Review: General Insurance
FCA ‘remedies’ – really? The FCA has published the interim report of its market study into the pricing of home and motor insurance. In particular, the FCA found that policies are often sold at a discount to new customers whilst premiums increase when customers renew. To tackle this, they are proposing a number of changes including banning or restricting practices like raising prices for consumers who renew year-on-year or requiring firms to automatically move consumers to cheaper equivalent deals. There could be consequences in the FCA’s thinking, meaning a broker may be expected to automatically switch clients to a cheaper deal at renewal. However, not all policies are the same. Whilst a broker can identify the differences in cover and discuss the benefits of a lower premium but with potentially less cover, the broker cannot make that value judgement on whether specific cover available under one policy and not another, justifies the different cost. Insurance is not like a utility supplier where at the end of the day the electricity coming through the cables is all the same. Each policy is different, with different terms and
Geoff Hall chairman, Berkeley Alexander
conditions and each client has different needs. The FCA is also considering restricting or banning auto-renewals. This could be dangerous on two fronts. Firstly, many clients choose to pay by direct debit, so they have the peace of mind that they won’t be left uninsured by forgetting to renew cover. Secondly, the price paid by clients is based on the insurance risk and cost of delivery; if auto-renewal is banned, that could significantly increase the cost at renewal, which may ultimately be passed onto the consumer. The FCA intends to publish a final report and consultation on remedies in Q1 2020. Ensuring the UK insurance industry treats customers fairly is paramount if we are to maintain customer confidence. Transparency is a good thing, as is ensuring dual pricing is avoided. However, some of the competition remedies they suggest may cause unintended consequences and different types of customer harm. I urge you to read the report and respond to the FCA with your views during this consultation phase, while the industry still has an opportunity to influence the outcome.
‘Events dear boy, events’! This year’s Rugby World Cup in Japan was a huge undertaking. So big, in fact, it has been billed as the world’s thirdlargest global sporting event. The heady sums involved with the World Cup might represent the glamour end of this area of insurance, but particularly as we run up to the festive period, it nonetheless highlights a crucial area of concern for organisers of UK events, of whatever size. As an event organiser, the responsibility and duty of care for the visitors, staff, entertainment, equipment etc. lays firmly in their hands and the possible risks and cover needed are extensive.
Events insurance will cover for cancellation, abandonment, postponement or curtailment. Most policies also include public liability and employer’s liability. Other insurable perils associated with event cancellation insurance can include natural catastrophes, acts of terror, communicable diseases, venue damage, power failure, strikes, and even national mourning! From the World Cup to a business conference, exhibition or even the village nativity, your customers could be hosting or attending events that carry significant liability. Providing the GI on clients’ mortgage related risks should be
Thomas Cook collapse highlights supply chain risk
The recent failure of Thomas Cook had far reaching ramifications, not least for its employees. Its bankruptcy is certain to have impacted the many hundreds of suppliers and sub-contractors that did business with it. For those brokers with commercial clients, or clients who own or run their own businesses, make yourself aware of the types of insurance available to mitigate the risks associated with the supply chain. Its not an area many brokers talk about, so you can add value to your clients because it’s as much a risk to businesses as damage to their own property through fire, theft of flood. Businesses can insulate themselves from the risks posed by the collapse of a key supplier using trade credit insurance. Trade credit is there for those concerned about the possibility of being knocked by a bad debt and is well worth considering for clients that sell products or services to businesses on credit terms. Cover for supply chain risks has historically been part of business interruption (“BI”) insurance. Some BI policies will provide limited cover for loss of revenue and/or profit following a property claim at one of the clients or suppliers that affects your client’s business, and policies can often be extended where needed. For example, would a manufacturer be impacted if their key raw materials supplier suffered a fire at their own premises, meaning they couldn’t supply the raw materials needed by the manufacturer? The broker’s role is key and underinsurance is a real risk. Understanding the extent of the supply chain is vital to getting insurance that’s suitable. www.mortgageintroducer.com