Archive for June 2011

Solicitors Are To Blame For Car Insurance Premium Hikes!

Many people have been in shock this year when their annual car insurance renewal document lands on the doormat. Premiums have risen by as much as a third this year if reports by some major UK car insurers are to be believed. This has even led to former Home and Foreign Secretary Blackburn MP Jack Straw to write to the Times today calling for a reform to the motor insurance industry.

So what has gone so wrong? Why are we paying more for motor cover?

Well first we were told it was uninsured drivers, two million of them apparently, that were pushing up the costs of car insurance because the Insurance Companies were having to pay more into the collective fund, administered by the Motor Insurance Bureau, to cover the costs of claims against drivers with no cover.

So after much pressure from interested parties, the Continous Insurance Enforcement legislation has been passed but to date we see no evidence of reduced premiums.

Then we are told that criminal gangs (mostly johnny foreigners if the British press is to be believed) are fraudulently staging car crashes that are adding to claims costs. Given the amount that Insurance Companies have invested in detecting fraud in recent years, Insurance Blog cannot believe that these claims are more than marginal costs.

Next we are told that the actual reason for increasing  car insurance costs is the amount that has to be paid out in claims and held in reserve for personal injury claims due to road traffic accidents.

Could we be somewhere near the truth?  The problem with this is that given the latest figures, in 2009 the number of road accidents involving personal injury was 31% down on the average for 1994-98 primarily due to better car and road safety.

So it’s not the number of claims but the costs of claims. The cost of personal injury claims to Insurance companies has doubled in the last ten years from £7bn to £14bn.

So why are the costs of PI claims rising so fast and leading to expensive car insurance for us all?

Well Mr Jack Straw would have us believe that its all the fault of the Claims Management companies that have sprung up in recent years, the so called ambulance chasers. Claims management companies collect details of claims and typically sell these onto solicitors for a fee ranging from £100 to £1000 per case.

Mr Straw has called these a racket and demands that referral fees should be banned as was proposed by Lord Jackson in the 2009 report on court costs prepared for Mr Straw’s government.

Yes, maybe those who refer the accidents to the claims farmers for a fee such as the insurance companies themselves, hospitals, police and repair garages, should be denied the introducer fee but do you really believe that an extra hundred pounds or so is the reason for £7 billion pounds worth of extra claims expense? Who really is benefiting from these PI cases?

Insurance Blog thinks that this is all smoking mirrors, and that the real reasons for the increasing costs of claims and car insurance are something quite different, even though they are mentioned in the Jackson Report, and they are:

1) The ridiculous fees charged by Solicitors. How can any profession especially one that just creates more work for itself justify charging £150 to £200 per hour? Solicitors costs should be fixed for civil litigation as they are for criminal at around a quarter of what they currently charge. Civil Solicitors are the racket and social pariahs!

2) The question of proportionality. How on earth can the UK courts allow claimants to bring cases that run up solicitors and expert witness costs on both sides that are often 1000% more than the value of the claim. (see the figures in the Jackson Report appendices)

This is morally wrong and makes a joke of British Justice. No costs for both parties combined should ever be allowed to exceed the value of a claim and where an award for damages is less than the amount claimed then costs against the defence should not be awarded.

Mr Straw like when he was Home ‘Class B’ Secretary has failed to grasp the real facts and jumped on the populist bandwagon of lets attack the claims management companies and conditional fee arrangements (CFA).

Access to justice at a fair rate should be written into humans rights law and if you were injured you would be glad of a CFA. Because Solicitors charge exhorbitant rates, a CFA is often the only way to get justice if you’ve been injured by someone else.

As for cheaper car insurance, shop around, compare car insurance quotes and if you don’t want to pay more at renewal ask the Insurance company what its current claims exposure is!

 

A Brief History of Insurance: Part 5 Post Renaissance Europe

More today from Insurance Blog for you scholars of Insurance as we take you into Post Renaissance Europe and the Great Fire of London in part five of A Brief History of Insurance:

In previous articles within this series we have discovered that forms of risk management have existed for well over seven thousand years with the ancient Chinese cultures kicking things off, before the Babylonian King Hammurabi laid down the first recorded insurance laws.

These laws, grounded in solid economic common sense spread across the trading nations of the time to land in the Mediterranean where they refined by first the Greeks and then the Romans. After the collapse of the Western Roman Empire, once again it was a sea faring merchant empires that shaped the further development of Insurance.

That empire was the merchant empire of Genoa, which had risen from being a small fishing port to perhaps the leading commercial empire of the Mediterranean Sea within a relatively short period, that we see insurance first appear as a stand alone product, separate from both the Guilds and investments.

