Archive for April 2010

Unemployment Insurance – An Election Safety Net?

The past week of electioneering and the unemployment figures released midweek by the Office of National Statistics, paint a gloomy future for many currently employed in the Public Sector and jobs that rely on Government Funding.

Whatever the outcome of the General Election on May 6th, there is risk in all the policies pursued and in the unlikely event of the Conservative Party winning an overall majority, six billion pounds of spending cuts would put thousands of public sector, particularly those in the health service, jobs at risk.

We are currently in the trough of the deepest recession since the Conservatives led us into the Thatcher generated trough of the early Eighites, and the Boom Bust Major recession of the early Nineties.

Recessions are basically measured by the level of output of a nation, it’s Gross Domestic Product or GDP. Output is of course affected by demand which in turn is controlled by Government and monetary policy. When output falls we are in a recession.

The difference with the current recession is that it is not a result of a mismanaged economy or poor government strategy as with previous Conservative led recessions, moreover it is the result of a collapse of a mismanaged global banking system.

The above graph demonstrates that although we are in the deepest output recession since the 1930′s, unemployment has remained relatively low up until now. This is because the current recession is a credit led recesssion where demand has been as artificially curtailed by the banking system as it was as artificially created for the housing market. Overall the state of the economy was fairly healthy!

The graph also shows that the effects of quantitive easing are working in keeping employment stable and the difference between the current stable levels of unemployment and those suffered under Thatcher in the 1980′s is the difference in levels that we should expect if the Conservatives are returned to power in May.
And who is going to pay for all this unecessary unemployment?
There is no North Sea oil revenue to squander on dole queues like under Thatcher, and no new information revolution coming to help as happened to Major!

Furthermore, the largest national debt in history created by the policies of quantitive easing, is not a sinkhole to be used as a political football.
Where has all the money gone?
Quite simply into the coffers of Northern Rock, Lloyds TSB Bank of Scotland and RBS to keep them afloat.

I for one am sick to death of hearing about job cuts and job taxes when it’s quite clear that it should be the Banks paying back the money they’ve borrowed and not profiteering off of the futures of Government bonds used to bail THEM out!

A hung parliament, the most likely outcome, will surely exacerbate the underlying trends in unemployment and it would be very prudent if you work for the Government, Civil Service, Armed Forces or Health Sector to get some private unemployment insurance in place now before the cuts start happening. Unemployment Insurance is simple to purchase online, just enter your age and the amount of cover you want to get a quote; and it will provide you with peace of mind and protect your family, income and lifestyle for a few pounds per month, no matter which colour is flying over Whitehall in May!

Car Insurance and Motor Insurance premiums reach record levels

UK Car Insurance premiums reach record levels!

Well we knew our car insurance premium were always on the up but the results of the latest AA British Insurance Premium Index reveal that rates have actually reached an all time high.

In the final quarter of the year the average car insurance premium for an annual comprehensive car insurance policy increased by a whopping 7.2% on the previous quarter. In real terms this meant that the average premium is now priced at around £1,000.00 per year.

On an annual basis the percentage increase was 18.7% for comprehensive insurance. This is the largest increase in this area of business since the records first began back in 1994. Meanwhile the average premium for third party fire and theft increased in the same period by 8.9% to £1,252.00. Annually third party fire and theft rose by 23.8%.

The increases have come as auto insurers have desperately struggled to make up for a lack of reserves which have slowly been exhausted during the economic downturn. Other factors such as steep rises in settlement costs and an increase in the frequency of personal injury claims can also be attributed to the sociological effects of the recession and are also driving the premiums sky high.

The report has been released at a time that most composite insurers are either actively increasing rates or at least discussing it, but the strategies are varied and diverse.

Zurich have taken the impulsive decision to implement a blanket rate increase on its private motor book, a bold move which has certainly caught the market off guard. The Swiss insurer announced it intended to push forward with sharp increases in personal lines motor expected to be in the region of 20% in the broker channel.

Head of personal lines at Zurich’s broker division, Mark Coffey said: “We have not aimed our increases at specific brokers or segments of the market – they are right across the piece. The majority of the increase will come in March and the remainder will follow in April.”

He concluded “It is an industry problem – not specific to Zurich – so I will be intrigued to see how other insurers react.”

And they were queuing up to respond too…

An Aviva spokesperson commented that “no plans for blanket motor premium increases”. And added that “Aviva’s motor pricing strategy is still tailored to the individual – we seek to recognise better risks with more competitive pricing,”

A spokesperson for Car Insurance comparison website said, “ We’ve been predicting this for a long time now – the underwriting Insurance Companies can’t keep running on a loss and eating claims reserves ad infinitum.”

Meanwhile both Allianz and Axa indicated prior to Zurich’s move that they will be taking some form of corrective action also.

Gareth McChesney, head of pricing and reporting at Allianz Retail, said: “We applied some strength to our ratings in 2009. It seems others in the market are realising the severity of the situation – just six months later than we did.”

