercial market lost rate-rise momentum in the latter half of the year. I hope this is something the market corrects in 2014.
Tulloch: The softening private motor market and trying to understand the impact of bodily and PI reform.
Who would you choose as the villain of 2013?
O’Roarke: LV’s villain of the year was a fraudster and benefits cheat who made a false PI claim against us, having already made six against other insurers. We defended it so vigorously in court that he resorted to insulting our lawyers with one-liners such as: “Question: What do you have when you bury six lawyers up to their necks in sand? Answer: Not enough sand.” We won the case.
Blanc: Too many choose from.
Dye: Anyone who tried to commit insurance fraud and anyone who drove uninsured.
Tulloch: Fraudsters remain the scourge of our industry.
Who would you choose as the personality of 2013 and why?
O’Roarke: That would have to be detective chief inspector Dave Wood, head of the Insurance Fraud Enforcement Department. He’s well known for his enthusiasm in ‘knocking down doors’ to arrest insurance fraudsters, and recently celebrated Ifed’s 400th arrest.
Blanc: The words personality and insurance are very difficult to reconcile.
Dye: My ex-colleague Chris Hanks, who retired from Allianz in 2013. He has been a great supporter of raising professional standards in the industry.
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