However, as we jump just a relatively few years forward now to Post-renaissance Europe, we enter perhaps the most important and exciting period within the history of insurance, as we begin to see modern insurance policies which now very much resemble the sophisticated products we expect to see today.

Whilst the sixteenth century was a century dominated by artists and explorers, the seventeenth century was where the mathematicians, scientists and the economists entered into the spotlight.

Throughout the renaissance, Europe had begun to rediscover its hunger for knowledge, re learning many of the forgotten skills and remastering them(renaissance literally means rebirth). By the time the seventeenth century arrived the questions had become more complex and therefore so did the sciences that developed to answer them.

Europe was no longer remembering, Europe was now learning and this was to have a profound impact upon the development of insurance as an economic product.

The practice of wealthy business men providing business insurance policies for merchants and the like had become reasonably common place by the middle of the seventeenth century. It is widely documented that in his will notable poet and colonist of the time, Robert Hayman, had in fact held two separate insurance policies.

Both referred to in his will dated 1628, these were personal arrangements held with a wealthy Londoner Arthur Duck, a lawyer and member of parliament. However, it was just a matter of decades before these personal arrangements were to become replaced with the emergence of the world’s first true Insurance companies.

The emergence of these companies was encouraged by a combination of scientific and mathematic advancements and tragic circumstance. It was 1666 when the tragedy occurred. We know it today as the great fire of London.

The fire started at some time shortly after midnight Sunday 2nd September 1666 in Pudding Lane in the heart of the city and raged across London for three whole days. It is suggested that over 70,000 of London’s 80,000 population lost their homes in this tragic blaze. It was from the shock and devastation caused by the fire that England’s first ever fire insurance company arrived ‘The Fire Office’ which is regarded by many to be the world’s first insurance company.

This was the beginning of a hugely important period of development for insurance and in the next article within this series we will discover how insurance went through a phenomenal period of transformation in the final decades of the seventeenth century.

FSA To Clampdown On Insurance Selling On The Internet In The UK

The FSA may well have the axe hanging over it’s head, be over-populated by a bunch of pen pushers and bureaucrats, culpable for the restriction in insurance products and markets available and be responsible for failing to avert the recession caused by the banks, but…….

Insurance Blog will be the first to admit that the FSA in it’s swansong is at least trying to do the right thing, with some notable recent successes in prosecutions and forcing the banks to heel over the mis-selling of payment protection insurance.

Those small insurance brokers, insurance agents, consultants and intermediaries whose rising FSA authorisation costs and annual fees have helped fund the Financial Services Compensation Scheme to pay for the banks mis-selling crimes would be the first to disagree, however their contempt for the organisation might be tempered some if they were aware of the FSA’s latest moves against their largest competitors……

The Insurance price comparison websites and aggregators selling general insurance products on the Internet.

If the FSA’s latest proposals for the regulated Selling of Insurance on the Internet are enforced, this could be a good thing for all small insurance intermediaries out there, who collectively currently receive less than 5% of the total internet traffic searching for Insurance.

First in the line of fire has been the Insurance price comparison websites, particularly those that compare car insurance and home insurance, and recommend insurance products to the public. In it’s investigation the FSA found serious breaches of it’s rules on the regulation of giving advice and selling of insurance. It subsequently wrote to 19 firms that it considers are breaking these rules in regards to advice and arranging contracts of insurance.

The letter advised the 19 Price Comparison websites:

· review your regulated activities and ensure you are appropriately authorised or otherwise exempt;

· ensure that you only enter into contracts with firms holding the appropriate authorisation and permissions to conduct that regulated activity (or who are exempt);

· withdraw your assistance from third parties if they are in breach of the general prohibition;

· review your disclosure documentation, sales procedures and your terms and conditions and make sure that these are compliant with all relevant regulatory requirements including our Guidance consultation Principles, ICOBS and the Unfair Terms in Consumer Contracts Regulations 1999. In particular, you should ensure they comply with  requirements on: customer eligibility, status disclosure, advice suitability, providing a proper statement of demands and needs, and that you do not seek in your terms and conditions to exclude liability for the regulated activities you are undertaking; and
establish, implement and maintain adequate policies and procedures to ensure your firm complies with all relevant obligations under the regulatory system and for countering the risk of furthering financial crime, in particular breaches of the general prohibition and restrictions on financial promotion.

A price comparison firm may be arranging contracts of insurance where its activities involve any of the following:

· the firm provides links to product companies or intermediaries for the purpose of enabling the customer to purchase a chosen insurance product;

· the firm requires a pre-purchasing questionnaire to be completed in order to filter sales (i.e. where the intermediary asks a series of questions and then suggests several specific products.