“In Q4 last year, the market started to correct itself and in 2010 I would expect to see that continue, certainly for the first half of the year. Zurich has put forward a hefty increase in a single month while the market is adopting slightly smaller increases, say 3-3.5%, every month to come up to an acceptable rating level,” he added.

Inevitable yes? Necessary pretty much? Helpful as we come out of recession? I let you answer that! From the pen of Insurance Blogger Kris Oldland.

Insurance Leads The Way To Global Economic Recovery

UK Insurance Regulation: Geneva report suggests Insurance leads the way in rebuilding the economy

A report by the Geneva Association published this week has indicated that Insurers and Reinsurers are likely to play a mammoth part in rebuilding and restructuring the faltering global economy.
The report ‘Systemic Risk in Insurance’ has required the international think tank – which largely focuses on the insurance industry, to analyse the role of insurance in financial stability.

It would seem that the report is designed with the clear goal of raising awareness of the industry’s need to no longer be shoehorned in with other financial sectors, such as the much maligned banking sector.
It will certainly go some way to ensuring the industries voice is heard in key debates across Europe and globally, discussing how to move forward from what many fear could be the worst recession in living memory.

Highlighting the very different roles that the Insurance and Banking sectors occupy the report accurately concluded that the core activities of insurers and reinsurers posed no systemic risks due to the very nature of the industry.
The report also called upon supervisors and policy makers to now focus their attention on activities and not financial institutions whenever new regulation is introduced.

It is key factors such as; strong operating cash flows without the requirement of wholesale funding, the long term nature of insurance policies and the relative steady capacity business volumes and prices during the financial crisis which have led to the report showing our industry in such a positive light.

Using the definition of systemic risk as defined by the Financial Stability Board and applying it to the core activities of UK Insurance and Reinsurance, the report concluded that these are simply not relevant to the sector.
It was also concluded that insolvency is less of a danger to insurers as it naturally develops at a relatively slow pace meaning it can often be absorbed. Strength of the sector is the interrelationships of insurance activities means that the exposure to contagion risk is also limited.

In yet another marketing coup, Aviva hosted the presentation of the report’s recommendations, firmly associating themselves with this upbeat report.
CEO, Andrew Moss commented that “The insurance industry with its strong cash flows and well funded customer contracts is a source of stability in the financial system. These recommendations will enhance the regulatory framework, strengthen consumer protection and support the industry’s capacity to provide investment to the real economy.”

Meanwhile the rest of the industry has also greeted the report’s findings with the Chartered Institute of Insurance (CII) claiming the report builds on their calls for a ‘pragmatic approach’ to regulation. To be fair they have been beating this drum for quite a while now and it is a very valid point they make.

Clearly glad of some solid support in this crusade David Thomson, director of policy at the CII, went straight on the offense warning the government to be “mindful of introducing sweeping regulatory changes simply to sate the thirst of public retribution over the financial crisis.”

The CII has been pushing for the UK Government to take a far more cautious and considered approach to regulation which Insurance Blog thinks most of us would commend. However the question remains whether either of the ‘would be governments’ we have in waiting would be brave enough to not radically change the system?
Our feeling is that whoever comes in will want to be seen to be doing something, even if they don’t fully understand what it is they are doing themselves.

Yes the financial system failed – but how much of that was due to the insurance sector? And don’t forget Insurance is currently underwriting all the Government debt around the World and already leading the road to recovery by supporting the Governments policy of Quantitative Easing – or bailing out the banks as it is otherwise known!

Do we really need a radical overhaul when perhaps just a few tweaks might be enough? May 6th may play a large role in this decision!

Thomson is fully prepared to admit that there will be failures but is keen to stress that “regulatory regime is there to try to ensure that there aren’t too many [failures] to undermine confidence in the system or the markets. “

It is this type of realistic and responsible approach that needs to reach the next government whether it is red or blue. Hopefully the growing strength of conviction now backed up by irrefutable hard cold facts of the Geneva Report can prove enough for finally the voice of the insurance industry to be heard.

We can but hope.

Van Insurance – Stalking White Van Man is taking over the UK!

You either love them or like me, hate them, but there is no denying that you can’t avoid them!

They are Everywhere and You can’t escape from Them!

I’m talking about the unique UK phenomena of ‘White Van Man’, that you will be stuck behind on every road and see parked with reckless abandon on every street corner thoughout the length and breadth of the country.

Insurance Blogger shouldn’t really knock them as the ‘old man’ slaved away for years at the home of the Ford Transit in Swaythling Southampton, and it’s an acknowledgement of ‘Great British Design’ that the Transit is still one of the biggest ‘culprits’ today!

But Why White?

Well when I was a kid the black van man was always a ‘copper’!

Anyway, largely because of the Internet and local delviery, they are out there on our roads and they are dangerous, especially the stalking subset called Cowboy Builders from Essex; so we had better insure them right?

We’ve been looking around at what’s available for White Van Man and have found that the best deal to be had online Van Insurance at the current time is through Direct Line and is not available on comparison websites.
It’s just been launched as a standalone product on Car Insurance TV……..
Full Tools and Liability covers are available online.