UK Insurance Regulation Is Changing The Face Of The Market
In 2005, two years before the credit crunch, the British government imposed far reaching financial and structural controls over the
UK Insurance Market by bringing the sale of General Insurance into the controlling hands of the Financial Services Authority, the FSA. Legal regulation and authorisation for the first time of the sale of UK personal lines and commercial risks.
Anyone large or small who wishes to market and sell the majority of insurance products in the UK must be authorised and regulated by this very large Quango.
Prior to this the UK Insurance industry was self regulated through professional bodies.
Five years on, what has this meant to the way we buy Insurance as consumers in the UK?
The regulation has certainly had a large impact on the available distribution channels, with a contracting market and barriers to entry.
Although regulation came into force during a period of Insurance broker consolidation and aggregation coupled with skewed figures due to new entrants from the Internet, it appears that our old friend the high street broker is the one to have suffered the most.
The problem with metropolis style regulation is that there is no point having it unless you have enforcement.
The UK Insurance Industry likes to use the nice word compliance as a synonym for the cost.
This has breed a whle new industry in itself, outside of the additional thousands of pen pushing bureaucrats in the FSA.
Compliance, generating a whole new industry and wealth base....the compliance officer or consultant.
The problem is ... it hasn't generated any wealth has it?
Where's the money for all this compliance come from?
Out of the pockets of the Insurance companies involved!
And where do you think that money is going to be retrieved from?
Quite Right! Higher Insurance Premiums for me and You!
So what we initially thought might be a boring insurance story has turned out to be very intriguing.
What's happening in the world of compliance and Insurance Brokers?
we thought we'd catch up...........
Insurance Blogger Kris Oldland Reports...
Regulation and Compliance: FSA Fees a “burden on smaller firms” Says Institute of Insurance Brokers’s Bradshaw
I imagine that there are no small amount of
insurance brokers out there at the moment wondering what on earth they have done to upset the financial authorities so much.
First we see her majesties wonderfully efficient revenue and customs chaps getting it completely wrong with Insurance Premium Tax and piling unnecessary and unwarranted taxation on the broking sector. Probably too busy trying to doubling erroneous tax bills to pay to much attention to what the role of the humble broker is.
But like the pantomime baddy that tries to steal every scene in the show in wade the FSA to show these clowns in the HMRC that when it comes to completely missing the point and costing brokers a lot of time, money and emotions – they have the market cornered by proposing a minimum regulatory fee of £1,000.
As they have done so many times before they really seem to have tried so hard to do the right thing but somehow just managed to get it so wrong. The move to review the fees and levies structure is the correct thing to do, but it needs done in a considered and intelligent manner.
When will the FSA understand that sometimes a one size fits all approach to all things financial just doesn’t work. Sometimes that square peg just won’t fit into that round hole – no matter how hard you smash it with that sledge hammer.
Well they’re in trouble now because Barbara Bradshaw, chief exec of the IIB and defender of the humble broker has the FSA in her sights. For the record I think that Barbara is a wonderful and very likeable lady, that said I wouldn’t like to get on the wrong side of her either, she is also a very powerful and determined lady who strikes me as being able to achieve anything she puts her mind to.
Referring to the proposed minimum fee as ‘totally disproportionate’ Bradshaw went on to comment that the fees were likely to become a major ‘burden for the smaller firms’
She added “While we welcomed the FSA's commitment to review the fees and levies structure, we're nevertheless concerned that the proposals really do penalise the smaller broker. The FSA's proposed fee structure means many smaller brokers could face up to a 200% increase."
Showing a complete lack of understanding for the complexities of the broking community as well as fundamental disregard for the smaller brokerages the FSA have claimed in their consultation document ‘Regulatory fees and levies: policy proposals for 2010/11’ that "These proposals simplify and significantly increase transparency as it is clear what the minimum fee covers and why”
The document goes on to later state that the new system will “be fairer as the basis for calculating it will be the same for all firms." Again they are so close to getting it right aren’t they? Again the theory behind it sounds like it is ticking all the right boxes but the delivery is just far too heavy handed.