Under these guidelines it would appear that any website that collects information with the view to arranging insurance or even provides a link, is breaking the FSA rules if not authorised to do so….

The FSA found the folowing types of Insurance websites in breach where they are not FSA regulated:

· the firm provides a comparison of the terms of different policies as opposed to a passive display of the features of different policies;

· the firm runs a website which is funded by one or more insurance or mortgage providers (i.e. it is not ‘independent’); and/or
· the firm offers a special discount on the product to its website users.

. Even where no financial benefit is derived, the firm may still be making arrangements if it brands the comparison service with its own name, endorses the service or otherwise encourages users to respond to it, negotiates special rates for users, or holds out the service as something arranged for the benefit of users.

Advising on insurance
The FSA now considers any type of recommendation as giving advice. In addition where the effect of the firm’s arrangements constitutes a recommendation to purchase a specific product or products, that recommendation is likely to involve the firm giving regulated advice.

Some indicators of where a website or price comparison website may contain advice which is regulated by law include:

· where the name or logo of only one insurance product is displayed on the website in a manner that suggests that the particular product is to be preferred over other products (for example, a particular logo might appear on a webpage containing generic advice on the merits of incapacity insurance contracts);

· where a particular insurance product is recommended as the ‘pick of the best’ product out of a number of other products in its category;

· where a particular insurance product is star-rated by a website, for example, the product is awarded five out of five stars, by contrast to a similar product which is awarded two out of five stars;

· where a scripted questionnaire gives a recommendation or opinion which influences the choice of insurance product and then goes on to identify a particular insurance or regulated mortgage product to which the advice relates;

· where the questioning process has resulted in the identification of one or more particular contracts of insurance based on a non-objective assessment of the product features;

· where the website generally makes any value judgement as to the merits of one or more insurance products or regulated mortgage contracts, by way of scripted questioning or otherwise;

· where generic best buy tables are used and are not populated from specific consumer information this might be advice depending on the consumer’s experience of it. So, for example, a website containing solely generic ‘best buy’ tables explaining the merits of futures as opposed to options would not be advice, but if those tables guide the consumer to a particular insurance product based on the consumer’s personal requirements, this is likely to be regulated advice;

· where generic statements on a website are not dependent on consumer information being populated; this could be regulated advice where they are displayed in such a way that the website operator is making value judgements as to the merits of buying, selling, etc. For example, ‘The products of the month are XYZ, ABC and DEF investments because they offer the best returns’.

Clearly if implemented to the full the following types of insurance marketing would be illegal on the Internet in the UK for all websites that are not authorised and regulated and will have huge ramifications for the way insurance is distributed online in the future:

· Linking of any sort to Insurance Provider or Insurance Comparison website (Text links and Banner ads)
· Distributing Articles and Media that link to or promote insurance products (Article Directories, Video Directories, Social Media, Blogs)
· Affiliate Marketing and Vertical Marketing by non regulated affiliates
· Review Websites
· White Labelled Websites
· Marketing Websites

Insurance Blog thinks that this is a good thing, if it is properly policed as it will remove a lot of the chaff from the Internet, much eminating from unqualified webmasters both inside and outside of the UK. We are of course authorised and regulated under our Insurance Publishing Group owners Insuretec Ltd. FSA no. 422934 and would love to see our FSA fees used in this way! And as a word of advice, when filling out an insurance proposal form online, no matter it’s detail, always check that the website states its FSA number and regulatory status, which can also be found at the FSA’s website.

Nightclub Insurance Risks – Remembering Summerland

Times have changed, fashions have changed, the music has changed and the dances have changed, even Insurance Blog has changed; but the risks to nightclubs remain as powerful as ever since Britain’s worst ever nightclub disaster, which killed more than 50 clubbers and seriously injured over 80 others, 38 years ago at the Summerland Resort Complex on the Isle of Man in August 1973.

The Summerland complex was opened 40 years ago in May 1971 in Douglas on the Isle of Man in the Irish Sea.
The 3.5 acre resort was cut into the cliff on the promenade and claimed to be the biggest and most innovative indoor entertainment centre in the World, providing artificial sunshine all year round for the holiday resort. The Summerland complex

The aim was to attract British holidaymakers to the Island to compete with the threat posed by the rapid development of package holidays to Spain, that were becoming ever popular with the public.

The Summerland Resort was a spectacular success…..until it’s destruction by fire.

The Resort which was built in modern materials of concrete, steel and plastics, boasted continuous live entertainment, a plethora of restaurants and bars, an Olympic sized indoor heated swimming pool, saunas, massages and Turkish baths, artificial sunshine, a children’s entertainment and theatre,  cascading waterfalls and……..an underground disco and nightclub.

