Lloyd’s of London pushed into loss by Covid-19 payouts

Lloyd’s of London has reported a loss of £900m in 2020 as a result of claims due to the Covid-19 pandemic.

In 2019 it made a profit of £2.5bn.

The 335-year old insurance market said that it expects payouts for coronavirus-related claims in 2020 to reach £6.2bn. After taking into account reinsurance policies, the net cost of Covid-19 for the market was £3.4bn.

“The year was also marked by a high frequency of natural catastrophe claims and the UK’s formal exit from the EU, driving further losses and uncertainty,” noted John Neal, Lloyd’s CEO.

However, the pandemic was the most costly single factor.

Covid-19 claims added 13.3% to the market’s combined ratio, a measure of claims payouts and other expenses vs. premiums paid by customers, pushing it to 110.3%. A combined ratio of 100% is break even (before taking into account investment returns), and a ratio less than 100% represents an underwriting profit.

Claims in 2021 will be impacted by, amongst other things, the week-long blockage of the Suez Canal by the stranded container ship Ever Given.

FCA proposes ‘radical’ general insurance reforms

Existing customers should pay no more than new customers for home and motor insurance, according to the financial regulator.

After concluding its market study into the pricing of home and motor insurance, the Financial Conduct Authority (FCA) said it is concerned that these markets are not working well for consumers.

To address this, the watchdog is proposing “significant reform” designed to enhance competition, ensure consumers receive fair value, and increase trust in these markets.

The FCA is proposing that when a customer renews their home or motor insurance policy, they pay no more than they would if they were new to their provider through the same sales channel. For example, if the customer bought the policy online, they would be charged the same price as a new customer buying online.

Firms would be free to set their own new business prices, but they would be prevented from gradually increasing the renewal price to loyal consumers over time (known as ‘price walking’) other than in line with changes in customers’ risk.

The FCA is also consulting on other new measures, including:

– Product governance rules requiring firms to consider how they offer fair value to all insurance customers over the longer term.
– Requirements on firms to report certain data sets to the FCA so that it can check the rules are being followed.
– Making it simpler to stop automatic renewal across all general insurance products.

The “radical package” of reforms would put an end to the very high prices paid by some long-standing customers and ensure that firms focus on providing fair value to all their customers, said Christopher Woolard, interim chief executive of the FCA.

In the long term, the proposed remedies are designed to improve competition, leading to lower prices. The FCA estimates that its proposals will save consumers £3.7bn over 10 years.

US hurricanes contribute to £2bn annual loss for Lloyd’s of London

Pre-tax losses for Lloyd’s of London reached £2bn last year, the first time the insurer has incurred an annual loss in six years. According to BBC News, this was a sharp reversal after the insurance market made £2.1bn in profit during 2016.

Lloyd’s of London cited a spate of bad weather as a key factor in the losses, including hurricanes in the US such as Harvey, Irma and Maria, wildfires in California, a Mexican earthquake and flooding in Bangladesh.

The market paid a total of £18.3bn in claims, of which £4.5bn was directly attributable to the disasters.

Lloyd’s of London’s chief executive Inga Beale said: “The market experienced an exceptionally difficult year in 2017, driven by challenging market conditions and a significant impact from natural catastrophes.”

Almost half (40%) of Lloyd’s of London’s business is in the US, making the US hurricane season especially costly for the market.

The market also disclosed its gender pay gap recently, describing a 27.7% pay gap based on 250 employees as “nothing to be proud of.”

AXA to buy XL Group for $15.3bn

AXA is to acquire 1005 of XL Group Ltd, according to Actuarial Post. The purchase price is said to be $15.3bn, to be paid in cash.

Under the terms of the agreement, which has been approved by the boards of both AXA and XL Group, the shareholders of XL Group will be given $57.60 per share, representing a 33% premium on the XL Group closing share price of 2 March 2018.

The chief executive of AXA, Thomas Buberi, said: “This transaction is a unique strategic opportunity for AXA to shift its business profile from predominantly L&S business, and will enable the Group to become the #1 global P&C Commercial lines insurer based on gross written premiums.

“The transaction offers significant long-term value creation for our stakeholders with increased risk diversification, higher cash remittance potential and reinforced growth prospects. The future AXA will see its profile significantly rebalanced towards insurance risks and away from financial risks.

“XL Group has the right geographical footprint, world-class teams with recognized expertise and is renowned for innovative client solutions. Our combined P&C Commercial lines operations, will have a strong position in the large and upper mid- market space, including in specialty lines and reinsurance, and will complement and further enhance AXA’s already strong presence in the SME segment.

“The two companies share a common culture around people, risk management and innovation, positioning AXA uniquely for the evolving future of the P&C industry.”