The biggest worry is if we get rid of this incompetent lot, who are on earth are we going to get to replace them? Part of me would say that its better the devil you know. Perhaps if they just started listening to people like Barbara, Eric Galbraith or even god forbid a few
insurance brokers, they may actually be able to make the leap from having good ideas to actually doing some good? But can we afford to give them the time to learn from there mistakes when their mistakes are costing us so dearly?
Sort ‘em out Barbara for all our sakes.
Labels: Compliance, Financial Services Authority, fsa, Insurance Brokers, Insurance companies, Regulation, The FSA, UK government, UK Insurance
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!
Labels: Credit Scoring, Experian, Insurance companies, Premium Calculations, premiums, UK Insurance
Insurance Companies are Going Cheap! - Recession Latest!
The recession has hit the insurance industry particularly hard and no sector has to date escaped. Aggregation has been a prominent feature of the market for a long time. Before the recession
Insurance Brokers were the main target with the number of independent providers reduced by more than half as aggressive agglomerators swooped on books of business up and down the country.
The recesssion has brought with it major troubles for large bank owned brands such as Churchill and Direct Line and it looks like RBS will finally be forced to sell it's crown jewels
Recent activity has also seen many large re-insurance companies going for a song!
However you really know the recession has hit home when you can pick up forward thinking Insurance Websites for peanuts....
Here is an Advert from this weeks
insurance news
Now that is Cheap!
Labels: acquisitions, Insurance Business for sale, Insurance companies, insurance domain names, Insurance Mergers and Acquisitions, insurance news, Insurance Websites, Internet Marketing, recession
Insurance Companies buy more UK Government Debt
The Bank of England has just announced that the latest efforts at so called Quantitative Easing involves the injection of another £25 billion of made up money in the circular flow of money system, which means that since the recession Britain has generated £200 billion of made up debt!
So Where's the money gone? And what is Quantitive Easing anyway
It turns out that QE as the press now like to call it, is radically different from the Pump Priming developed by FDR in 1930 to get the States out of the Great Depression!
And this explains why you and me, the small and medium sized enterprise and it's workers are not getting any credit or money!
Truth of the matter is QE is designed to shore up the internal arteries of the international banking system and not leak any money out. To leak money by the creation of credit to the general public and increasing the money supply would introduce both inflationary and currency exchange pressures that would be far from welcome in the current economic climate.
So here is how QE works - The UK Government decides to make up some more cash to shore up the banking system. It creates £25 billion pound worth of bonds that it says you and me will repay! It then instructs the Bank of England which sells them to Banks. They make a nice profit by selling them onto - have you guessed it yet?
Yes 95% of the guilts and bonds go to INSURANCE COMPANIES! Very little money is being released to the public system.
It just means that today the Government decided that You, Me and Everybody! - in the UK, now owes another £25 billion of made up money plus the made up Interest, to Aviva et al.
So QE cannot have any beneficial effects to the likes of you and me, Joe Public, except the potential ability to stave off a second wave of recession by keeping the banks ticking over!
Pump Priming conversely is a 'lets spend our way out the crap' solution which would only work in the UK if the money is diverted into the public sector.
Why just the public sector?
Because only large national institutions have enough employees to spread the money to all parts of the system before it returns to the investment banks.
Like all system solutions they have to be top down and bottom up!
The recession will not come to an end in this country until we start pumping it into the bottom!
Labels: Bank of England, credit crunch, Insurance companies, money supply, Money System, pump priming, Quantitative Easing, UK government
Selling Your Insurance Broker Business? There's never been a better time to sell!
Selling Your Insurance Business?Despite the recession there's never been a better time for selling your insurance business with demand and consequently prices high.
Agglomeration of books of business and size are still driving factors when it comes to negotiating commission levels with the big Insurance companies. It's also sale time in the overstretched re-imnsurance sector at the moment!
Kris Oldland looks at the options for
Insurance Brokers in the UK who might be thinking of selling their businesses...
The Most Important Deal of Your LifeYou have spent the majority of your adult life working hard and slowly nurturing your company to a position of strength. Your reputation as an honest and efficient business person is a proud reflection on your work and the fact that many of your long standing clients are now trusted friends is testament to this. So how do you put a price on your life's work and can you really walk away knowing that the business will be in safe hands?