The fire is believed to have been started outside by some smokers next to a plastic kiosk adjoining the main complex building which housed the nightclub. The building was packed with holidaymakers relaxing at the time and the disco was full.

The melting plastic kiosk collapsed against the side of the main complex and rapidly ignited the building that was covered in a damp proofing bitumous material called Galbestos. The fire spread extremely rapidly through the wall cavities which contained flammable materials and quickly engulfed the flammable acrylic see through roof, which came crashing down on the 3000 people inside who were trying to escape the flames.
Many were crushed to death in the ensuing panic or injured by falling flammable debris, however the biggest amount of casualties were in the underground nightclub where the majority of bodies dead through asphixiation were piled against locked security doors.

Following the tragedy Business Insurance Companies tightened up their cover offerings for nightclub insurance, specialist insurance providers emerged and many new building regulations were put into law. Specifically, building materials of flammable quality were forbidden in construction and many health and safety regulations for nightclubs were introduced. The industry is now very well regulated and the covers offered under a nightclub insurance policy sit well with the establishments legal responsibilities of risk management.
Fortunately the measures have worked in the UK to date which has avoided such a similar nightclub disaster although that cannot be said for other places around the world……

* Rhythm Nightclub fire 23 April 1940; Natchez, Mississippi; 209 dead
* Cocoanut Grove fire 28 November 1942; Boston, Massachusetts; 492 dead
* Club Cinq-Sept fire 1 November 1970; Saint-Laurent-du-Pont, France; 146 dead
* Beverly Hills Supper Club fire 28 May 1977; Southgate, Kentucky; 165 dead
* Stardust fire 14 February 1981; Dublin, Ireland; 48 dead
* Alcalá 20 Nightclub fire 17 December 1983; Madrid, Spain; 82 dead
* HappyLand fire 25 March 1990; New York City, New York; 87 dead
* Kheyvis Nightclub fire 20 December 1993; Olivos, Buenos Aires, Argentina; 17 dead
* Ozone Disco Club fire 18 March 1996; Quezon City, Philippines; 162 dead
* Gothenburg Nightclub fire 29 October 1998; Gothenburg, Sweden; 63 dead
* Luoyang Christmas fire 25 December 2000; Luoyang, People’s Republic of China; 309 dead
* E2 Nightclub stampede 17 February 2003; Chicago, Illinois; 21 dead
* The Station Nightclub fire 20 February 2003; West Warwick, Rhode Island; 100 dead
* Cro-magnon Republic Nightclub fire 30 December 2004; Buenos Aires, Argentina; 194 dead
* Wuwang Club fire 21 September 2008; Shenzhen, People’s Republic of China; 43 dead
* Bangkok Nightclub fire 1 January 2009; Watthana, Bangkok, Thailand; 61 dead
* Lame Horse club fire 5 December 2009; Perm, Russian Federation; 149 dead

Insurance Blog thinks it is rather ironic that the Summerland fire was started by smokers outside the building, when the current policy of most nightclubs is to force smokers to outside areas.

Making Business Insurance Decisions Easy for Business Owners

Decisions, Decisions, Decisions. If you are starting out in business or reviewing your initial company procedures and processes you will be faced by an endless choice of decisions to make.

Whilst the potential rewards of running a successful business drive them onwards, there are many challenges faced by small business owners, especially during the initial outset of the business when methods and procedures are being put in place. None more so when trying to navigate through the vagaries of business insurance risks and covers, which vary widely depending upon the type of business you engage in.

So where do you start to try to understand the risks that your business might face and the types of insurance that are available to protect your business from these risks?

Fortunately this has been recognised by specialist small business insurer, Hiscox who understands that business owners want to focus on what they do best – running their business.

So they have created a Business Insurance Decision Tree in the form of an infographic to help steer small business owners through the different types of insurance available to them.

The Hiscox Business Insurance Decision Tree looks at variables such as whether you work from home or in an office, how many employees you have and what type of property you own, suggesting applicable cover which best suits an SME’s (Small to Medium Sized Enterprises) needs.

So whether it is office contents insurance for damage to property, employers’ liability for those with employees, professional indemnity insurance when offering advice, or public liability insurance, the Business Insurance Decision Tree can help clarify which insurance is suitable.

The Business Insurance decision tree

The Business Insurance decision tree makes getting the right cover easy! Click to view

Hiscox SME Underwriting Manager, Deepak Soni, comments: “SMEs are experts in their area, but we don’t expect them to be experts in insurance, that’s what we are here for. No two businesses are the same, so the Business Insurance Decision Tree is a useful tool to help SMEs understand the risks they face and get the right cover in place.”