The purchase of the Bermuda-based specialist XL Group indicates the pressure on niche insurers. Low interest rates, tax reforms in the US and falling prices are creating a challenging environment for specialist insurers.

Public liability insurance: Business essential or nanny state gone mad?

Many business owners make the mistake of not properly understanding public liability insurance before launching their small business. This leaves them at risk of paying exorbitant fees for damages in future.

Public liability insurance is suitable for both small businesses and bigger corporations. The concept appears confusing on the surface but with proper research into available policies, it is easier to see how the range of options available can protect your business from disaster. It must not be confused with employers’ liability insurance.

Is Public Liability Insurance compulsory?

Public liability insurance is not compulsory by law. However, is essential if your business will be interacting with the general public in its day to day operations. Do customers visit your office or work premises? Do you send deliveries to your customers? Are you operating a home based business with meetings holding in your home? Public liability insurance is essential for your business.

What does public liability insurance cover?

Public liability insurance covers a wide range of scenarios. Generally however, you can expect cover if anyone is injured by your business or when third party property is damaged during the course of your business. The damage doesn’t always have to be massive. Even a minor scratch could set your small business back by tens of thousands of pounds as long as the affected party agrees it is enough to seek redress in court. Public liability insurance will not only provide you cover for against the fines but will also take care of your legal fees.

To get an effective public liability insurance policy, you need to provide a comprehensive description of your business processes to the insurer. This goes beyond documentation purposes as it will help the company determine the policy best suited to your business. The two main policy types, such as this one offer cover for up to £1 million and up to £5 million respectively. Businesses in the public sector are most likely going to be offered the latter by insurers.

It is important to avoid assumption that there is no need for public liability insurance because you run a small business and it is not a legal requirement. Simple scenarios such as liquid spill over a visitor’s computer or a poorly lit doorway leading to a visitor’s fall and injury could leave you in danger of paying thousands in fines without public liability insurance.

Fraudulent insurance claims rise to over £110 million in 2013 – Aviva

More than GBP110m worth of fraudulent insurance claims were detected by UK insurance company Aviva during 2013, it revealed on Wednesday.

Aviva said its claims fraud detection data for 2013 shows that there was a 19% increase in insurance fraud, compared with 2012. The company reportedly discovers over 45 fraudulent claims each day, which are said to be worth more than a total of GBP300,000.

Insurance fraud varies from genuine claims to injuries that are exaggerated, or entirely fictitious claims and accidents. The fraud is often carried out by third parties, people who are not insured with Aviva but who are making a claim against an Aviva customer, for example injuries incurred as a result of an accident.

Motor injury fraud is said to be most common type of fraud in the UK and represents 54% of Aviva’s total detected claims fraud costs. Over half of these claims come from organised ‘cash for crash’ claims. One in seven personal injury claims are linked to suspected ‘cash for crash’ claims and the total annual cost to insurers for cash for crash is estimated at GBP392m annually, according to the Insurance Fraud Bureau (IFB). Aviva added that organised insurance fraudsters are often linked to wider gang-related criminal activities

Aviva has a team of 25 staff dedicated to detecting and prosecuting organised fraud, which is currently investigating 5,500 suspicious injury claims linked to known fraud rings, an increase of 20% since 2012. It has successfully prosecuted insurance fraudsters who made organised and bogus whiplash claims, who were given sentences of between 4 and 7 years. These organised frauds included more than 200 claims that had a potential value of over GBP5m. The company also shares information with other insurers, the IFB and the Insurance Fraud Enforcement Department (IFED) in order to bring about prosecutions.

Research conducted by Aviva shows that there is concern among consumers regarding the scale of insurance fraud, with 90% finding it unacceptable and 64% wanting insurance companies to take further measures to tackle fraud.

However, many people reportedly turn a blind eye to fraud. Aviva’s research showed that 66% of people would not report insurance fraud to the police if it was carried out by someone they knew. This was a 53% increase compared to a 2008 survey by Aviva. The impact of fraud appears to have been underestimated, as just 10% of consumers realise that everyone is affected by higher premiums, as well as more road accidents that are caused by fraudsters seeking injury compensation.

The research also revealed that 23% of people knew someone who had exaggerated a genuine claim, while 17% knew someone who had faked a whiplash injury in order to get compensation. More than one in eight people said they would consider exaggerating a claim, an increase of 35% when compared to Aviva’s survey 5 years ago.

Tom Gardiner, Head of Fraud at Aviva, commented:

“Our priority is to pay genuine claims quickly and fairly while offering a great service to our customers. Last year in the UK, for example, Aviva settled over 910,000 claims worth GBP2.65 billion. We identified fraud on less than 1.9% of claims we received.