When considering selling, it is vital that you establish a clear cut succession plan to ensure that you receive the correct financial reward for your career's work. It will take time and careful consideration to find the option that works best for you and there are plenty of questions to be raised before you choose which path is best for you.
In practice there are six main options for those looking to pass on or sell their business. Of course each situation is different and often a compromise between these will be required. However as a general rule at least one of the following scenarios will fit with most acquisitions within the broking sector.
Possibly the simplest option is to persuade your fellow directors to buy you out. This can often be agreed quickly and without too many problems as you are dealing with people whose trust and understanding you have gained over the years.
The integrity of the business remaining unaffected and the lack of disturbance on your client base and staff are also great advantages.
However, this form of buy out is dependant on finance being readily available to the remaining members of the board so it is not always viable.
Alternately an individual could sell their shares to an external third party.
There is some risk in this as the wrong person coming in could cause difficulties with the remaining shareholders.
The flip side however, is that if the right person comes on board then they can add an injection of new ideas and fresh life into the business propelling it forwards.
A long term strategy is to train an existing employee with a view to taking over the reins.
This offers the prospect of instilling your existing values into the next generation of your company and goes some way to ensuring a legacy; however the obvious pitfall is the realisation of capital.
Unless your protege has substantial personal wealth or you are a very generous employer, will they have the funds necessary to step in and buy you out when the time comes?
If all shareholders are in agreement then selling up to another firm is a common choice, but how will working under a new regime impact upon those that stay on?
Can those members of the board that stay adapt to less business-critical roles so easily?
Without the full backing of all the shareholders a successful deal cannot be agreed so negotiations need to reflect the needs of those who will remain as much as those who are looking to leave.
The final option is to face up to facts that liquidation may bring in more revenue than selling the company as a going concern.
If the business is turning over just enough to stay afloat but retention rates are not sufficient enough to attract a reasonable offer, it may be that the equity tied up in assets such as cars or property may be more profitable sold on their own. Again the decision to wind the company down is one not to be taken lightly as the welfare of your staff also enters the equation once again.
Ultimately you need to think carefully about the exit strategy that fits with your own thinking and how you wish to see the business develop once your gone.
The most desirable strategy may not be available to you and of course market conditions and levels of third party interest is always going to feature highly in how you leave your business and the value you are able to realise for it.
For any seller, it is essential to find a suitor that you are comfortable with so you can be confident that the new corporate culture will sit well with the way business has been run traditionally. It may be the last deal you make, but be prepared to do some serious work on this one as quite simply; it is the most important deal of your life.
Insurance Aquisition and Mergers specialists Insuretec agree........
LARGE DEMAND FOR INSURANCE BROKERAGES IN THE SOUTH EASTIf you’re a insurance broker or agent in the City, Home Counties, Sussex, South East or South West England........
Then now is the time to sell.The demand for brokerages and books of business has never been so good.
Whether it be the cash rich regionals who are looking to grow or extend their regional capabilities or brokers looking to extend their strategic position or simply to purchase quality accounts and schemes to bolster their ever growing books of business, the demand is enormous.
The huge demand for brokers in these regions leave the price of selling at a stable position.
Yes, there are always people looking for a bargain and using the present credit crunch to squeeze the price down, but the demand for quality accounts has never been so good.
A good quality book of commercial insurance business or high net personal lines in the required sector is always worth selling.At the end of last year we saw a slow down in businesses for sale.
Why? The buyers were still there?
Just not the very few larger organisations who decided to close their doors to acquiring.
Regional brokers and UK brokers who had structured their businesses well were still trading and still looking to acquire and still are.
We have also seen more businesses looking for schemes and blocks of specific business eg property owners, marine, credit,hauliers.
We have also seen the increase of more overseas companies looking for uk brokerages to place their uk clients and to extend their insurance market relationships.
These work very well for brokers who need to take the business to the next stage but do not have the investment to do that.
Their everyday job can remain stable, although on a wider basis and normally part of something larger.
At the end of the day if you have decided that you do not want to be in the industry anymore, then selling is your best option.
There is no price for the freedom of doing something that you want to do.
