News Review: General Insurance
Insurance pricing set for wholesale change
by Gary Little, head of key accounts, Assurant Intermediary
2011 has proved to be another tumultuous year in the general insurance market. one of the most significant
changes to legislation was announced back in march when the european court of Justice outlawed the use of gender in underwriting. the judgement, which goes into effect in the uK in december 2012, means that it will be illegal for insurers to consider a person’s gender when pricing insurance. in response, the association
of British insurance stated that the ruling ignores the fact that, when relevant to the risk, taking a person’s gender into account enables both men and women to get more accurate pricing for their insurance.
Men vs women research carried out by the aBi last year revealed the impact of removing gender from risk assessment. it estimates that young women under the age of 25 could see their motor insurance premiums increase by an average of 25%. Women also could face an increase of as much as 20% in the cost of life insurance, while men could see a reduction of 10%. in our opinion, this ruling could result in income protection and critical illness rates falling for women while men could experience a rise. the ecJ ruling also has sparked widespread concerns
that age could be eliminated as a factor in underwriting. this could have a far greater impact than the gender ruling on the general insurance industry, particularly when it comes to insurance protection products. While there have been no further rumblings from Brussels at this stage, we’ll be keeping a close watch on this particular issue next year. 2011 also saw the
introduction of another industry-altering proposal in may when the government introduced the consumer insurance (disclosure and representations) Bill. the legislation aims to change the relationship between consumers and insurance providers radically.
Having faith the proposed reforms will shake-up a principle of insurance that has been in place since 1906: ubberimae Fides, the concept of utmost good faith. this principle requires that all parties engaged in the negotiation regarding the establishment of an insurance contract must disclose all relevant information – material facts in other words – to all the other parties. instead of parties only having to give information that they are directly asked about, there is a positive duty of disclosure where the parties must volunteer the information even if not asked. effectively, an insurance
company relies on the utmost good faith of the consumer to disclose all information available regarding what is to be insured whether it is a car, home or a mortgage.
18 mortgage introducer DECEMBER 2011
not disclosing all the facts or misrepresenting information gives the insurance company the right to cancel the contract. the Bill proposes to shift the responsibility to provide all relevant information regarding a risk from the consumer to the insurer.
the customer – particularly as they are collecting information to search the whole market, and not for a specifically named insurer. While uncertainty prevails, this Bill should represent a positive step forward for the insurance industry as a whole. in particular, it should positively impact the payment protection
insurance
market as it rebuilds trust and confidence amongst consumers.
Up front underwriting if passed into law, insurers will no longer be able to decline claims merely because of accidentally inaccurate or misleading statements made by consumers. it will require insurers to capture full risk data about customers at the point of sale. this could well bring about the demise of the traditional approach to underwriting payment protection insurance at the point of claim. not a moment too soon if you ask me. underwriting at point of sale establishes eligibility and suitability upfront and removes the ambiguity that hovers around the historical point of claim approach. there is some uncertainty
as to a broker’s responsibility when collecting pre-contract information as the insurer’s agent. the British insurance Brokers’ association has told the government that brokers are the principal agent of
2012 the ecJ ruling means that insurers will be making large scale changes to their pricing models. they face a huge administrative burden of amending policy documentation, contacting customers with new information, updating sales and marketing material, changing
it systems,
ensuring brokers have the right pricing information … the list goes on. there is a lot of speculation
regarding rates across the full spectrum of general insurance products. the result of two severe winters has impacted the average price of home insurance according to the most recent aa British insurance Premium index. the average cost of building cover is 58% higher than seven years ago. another big freeze this winter could see costs rise further for your clients in 2012. on the positive side,
however, the consumer insurance Bill should have a positive impact on consumers and on the protection insurance market in particular.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56