Archive for January 2010

Getting Married? Wedding Insurance May ReduceThe Pre-Nuptial Stress

Insurance Blog would like to congratulate one of our regluar contributors Kris Oldland and his new Mrs,  who recently tied the knot and took the plunge!
Well we couldn’t let him get away with not writing about his experiences so as soon as he got back from honeymoon we asked him ……….

Is wedding insurance a worthwhile product or is it just another expense to add to the list?

Well, as a newly wed here is my first piece of advice for those who have decided to take that stroll down the aisle.
Within reason don’t think about the expense, this is a once in a lifetime (hopefully!) occasion, the happiest day of your life and the memories that you make on this magical day are memories that will last you a lifetime.

The second piece of advice is for crying out loud get yourself insured!

The average wedding in the UK is now apparently £17,000 you can pick up a fairly robust premium for a cost starting at around just £30. This ladies and gentlemen really is a complete ‘no-brainer’.
Set a date, make the necessary bookings, arrange your wedding insurance cover and then start paying your deposits.
Get it done early and it is one less worry. Trust me there will be plenty of other things to worry about during the build up and on the day!

Even if you are thinking of not spending quite so much then a specialist wedding policy is still worth very serious consideration – you may be planning a small, intimate affair, but it is probably fair to assume that you will be buying some of the most expensive dresses, outfits and meals you have ever bought.

However, as with any form of insurance it is important to understand what your existing exposure to risk is before purchasing additional cover.
One suggestion is that to make payments on credit card where possible (although always make sure you can clear the balance immediately). Any payment between £100 and £30,000 can be claimed back through section 75 of the Consumer Credit Act if there is a problem with goods or services.

Also, many home contents insurance policies increase cover for a month either side of the wedding of someone in the household to cover wedding gifts and sometimes items bought for the wedding. Check your home insurance policy documents for details.

What you really need to be looking for in your wedding insurance policy is cover for loss of damage to the wedding attire, such as the wedding dress, as well as presents, the wedding cake, rings, flowers and gifts for the guests.

Most often cover starts a set period before the wedding and finishes a set period after – from seven days before to 24 hours after for wedding gifts, for example – but this will vary depending on the policy. Also you’ll be relying on wedding services from a range of providers so make sure your wedding insurance can cover any extra costs you incur up to the policy limit if things don’t go exactly to plan.

Wedding insurance also covers you for deposits you can’t recover or the cost of arranging alternatives if suppliers go bust (but don’t forget that you would already be covered by section 75 if you paid by credit card so do not pay an unnecessary premium if you have an option to opt out.)

The other important area to have covered by your wedding insurance is personal liability for injury to third parties or loss or damage to third party property. Again this is often covered either by your home insurance or the hotel’s own cover etc but this can be quite important if you have the wedding in a public place such as a beach or park etc.

There are additional areas of cover, some policies offer legal expenses, personal accident or even stress counseling but these really need to be tailored to your party’s individual needs.

The Internet has made it easy to purchase and Compare Wedding Insurance online, and you can save money both by shopping around and by visiting a specialist events insurance company, who often have better value for money products with a wider range of wedding insurance covers.

How Insurance Companies Use Your Credit Rating To Decide Your Premiums

UK Insurance Companies have been using credit scoring to determine policy acceptance, flag potential claims risks and load premiums for over ten years now.

What this means for the consumer is that if you do not fall into the credit/lifestyle brackets determined by the credit rating companies and identified by the Insurance Companies as the most profitable people sectors for their particular products, you will be either declined cover or offered it at a loaded rate commensurate with the amount of extra risk that the lifestyle group that you fall into presents, and designed to deter you from taking up cover.

In other words if you aren’t what the insurance companies are looking for…. they don’t want your business!

Here are the examples of the Experian Groups of type of person that YOU are! These are used for what is known as ‘customer segmentation’. For Insurance purposes these are then grouped into four quadrants.

Low Conversion / Low Risk of Claims – An Insurance Company’s desired customers
1. Wealthy Retirement
2. Mid Life Affluence
3. Surviving Singles
4. Elderly Deprivation

Low Conversion / High Risk of claims – An Insurance Company’s least preferred customers
1. Ageing workers
2. Happy housemates
3. Credit Hungry Families
4. Advancing Status

High Conversion / High Risk of Claims – The customers an Insurance Company would like to be rid of
1. On The Breadline

High Conversion / Low Risk of Claims – An Insurance Company’s most preferred customers
1. Gilt Edged Lifestyles
2. Modest Mid Years
3. Successful Starters
4. Flourishing Familes

So…..which one are you?

