Archive for July 2010

Insurance Brokers Pay for UK Banks PPI Claims

It’s that time of year again when UK Insurance Brokers and Intermediaries are asked to pay their annual membership fees for the soon to be defunct, Financial Services Authority (The FSA).

Reading through the Insurance news this week you will find multiple stories from Brokers moaning about the ‘ridiculously’ high fees they are being asked for in order to trade. In some cases the fees have risen three fold on last years costs and many small operators are threatened with going out of business. In some cases the fees represent 20% of their income.

The reason, the FSA’s Financial Services Compensation Scheme to which all members have to contribute.

In the last couple of years the FSCS has paid out over a billion pounds in damages for claims to individuals who were mis-sold payment protection insurances (PPI), such as mortgage protection or loan protection primarily by – The Banks.

Yes those good old bastions of the British financial system, the Banks and not forgetting the Building Societies who were equally as guilty, had been systematically robbing their customers for years, who took out PPI on the back of their mortgages, loans and credit cards .

On average these institutions were charging in excess of five times the premium for the same cover that could be had from an independent supplier or Insurance Broker offering mortgage protection.

They got away with it for years because you and me the UK public were initially only too keen to sign their agreements to secure the loan!

When they finally got found out, thanks to the lobbying of Insurance Brokers, The FSA fined them all a pittance!

Now there’s a shortfall in the amount of cash needed to foot the bill, and guess who’s got to pay?

You got it – the very same Insurance Brokers who pointed out the misdeeds of the UK Banks and PPI  in the first place.

How mad is that!

So what do the FSA do and what does the Insurance Broker get for his fees?

Well from our experience absolutely nothing, until today that is, when a letter came in the post advising us to ‘cold shoulder’ this investment company we’ve never heard of on penalty of being struck off the register……

Meanwhile the UK Government owned Lloyds TSB Group owners of Halifax and Bank of Scotland have announced today that they finally will not be pressurising their customers into buying their PPI products!

Insurance Blog is of the opinion that the sooner the FSA is removed and replaced by another bunch of bureaucratic pen pushers the better and worse for us all………..

This time please keep the Bankers out of Insurance!

UK Public Demand Cheaper Young Drivers Car Insurance

Insurance blogger was searching the blogosphere when he came across this interesting story about the incredible number of uninsured drivers there are on the UK highways and byways, that quite frankly make you paranoid every time you get behind the wheel of your car:

300,000 Young Drivers without Insurance on UK roads

by Performance Car Insurance on July 22nd, 2010

According to the Motor Insurers’ Bureau in a report released today, there has been a twenty percent drop in the number of people driving without car insurance in the UK.
However, there are still a third of a million uninsured drivers on the roads in the UK without adequate car insurance cover.
And it’s young drivers who are the biggest culprits when it comes to breaking the law and putting other road users at risk of loss.

The Motor Insurers’ Bureau (MIB) reports:

Young drivers are the least likely to be insured with new figures suggesting the problem is worse in Britain than any country in Western Europe.

One in five uninsured drivers is aged between 17 and 20.

300,000 young drivers in that age group breaking the law when they get behind the wheel of a car. Many have taken their driving test and hold a full licence but claim they cannot afford the rates charged by Car Insurance Companies

The Motor Insurers’ Bureau Chief executive Ashton West said

“We’ve made significant progress and seen a 20% reduction but we’ve still got a pretty embarrassing record in the UK and there’s a lot more that we need to do to rid the country of this problem.

“Young drivers present a higher risk so they end up paying more.

“The cost of insurance is higher, therefore some of them see that as beyond what they’re prepared to pay and they take the risk.”

Uninsured driving is not helped by the courts who typically hand out  a £200 fine and six points on your licence.
When you consider that the average young drivers car insurance premium is in the region of £2000 per year, and that the car may only be worth £500 and the fine £200  – you can see why taking a risk with uninsured driving is attractive to a certain type of young driver.

However what they fail to realise is that when they are caught they will be paying for this in high premiums for rest of their lives.

Cheap Young Drivers Car Insurance is available from a variety of providers at Car Insurance TV. Compare car insurance prices and shop around for cheaper quotes!

So on my way over to the Insurance Blog offices what do I hear on the BBC Radio One lunchtime news program for young people – Newsbeat – a very interesting  programme about the outrageous costs of car insurance for young drivers.