For a free service if you are considering selling visit
Insurance Broker Sellers or speak directly with Chris Coates on 07801 329242
Labels: acquisitions, books of business, Insurance, Insurance Agents, Insurance Brokers, Insurance companies, mergers, selling
Should Obscene Domains be Banned by Nominet?
At Insuranceblog we own many insurance domains bought through the UK registrar and trust Nominet. We found this press release today from a UK
Income Protection Insurance Company who have been having trouble registering their company domain with Nominet, and whilst trying to do so found out that its easier to register muslimterrorists.co.uk or childp**n.co.uk. than an insurance company domain
Hmm!
Here's the full story -
Nominet domainsLet us know your thoughts!
Should obscene domain names be banned or is this freedom of speech?
Labels: income protection, Insurance companies, insurance domain names, insurance marketing, Nominet
Norwich Union is Dead! Arriva Aviva!
The grand old lady from carrot crunching country just couldn't cut the mustard with the bosses of the Iberian sounding Aviva and will officially be given the fatal injection at midnight tonight.
As an ex-employee of GA bonus (New Zealand Insurance) do I care?
At the time of the merger / takeover Insuranceblogger had already moved on to pastures new in the city, but I had left them over thirty commercial products on their brand new AS/400 and at the time it was annoying to see the Misers from Perth (GA) and the Wastrels from Whyteleafe (CU) surrender to the much weaker brand.
What a waste of money rebranding is - shareholders must be outraged, mind you they are all at it! The necessary systems centralisation cost which has already happened obviously needs a centralised culture under the same banner - A banner for job and branch streamlining.
I thought Santander was a port in the basque country!
Labels: AVIVA, Economy, Insurance, Insurance companies, insurance marketing, insurance news, mergers, norwich union, unemployment
Google Arrested - We Hope It Had Valid Car Insurance!
Google Visual Information is Arresting!
Insurance Companies must be rubbing their hands in glee at the introduction of
Google Maps Streetview. The 360 degree high definition view of your house from outside the front door, is a valuable tool for both loss adjusters and claims assessors for virtually every type of insurance cover.
Combine it with the already impressive aerial views from Google Earth and Insurance Companies can add very valuable visual attributes to their already impressive Geographic Information Systems (GIS).
Claims assesors can for example look at the state of the roof of a building before heavy storm damage and in
car insurance, there is no more drawing of maps to describe the scene of an accident when making a claim, or playing with toy cars in front of the District Judge to explain the accident if the case goes to court - simply all sit around Google Streetview and pinpoint the testimony.
So while on the subject of Google Streetview, have any of you seen the cars going around the country? If you have, it is highly likely that that moment has been captured for posterity and your image is now truly global!
Look what one guy witnessed in Northern England -
Google Arrested!Chris Whiteoak was walking down the road in Bradford when he noticed Google car being pulled over by the police … here’s the story, in Chris’ own words:
"I’m from Bradford, United Kingdom. I was just going on my lunch break at work today and i noticed a black car that had stopped at a red light. It had a "google" sticker on the side, and a large camera "thing" on the top. I decided to pull out my camera phone to take a pic, but just as i did a police car pulled up right behind it and put on it’s lights and officer inside was motioning the car to pull over.
I then realised why, as the car was in the lane to go straight ahead, which was marked "bus / bicycle / taxi only", before i could take another pic, the google car sped off, went nearly the whole way round the block in busy Bradford city centre (the police still following now with lights and siren on!), before eventually pulling into a car park… which just happened to be the car park to the old police station!!!
When i eventually caught up i did manage to get a picture of the police car and the Google car pulled over in the car park, after which the officer got out of the car and started asking me not to take pictures! lol
Also, I’m hoping when they put the street level view for Bradford on google maps, am hoping there will be a cheeky pic of me taking a pic of the google car, which i can then upload to google earth my pic of the google car taking a pic of me (if that makes sense?!? lol) :-D "
And now, the those arresting photos:
Well guess what Chris? - Bradford has just come on line at Google Streetview UK and Yes, you are on it!
Let us know
if there’s a picture of you on Google Streetview and thanks Chris!
Labels: claims, Google, Insurance companies, loss adjusters
Insurance Cyber Network up for Sale
Here at Insurance Blog we love to speculate and predict outcomes, usually based on probability, for our own personal chest beating and so we can turn around after the event and say 'told you so!'
