Insurance Post

Review of the Year: General Insurance: A year of red tape

Red tape

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'RoarkeJohn 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 BlancAmanda 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-allianz-retailJon 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-tullochMaurice 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.

huw1Huw 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.

gi-roty-1stWhat 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 are your main targets and goals for 2014?

O’Roarke: To ensure our people continue to enjoy working for LV. The rest will take care of itself.

Blanc: 2014 is about consistency and meeting the high expectations we have set among our customers. Part of that will be a much stronger focus on transparency – as an industry we are far too opaque. We want to get rid of that. You’ll see some interesting initiatives from us in 2014.

Dye: To make sure I can look back on my first year as CEO and say that as well as it being a terrific challenge, I had time to enjoy it too.

Tulloch: Achieving responsible growth in our business and harnessing the best 
of our global data capabilities to stay ahead on pricing, risk selection and  fraud management.

Evans: The Association of British Insurers has to continue to engage with medium-term challenges as well as fight the day-to-day battles – big data, more individualised  risk pricing and changing consumer attitudes. And we need to continue to change our way of working, with fewer bureaucratic committees and better use of our members’ time.


gi-roty-19What 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.


If Santa were to bring you one present this year what would it be?

O’Roarke: A return to a more rational motor market in 2014.

Blanc: Completely clement weather all year round. Not even a snowflake please.

Dye: To end the year with a combined operating ratio of well below 100%. This is a present Santa has brought the company for the last 10 years and I never get tired of it. On a personal level, a man can never have too many socks.

Tulloch: Another year of relatively benign weather.


gi-roty-3Who 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.


How would you sum up 2013 in a tweet (140 characters)?

O’Roarke: Motor premiums fell further than they should and Laspo has yet to deliver; but another strong year for LV. #Rollon2014

Blanc: 2013 – I loved you, I loathed you and loved you again. It’s been fun but my heart now lies with 2014. Have cancelled the milk and newspapers

Dye: You never know what’s around the corner, so expect the unexpected!

Tulloch: Excited. Optimistic. Great business. Superb broker support

Evans: Motor costs down. Affordable, available flood insurance on its way. Meso reforms coming through. More to do on all fronts. Wales 6 Nations Champions again


gi-roty-2bnWho 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.


General insurance timeline 2013

18 January
Mark Summerfield took over from David Neave as managing director of The Co-Operative Insurance

27 February
Esure confirmed its stock market flotation, with chairman Peter Wood describing the move as “a natural step”

21 March
The Co-Op revealed its plans to sell its general insurance business

22 March
Esure lists with £1.21bn market cap

1 April
The Jackson Reforms came into force via the Legal Aid, Sentencing and Punishment of Offenders Act, targeting anyone conducting litigation – from small claims to multi-track, personal injury to professional indemnity and claimant to defendant

4 April
Aviva intermediary and partnerships director Janice Deakin announced her decision to leave the company and take on the role of UK commercial director at Arthur J Gallagher

24 April
Aviva axed 2000 jobs globally, a move that equated to a 6.4% reduction in headcount. The company was criticised for targeting longer-serving staff

28 May
Tim Ablett – chair of the 2013 British Insurance Awards judges and former RSA director of personal lines, as well as MD of Groupama – passed away

17 June
Allianz retail general manager Jon Dye was announced as the company’s new chief executive, replacing Andrew Torrance

26 June
Aviva confirmed plans to make 200 UK-based injury claims handlers redundant, while increasing the number of GI roles carried out by staff at its call centre in Bangalore

27 June
The Association of British Insurers and government announced memorandum of understanding on implementing Flood Re. The Water Bill was also published

28 June
Direct Line confirmed office closures in Croydon, Liverpool and London, leading to 2000 UK redundancies, as part of a restructure

29 August
Dominic Clayden, Aviva GI claims director, was appointed as claims director at QBE

9 September
Sabre was bought by private equity group BC Partners, for a sum in the “low hundreds of millions of pounds”

24 September
Aviva replaced UK and Ireland GI CEO Robin Spencer with the CEO of its Canadian business Maurice Tulloch

25 September
Phil Bayles was appointed intermediary and partnerships director at Aviva, following Janice Deakin’s departure for Arthur J Gallagher

2 October
The European Union announced a final delay to the application date to Solvency II to January 2016, pushing back the legislation by two years.

10 October
Research from Defaqto found that the number of car insurance products featuring telematics had increased from two to 14 in the past two years

23 October
The ABI announced plans to merge its GI and pensions arms under director of policy and deputy director general Huw Evans, while director of GI Nick Starling, director of financial conduct regulation Maggie Craig and director of life, savings and protection Steve Gay all left the organisation

27 October
The St Jude storm left more than 220 000 homes without electricity, costing the insurance industry an estimated £130m

7 November
Zurich cut 121 jobs in its UK personal lines and property claims divisions, including the role of UK personal lines claims director Jon Cawley, as part of a restructure

8 November
RSA’s Irish operation suspended three top-level bosses as part of an investigation into claims and finance issues, while insurer issues £70m profit warning

20 November
Am Trust Europe Legal cut one-third of jobs as a result of April’s civil litigation reforms

5 December
Windstorm Xaver caused sea levels to rise to their highest in 60 years. Floods and storm damage were seen across the country

This article was published in the 19/26 edition of Post magazine 

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