Being the BBC they have gone all multi media and you can follow the show at BBC Newsbeat  Facebook and listen to and download the podcast at

Listening to many of the comments and reading posts like this….

From Facebook

Chris Kidwell
I’m 22. I’ve been driving for 5 years. I’ve never had an accident. 2 weeks ago a 60 year old man crashed into my car while it was parked. He’s probably got protected insurance cover, and his premium will hardly go up even though he wrote my car off and damaged 2 other cars. I’ve never even come close to an accident in my 5 years, but my high … See more insurance policies have probably totaled enough to cover the damage to the other two vehicles, my written off car, and all the hire cars involved… So even though I’m the driver that is least likely to have an accident, my money is more likely to have paid for his irresponsible action. I do feel that young drivers are all tarred with the same brush. There should be a standard amount that all drivers start on (say £900-£1000) a year. Then the premium can increase/decrease accordingly depending on how the driver fares on the road. To charge anyone £3000 a year without knowing whether they are actually a bad driver is wrong.


You’ve got to agree…hey, maybe the kids do have a serious point!

The effect of the Budget upon the UK Insurance market

The hatchet man Chancellor George Osborne has spoken and the little red box opened to reveal one of the most stinging budgets in recent memory, already named the austerity budget, with huge public sector job losses, spending cuts and tax rises for all!

On the face of it Insurance escapes fairly lightly with Insurance Premium Tax (IPT) raised for the first time in over ten years to 6% from 5%. 

 IPT is chargeable  on every insurance policy sold within the UK,  although Insurance is currently VAT exempt. 

This rise will harden the market with slightly raised premiums,  however it is suggested by many in the City that the percentage increase will mostly go un-noticed by the majority of the insurance buying public.  A spokesperson for specialist car insurance company Car Insurance TV said that ‘this increase in IPT will add just a few pounds to the cost of an average car insurance policy, however levels of competition will often see this absorbed by the Insurance Companies trying to win your business’.

A major impact upon the supply of Insurance and adding further inflationary pressures, will be the raise in the basic level of VAT from 17.5% to 20%.

 The rise in VAT will add additional costs to the supply of insurance. Most distributors of Insurance such as Insurance Brokers are UK VAT exempt and therefore unlike VAT registered businesses, cannot claim back their VAT expenditure against their VAT income.

This will mean that all the additional costs of running the business such as bought in services like marketing and IT support, are likely to be passed onto the consumer in higher premiums.

Another major problem and potentially the biggest ticking time bomb for the UK Insurance market, will be the inevitable lack of demand for financial services products , as unemployment rises and demand falls, with cuts to public sector jobs and welfare across the board. This will naturally lead to further rationalisation of the market with the expected loss of up to 60,000 financial services jobs…. in addition to the thousands destined to go from the FSA!

Insurance Blog is of the opinion that  if the ill thought out measures announced in the recent UK budget and due to be delivered this Winter, don’t lead us into a double dip recession… then nothing will!

The Cost of Insuring The FIFA World Cup

Every four years Insurance Companies underwrite all the risks associated with holding and attending the World’s largest sporting event – The FIFA World Cup Finals.

Insurance Blog reports on the risks and covers available and the large premiums paid to ensure that this years Tournament currently going on in South Africa, went without a hitch…

World Cup Finals 2010 opening ceremony

The prior concerns and fears that had been raised over the insurance cover for the 2010 World Cup failed to materialise as the tournament passed off without a major incident or claim.

FIFA had been forced to build a R6.3 billion contingency fund (around a billion US dollars) to cater for the possible collapse of the 2010 event -  a lot of money when you consider that the winners Spain only receive £40 million pounds ($60 million) in prize money.  FIFA have taken out cover  for any kind of interruption, delay or abandonment of the World Cup and the consequent loss of revenues.

Individual players and their respective Football Association’s had to make their own arrangements for sports disability and sports accident  insurance , with the number of top players appearing at the tournament making it the most injury exposed in the history of the sport.

Fortunately for FIFA and the Insurance companies involved, the Tournament passed off without any major player injuries, which was fortunate as many National Football Associations, particularly those in Africa, would have struggled to meet the cost of covering the wages of the likes of Didier Drogba, Michael Essien, Soloman Kalou and Kolo & YaYa Toure, nevermind the liabilities to the individual Clubs.