Insurers to get more than their fingers burnt!


I have previously referred to “high level” concerns expressed regarding the lack of accurately underwritten risks on the books of UK commercial insurers. This was something highlighted in research from Mactavish Consulting, in January 2010.  The future ain’t bright until WE see the light!

Somewhat alarmingly there has been very little open discussion on the subject and word has not reached my, well-trained, ears of any insurers indulging in a thorough cleansing or even a review. Perhaps this IS happening but is just low key!!!

If it isn’t I dread to think about the consequences. It would appear, from the industry commentaries from both Citi and PwC (as well and from several other conversations) that the concern does not start and end with there.

Nick Starling, the ABI’s director of general insurance and health, said: “The challenging economic climate is having a significant impact on the fire danger. While the numbers of fires may have been falling, the increase in large-scale fires is increasingly putting lives at risk, and puts more pressure on businesses in these already difficult trading times.”

Whether the “pressure” upon business is as a result of external or internal problems the impact upon claims tends to be rather predictable. Of course, claims don’t always come in the form of fires:

Crawford & Co sum up 2009 succinctly: “In difficult times, human behaviour patterns change; people who would normally behave honestly may consider instigating an insurance claim as a way of resolving their financial problems. Sadly, desperate people do desperate things.”

Early this year, Crawford’s Head of Global Counter Fraud solutions, Bobby Gracey, said he has witnessed a 13% rise in false claims over the past 12 months and that the frequency is only likely to increase in the near future. Compounding the problem is the fact that it is opportunistic fraud that is rising most significantly.

Unsurprisingly, the most noticeable spike in suspicious claims in commercial lines has come from the small to medium-sized enterprise sector, where small businesses, hit hard by the recession, resort to filing exaggerated property claims or, in extreme cases, commit arson.

So if you fancy a few stats “cop this” from ABI figures published in February:

In the first half of 2009, insurers paid out £639m – £3.6m every day – for damage caused by fires.

This is the highest half yearly figure ever, and follows on from last year’s record high level of fire claim costs which stood at £1.3bn, a 16% rise on 2007.

So here is the scenario: Rising claims, at least partly, due to the economic climate – anyone want to bet against a W-shaped recovery manifesting itself on the other side of 6th May (irrespective of outcome)???; unknown or inadequately priced risks on the books; underpriced new risks being taken; new risks emerging; dire warnings re the potential for future investment in the industry; lack of public trust…

So what is the industry doing about its future strategy? Anybody!? Please someone…anyone…give us a clue. Prove that there is some vision and some leadership worthy of the name. Now is the time to stand up to be counted. To really seize the initiative and the competitive advantage that goes with it.

NEWS!?: Insurance fails to instill trust

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