Archive for May 2010

Insurance Companies must be held to account for the Recession

Who really calls the shots – The Government or Big Business when it comes to setting the direction and flow of the future economy?
You don’t need to look much further than the Insurance Industry to see that new forces are in play in a new world economy, driven perhaps by Government steering rather than a cyclical wave of uncertainty created by the money markets who are ultimately the owners, underwriters and profiteers of the multi national corporations.

The Insurance Industry which is at the top of the triangle of the money market distribution, is renowned for it’s slow reaction to change.
You’ve only got to ask a dynamic young business analyst or insurance product underwriter how difficult it is to implement solutions that would ultimately bring an Insurance Company competitive advantage……
Insurance Companies are naturally cautious and are able to absorb external change over time through their ability to control the provision of products and the levels of competition within the market.
They do this by controlling the rates at which they sell their products to the retail market through various differing distribution channels.
The rates that Insurance Companies set for Insurance are typically determined by the levels of profit that the investment side of the company is making.

This level of profit is ultimately determined by the Base Interest Rate set by the Government above which the Insurance Companies can not only sell you products with hiked up rates such as mortgages and pensions, but much more importantly make the bulk of their profits from reinvesting your money in very large chunks, for guaranteed long term profits.
For example ,the current Government borrowing deficit of 165 billion pounds sterling has mostly been underwritten by Global Insurance Companies buying up the bonds.

Incredibly the money was borrowed, to bail out many of the private corporations who created the recession but who are now profiting from the debt.

Even more incredibly the Insurance Companies are crying ‘Please don’t tie us in with the banks – We’re not the baddies’!

Well I’ve got news for you Insurance companies!
Thanks to the policies followed by all those chairmen of the Insurance Companies throughout the 1990′s of agglomeration, Cartels, price fixing and that word that they now pretend never existed ‘Banc-Assurance‘ …

You are the bad boys- You and the Banks are the same thing!

And where are all those Chairman of the Bank Assurers who created and introduced risk into the Economy now?
Yes, all sitting pretty in the House of Lord’s, unelected and having further say ion the Country’s future. Outrageous!

Back to the point, Insurance Companies must now adjust to the new economics.
In the past they have had the arrogance to talk about fixed seven year cycles between hard markets where they can increase the rates to high profit levels and soft markets where wider levels of competition keep the prices down. At the end of the day the volume of business is exactly the same and the levels of claims homogeneous, so why the fluctuations?

Purely for profit!

Now though these very same companies are stuck between a rock and a hard market as they no longer have either the control over the flow of money or thanks to Global business and The Internet, the number of entrants able to enter the market,

In the past when Insurance Companies were making losses or wanted to make super-profit, the Insurance market would Cartel like, hike it’s prices across the board. A so called hard market. They are no longer in a position to do this!
Furthermore the profits they make from their investment vehicles are down due the Interest rates sensibly being held low by the Bank of England.
It won’t be long before the Insurance Company shareholders start screaming when they don’t get the dividends they expect or deserve! The Insurance Companies are already moaning about how incredibly unfair the Base Rate is to their investment vehicles!

Remember these are the same people – The Banks – who would like to charge you 15% on your mortgage debt and make super profits – if they thought they could get away with it. They’re already charging you more than that on your Credit Cards!

The Car Insurance Market is traditionally the first to harden it’s rates, with you and me the motorist suffering, but with increased number of distribution channels and the ability to shop around, it would be a foolish insurer who hardened his rates and expected to keep his book of business in the current economy.

You can expect similar resistance to unfair and unwarranted commercial insurance premium hikes, especially when the business had carried out good risk management and claims loss prevention.
Why should they pay more?
Because they are in a poorly managed risk pool?
Shop around Shop owners!

If the collective Insurance industry try to impose a hard market on the public during a recession they will create untold social problems as individuals and businesses under insure and health and safety practices go out the window.

Insurance Companies have to develop a real sense of social responsibility not just some hyped up marketing blurb about planting tress or paying to brand yourselves with Athletics and Football!

Insurance Companies have got to learn to be symbiotic and not Parasites on the State and it’s People! Restricting their profits would be a good place to start!

New look Insurance blog for a New Look Parliament

At last we are back with a new look insurance blog in the week that Black Rod smashed his way into the House of Lords with a new look Government that might actually put him out of a job if the Queen gets the parliamentary sack!

In a week that’s seen inflation, mortgage lending, and economic growth indicators higher than expectations, it’s almost possible to believe that we are coming out of recession… until you look around and speak to people the length and breadth of the country……

So what does the future hold for insurance under the new administration?

In a month where the UK Insurance regulator, the Financial Services Authority (‘the FSA’) have continued to show the results of its enforcement action through a series of arrests and bans for regulatory failings such as insider dealing, the FSA have given further insight into their ‘new’ intensive supervision culture and how it will be applied in practice in a series of press releases.

The problem is…. The majority party in the unholy alliance squatting in Whitehall has got it in big time for the FSA and nobody in Parliament is really listening to the success stories coming out of Canary Wharf. In fact it’s even part of the Conservative Manifesto to replace it….
Hmm….. probably due to intensive Insurance Brokers Lobbying!

Now that Cameron and Osborne are in power though the question is….Replace it with What? Remember GISC and all the other predecessors.

The reality of the task and the size of the behemoth would take an eternity to dismantle and can only really be chunked away at. Which is precisely what the Tories intend to do with the FSA.
Little by little they will disarm it and shift the jobs to civil servants and away from the ex-insurance company employees, who all landed soft jobs there at it’s creation.
This will help to placate Corporal Clegg whose Party is firmly against the destruction of the FSA.

They’ve already started, by the way!
The Financial Reform Bill outlined in the Queen’s speech opening of Parliament this week indicates in line with the recent treasury counterpart in the USA, announced that all macro economic regulation functions will be handed over to the Bank of England.
Hidden deep down inside the depths of the Con Dem Nation agreement, Insurance Blogger has found that the alliance have agreed to transfer the part of the FSA that deals with Fraud and Serious Financial crime, to a specialist new team comprised of elements of the Police Serious Fraud Office and the Office of Fair Trading.

So don’t worry Taxpayers, the 6 billion pounds of cuts necessary to keep us afloat can probably be made at the FSA and keep our front-line services intact. Hopefully they’ll slash the registration fees as well and allow the British People a more diverse Insurance Market and some real competition!