“However, a combination of factors including the economic climate, social attitudes toward insurance fraud as a ‘victimless crime’, and a lack of effective deterrents are increasing the frequency of insurance fraud. The good news is that we are constantly improving our ability to prevent and detect fraud, helping to keep premiums down for innocent policyholders. The ABI estimates fraud adds GBP50 to the cost of insurance premiums.”

HSBC agrees to sell Macau-based general insurance operation to QBE

UK financial group HSBC Holdings Plc (LON:HSBA) on Thursday said it had agreed to dispose of its general insurance operations in Macau to QBE Insurance (International) Limited.

HSBC will carry out the divestment via its indirectly-held unit HSBC Insurance (Asia) Limited, it explained.

The value of the transaction was not disclosed, but the vendor said the Macau general insurance business had gross assets of HKD6.97m (USD898,000/EUR687,000) at 31 December 2012.

Subject to regulatory clearance, the sale is expected to wrap up in the first half of this year, the vendor said.

HSBC Holdings’unit Hongkong and Shanghai Banking Corporation Limited has also inked a non-exclusive accord with QBE to distribute its general insurance products to the bank’s customers in Macau for a commission.

HSBC sells Singapore insurance unit to AXA Life

UK financial major HSBC Holdings plc (LON:HSBA) said Wednesday that fully-controlled unit HSBC Insurance (Singapore) Pte Ltd had inked an accord to sell its group term life insurance and group medical insurance portfolios in Singapore to AXA Life Insurance Singapore Private Ltd for an undisclosed amount.

The deal, which has yet to be cleared by regulators, is seen to be wrapped up by the end of the year.

The sale of the portfolios, whose gross asset value amounted to SGD23.5m (USD19m/EUR14.8m) as at 31 December 2012, is a step ahead in the implementation of the group’s strategy, HSBC said.

AXA Life Insurance Singapore is part of French insurance and asset management group AXA SA (EPA:CS).

No substitute for age and experience, say car insurance companies

Car insurance companies now have only two criteria when it comes to offering their best premiums, age and experience.

With the ruling by the European Court of Justice that came into force on December 21 last year, women can no longer be offered discounted motor insurance premiums on the basis of their sex, despite the weight of statistical evidence tending to prove that on average they are less likely to make a claim than men. The net result of the sexual equality legislation is that women’s car insurance premiums have risen to come in line with men’s, and the only attributes that a driver can now brandish at their insurer in order to garner a healthy discount are a long, blemish-free driving history and the promise of a cautious and responsible nature, which is most likely to have come with age.

And the preferential treatment of older drivers is hardly surprising when looked at in terms of road accident statistics. In the UK only around 13 percent of driving licence holders are under the age of 25, and yet a third of drivers that are killed on the road come from that age group. Older motorists are only half as likely to have a crash as under 25’s, and when they are involved in accident, the cost is likely to be half of that incurred in a collision involving a younger driver.

Like any other prudent businesses, car insurance companies are looking to maximise their income and minimise their outgoings, and all of the indications are that leaning their client lists towards older and more experienced drivers will go a long way towards achieving that aim. This is good news for older drivers, particularly the over 50’s, as they have become THE target market for insurers, with many, like Staysure, offering considerable discounts to attract them into the fold.

The benefits of getting older are not always that obvious, but being the darling of car insurance companies is one to cling to.

ING sells Malaysian insurance unit to Hong Kong-based AIA

 Dutch financial group ING Groep NV (AMS:INGA) said on Thursday it would sell its insurance business in Malaysia to Hong Kong-based insurer AIA Group Ltd (HKG:1299) for some EUR1.3bn (USD1.7bn) in cash.

Under the terms of the agreement, AIA is taking over ING’s Malaysian life insurance operations, its employee benefits business and its 60% in venture ING Public Takaful Ehsan Berhad, the vendor said.

The move marks ING’s first major step towards disposing of its insurance and investment management businesses in Asia, reflecting progress in its restructuring efforts, CEO Jan Hommen commented. The combination of this ING business with AIA’s operations in Malaysia will create a top player in this market with a good position for further growth, Hommen added.

The process for the sale of the rest of ING’s Asian insurance and investment management businesses is ongoing, the group said, adding it expected the disposal of its Malaysian insurance activities to result in a net gain of around EUR780m.

Completion is expected to take place in the first quarter of 2012, subject to securing regulatory clearances.

ING is among the major life insurers in Malaysia with a portfolio including life, general, employee benefits and Takaful, serving over 1.6m customers. The company has around 1,200 employees and 9,200 tied agents in the country.

Present in Malaysia since 1948, AIA’s footprint covers 15 countries in Asia Pacific, leading many of these markets.