After all isn't that how Insurance operates!
But we're not averse to a bit of rumour or gossip as well especially when it could involve a lateral shift in the way Insurance is sold on the Internet, which soon will in one form or another BE for most products the only way insurance is transacted and sold!
Word has reached one of our intrepid contributors that an Insurance / Investment Company with a very large warchest has been making approaches to some of the best Internet Insurance marketing companies who run the major independent insurance directories out there in Cyberspace, with the intention of aquisition. One company is believed to be in advanced talks with a Broker Network to the purported sum of five million UK pounds
Now this is hardly surprising stuff, but it's made very interesting for two reasons.There are currently around 10 to 20 very large agglomerates of insurance brokers and underwriters and investment companies out there in the UK who have reached their current size in the UK Insurance market today through aquisition of companies and Insurance Brokers and accounts and books of Insurance business and physical businesses and buildings.
So does this mean that there are no more available smaller real-world businesses to buy and they've finally turned their attention to what is available in other distribution channels?
ORThey've looked enviously at the way that Moneysupermarket.com etc. and all the other comparison / aggregator websites dominate the Search Engines for all the major keywords in their market, and have realised that these types of cyber insurance networks could give them a platform on which to compete and maybe take advantage over the single comparison site big Google payers, for just about every niche insurance market.
If the latter is true, which I doubt their business foresight or acumen, then we would see a serious shift in the way Insurance is sold on the Internet.
A large cyber insurance network would fit many a large insurance (broker or company)network with little or no painful business integration and could be assimilated in the existing business corporate Internet structure on a transitional basis with little or no disruption to current processes. The cyber network would create hundreds of links during any assimilation which by its very process would create and pass enough page rank to compete with all those comparison sites that buy links. Very powerful stuff. It would also give a rapid ROI as many of these cybernetworks dominate the niche insurance products cyber markets and search engines.
There are currently equally, about 20 of these insurance cyber networks out there. You can easily come across their websites everywhere in all Insurance Internet niches. In many places they are managing the complete online lead generation for individual insurance companies and brokers. They are easily recognisable from their generic or keyword domain names and are often managed by small teams of so called Webmasters.
So got any ideas whose after who?
We believe we can narrow it down to possibly three candidates for the honeypot simply by looking at who dominates the google query for 'insurance directories' and niche products keyword searches.....as for the wolf...hmm we'll keep you posted if we hear anything but there are some very predatory broker networks and companies out there at the moment... so expect some big announcements soon!
Realising that Moneysupermarket and the other Insurance comparison websites that dominate the search engines front pages for keyword searches like 'Car Insurance'
each spend over
£5 million each week in Adwords and other PPC advertising perhaps £5 million for one of these internet website networks is small beer in the bigger scheme of things.
Even more worrying, especially for the niche players and the public is if the likes of MoneySupermarket.com or one of the other insurance comparison sites who retain their search engine postitions by buying lnks, see £5m as a very cheap investment indeed.
Isn't agglomeration a wonderful thing. Did you use to collect football cards when you were a kid?
Expect a goldrush!
Labels: Insurance companies, insurance marketing, insurance news, Internet Marketing
HBOS & LLoyds TSB merger sees Insurance brands disappear
Those who like to see agglomeration in an Insurance Industry dominated by 'Bancassureurs' will no doubt be pleased by the latest merger.
According to the
HBOS website 'Over 7 million customers rely on our household, travel, repayment, health and pet insurance. Our business already generates over £1.7 billion premium income and nearly £½ billion profits – and we’re growing very fast. '
(Maybe they haven't updated the site yet)
Yes very fast and note the amount of profits!
Insurance blogger sees no benefits of this merger to the general public - there will just be less outlets selling less brands or versions of the same offering which are usually overloaded with commisssion profit!
Our advice to those seven million new LloydsTSB customers (and the existing ones) is - shop around on the internet - save money! Apathy costs!
Alternatively get one of those good old fashioned
insurance brokers to do it for you - at least that way you'll be properly covered and not paying over the odds for all your insurance needs!
Labels: credit crunch, HBOS, Insurance Brokers, Insurance companies