In the UK credit scoring was first introduced in the household and car insurance markets in the late 1990′s.
It is important to remember that credit scoring in the UK as carried out by ‘big brother’ credit scoring company Experian plc, is postcode and not people centric.
Where you live is the database primary key!

Nothing much has changed in the last decade with regards the database structures with the exception of the amount of data that Experian holds on each and every one of us and how the data Experian holds on each and every one of us is used!

When a customer applied for home insurance in the 1990′s, the insurance company collected the data regarding all new policyholders and sent the extract overnight to Experian. Experian then took the extract and applied it to its credit scoring database and sent the file back a day or so later with the credit scores for the applicant attached. The Insurance companies could then use the database to see the likelyhood of claims by the type of people they’d underwritten the policies for.

At renewal those likely to make a claim could have their premiums loaded to discourage renewal and in theory protect the fund.

That is if you believe the Experian categorisation of propensity to claim!

When I first was asked to design these systems I thought that propensity to claim by lifestyle had some merit, for example young drivers, but to judge someone by the house the live in, job they do, credit cards they hold, and nowadays even by the school reports they were given… as being rational variables in a model to determine propensity to claim….was complete and utter bullshit… and I still do!

Yes Big Brother Experian even holds your school reports these days and it won’t be long before they get your medical records as well………

Thanks to the Internet and Experians new offshoot company Hitwise, all these things can be done online and the decision to offer insurance made instantly.

If you’d like to see an interesting if flawed analysis by Experian of the UK Insurance Industry online for 2009, but more importantly an excellent demonstration of how Experian data is used by UK Insurance companies to bracket and categorise each and every one of us before deciding how much to charge us in premiums…… – watch this!

UK Insurance Mergers & Acquisitions: Could HSBC sale see Marsh and Aon on par again in 2010?

As 2010 warms up Insurance Blog has let resident Insurance journalist Kris Oldland give his UK Insurance insiders view as he plays Nostradamus with HSBC Insurance Brokers…..

In a year that has seen considerably less Insurance Mergers & Acquisitions activity than we had become accustomed to in the latter half of the noughties, the UK Insurance press at large has seemed occasionally a little desperate for gossip. So when one company keeps returning to the forefront of the latest trade press pages we can’t be blamed for thinking that we may have heard it all before…

However there is a certain persistence in the continuing rumors that Marsh are intent on purchasing HSBC Insurance Brokers to make me think that there could be just the tiniest hint of truth behind all this.
Of course from a strategic point of view it would make absolute sense for Marsh to make a bid also.
The market speculation is that Marsh has offered to buy the bank’s broking arm, HSBC Insurance Brokers. The inference that is being made in somewhat hushed tones however, is that this is all just part of a wider strategy by Marsh to get the banking giants on side. The long-term aim it is suggested is then to broker an affinity deal with the bank.
To date both companies have refused to comment on the speculation despite the rumor being reasonably widespread for some time now.
What is clear though is that a decision of HSBC to sell the division would fit in with plans for a wide reaching shake up of its insurance operations. In the previous financial year the bank disposed of its insurance operations based in Malta, Guernsey and Bermuda. The latter being perhaps the most telling move of all that the bank sees insurance as becoming non-core to their overall strategies.
Then as if further re-enforcing this position HSBC Insurance made the announcement that it was to cease underwriting motor insurance completely, swiftly putting HSBC Insurance (UK), its UK motor insurance vehicle into run-off.
It was at this time – when HSBC made the announcement that the corporate strategy was now to be focusing on pensions, investments business and life insurance and moving away from (motor) underwriting in the UK, that tongues really started to wag regarding the other insurance elements.
Various suitors have been referred to in the insurance press ever since, however for me, the fact that through this one acquisition Marsh could make a serious dent in the gap between themselves and their largest and oldest rival, super broker Aon (who of course pulled a similar trick last year when they bought Benfield) would suggest there is more than idle gossip involved here.
Based on the figures produced by IMAS corporate advisors earlier this quarter, the gap between these two giants of the broking sector is currently at £214m. HSBC Insurance Brokers are currently ranked ninth in the UK and should there revenue of £146m come under Marsh control then the gap between Aon and Marsh would come down to a rather more competitive £68m. What this would mean for the rest of the UK Insurance Brokers market is a topic for another article entirely though!
So for Marsh the attraction of picking up HSBC Insurance Brokers, especially from a parent company who appear keen to exit this sector, could be a little to tempting to resist? Well add into this mix the fact that the current CEO of HSBC Insurance Brokers, Phillip Gregory is an ex Marsh man. (CEO Europe, Middle East and Africa)
So with a tailored made CEO to oil the process of transition, should the question perhaps be when rather than if this deal is going to go through?
Well I’m not one to gossip but….

Interesting analysis Kris!
We’ll keep you posted here of any developments.