Massive earthquake hits Haiti

Hundreds are feared dead after massive earthquake struck the Caribbean island of Haiti on Tuesday (13 January) to the south-west of the capital Port-au-Prince. The current United States Geological Survey has estimated the quake was a magnitude 7.0 event at 10km depth just 15km southwest of Port-au-Prince. The earthquake shaking was felt strongly in the Dominican Republic, Cuba and Jamaica, although little to no damage is expected outside of Haiti, according to CCRIF, a Caribbean-based risk pooling facility, run by Caribbean governments. In a statement it said: “The earthquake appears to have occurred along the Enriquillo Fault Zone, which runs east-west along Haiti’s southwest peninsula. Although smaller earthquakes are relatively common in Haiti, the last major earthquake to affect the country was in 1842 (devastating Cap Haïtian in the north). "Two large earthquakes in the middle of the 18th Century occurred close to Port-au-Prince, likely along the same fault line, and caused widespread devastation. These occurred in 1751 and 1770 and both had an estimated magnitude of 7.5.” It added: “CCRIF, through its facility supervisor, is closely monitoring the situation. Haiti purchased both hurricane and earthquake parametric coverage from CCRIF, and initial earthquake magnitude/ location estimates from the USGS suggest that a payout will be triggered. CCRIF will announce a preliminary payout estimate within the next several days, with the final calculation and payout made available to Haiti after 14 days."

Sheilas' Wheels enters new market

The female-focused Sheilas' Wheels has extended its product range with the launch of travel insurance that aims to deliver comprehensive cover with some additional features. Following both Sheilas' Wheels car and home insurance, this product - which is also available for men to buy - has standard features and optional policy enhancements that it believes should resonate strongly with women and their families. Sheilas' Wheels travel insurance includes ‘handbag on holiday' cover as standard within the policy's baggage cover; ‘Kids go free' on all family policies; a Sheilas' Wheels Holiday Hotline accessible 24/7; a ‘Travel Bag top-up' option aimed at those taking an extended trip or holidaymakers who pack a more substantial sum of valuables, outfits and accessories; anda wedding cover add-on. The travel insurance will be offered through white-label specilaists First Assist and includes web and telephone sales, administration, underwriting and claims services. Jacky Brown, spokeswoman for Sheilas' Wheels travel insurance, said: "Traditional travel insurance cover has until now remained unisex in its offerings but Sheilas' Wheels travel insurance looks to target the savvy, female holidaymaker. "This is a serious product in the wrappings of an innovative female-focused brand with features that should appeal to the needs and priorities of today's modern woman - whether they're single, a wife, a partner or have a family." "Travel insurance policies can vary considerably in terms of the levels of cover offered, maximum limits, exclusions and overall cost. "Whilst a no-frills travel insurance policy could leave you high and dry when you and your family need it the most, opting for a comprehensive and more tailored policy will give you added peace of mind - especially when on foreign soil." Alistair Hardie, managing director of speciality insurance, for First Assist added: “We are delighted to have been chosen to support Sheilas’ Wheels move into the travel insurance market, further reinforcing our position as a top five provider in this specialist area. "Travel is a key market for us and this win serves to demonstrate our expertise and flexibility in designing white-label products which enhance our clients’ brand positioning.”

Zurich continues Irish transfer

Zurich Financial Services is to transfer of the vast majority of its general insurance portfolios in Italy, Portugal and Spain to local branches of its EU-based risk carrier Zurich Insurance plc, Ireland. A similar transfer is planned for Zurich's general insurance business in Germany later this year. The general insurance business in the United Kingdom was transferred to the ZIP UK branch effective January 2009. In addition, most of the Global Corporate division's business written in the EU has been progressively transferred to ZIP branches since 2005. Zurich explained the transfers are part of an ongoing group-wide effort to simplify Zurich's legal structure and consequently achieve greater flexibility in its capital management. Markus Hongler, chief executive officer Western Europe and Zurich Insurance, said: "Upon completion of all transfers, ZIP is expected to generate revenues of about EUR 11bn. "For Zurich as a Swiss-based corporation, a single EU-based risk carrier with branches in the EU member states is both capital and operationally efficient. It enables us to take advantage of the EU single market and regulatory environment."

Another one bites the dust

Just when insurers thought there was light at the end of the tunnel, the Ministry of Justice has taken away all hope of the personal injury claims reforms finally reaching a conclusion. However, it’s not all doom and gloom, according to the Motor Accident Solicitors Society (MASS). Following an announcement from the MoJ that their proposed implementation of the new claims handling procedure for road traffic accidents has been put back to April 2010, the chairman of the Motor Accident Solicitors Society (MASS), John Spencer said: "MASS has played an integral role in the discussions and negotiations to streamline the claims process. We have for some time expressed our concern at the short timetable that the MoJ had set itself and the implications this may have on the success of the scheme. "In order to ensure that this new process achieves the Ministry's aim of improving the efficiency of the claims handling process, it is vital that the new proposals are thought through logically and will work practically. At present there are still a number of issues outstanding and many 'grey' areas that still need to be addressed. It was becoming increasingly difficult to see how all these outstanding issues could be agreed and the new rules drafted for the Rules Committee for July. In addition, sufficient time had to be given to both claimant solicitors and the insurers to adapt their claims management systems and train their staff accordingly. "Consequently MASS is extremely pleased to see that the Ministry has put back the implementation date to April 2010. This sensible approach will ensure that all the necessary detail that is entailed in handling a road traffic accident claim is encompassed and sufficient time provided for internal system adjustments and training. Furthermore, there is still the essential issue of the new costs regime that will accompany the new process. "This is likely to be as important a factor, if not more, in the success of the scheme. Whilst the insurance industry have consistently campaigned for reduced costs, MASS maintains that this whole process must ensure that the claimant's needs remain pivotal. Consequently, in order to ensure the claimant receives access to quality and independent legal advice, the costs awarded must be set at a sustainable level. "MASS will continue to work extremely hard with the MoJ to ensure the new process can be finalised and that it will ultimately once implemented, give injured parties improved and sustainable access to justice."

Brown makes plaques promise

Insurers should be worried about more than a chocolate hangover after Easter. During a recent prime minister’s questions session, Gordon Brown said the government would make a statement on pleural plaques after the holiday – and his message could be considered a jab at insurers. In response to a question from MP Stephen Hepburn, Gordon Brown said: “Asbestosis is a terrible disease, and all those who suffer from it deserve the best of help from the public authorities. “It is right that we look again at this as a result of legal actions that have been taken about the obligations of insurance companies. The justice secretary will make a statement on this when we return after Easter.” The thing is, while pleural plaques – symptomless growths on the lungs – are considered harmless, they still signal exposure to asbestos. And exposure to asbestos also causes deadly lung cancer. Medical evidence has shown pleural plaques don’t lead to lung cancer but even just developing plaques – and knowing your employer put you at risk – is an emotive issue. And when something is emotive, it’s bound to be political. A group of MPs has been lobbying for pleural plaques to be compensable. Added to this, the Scottish government has passed a bill making plaques compensable. Now, the UK government is preparing to take its own stance on the issue. It wouldn’t be a surprise if it followed Scotland’s lead.

Fake claims

The ABI's latest fraud figures prove that people are more than williing to use their insurance policies as a way of bringing in some extra cash when times are tough. Here are some the most interesting fraudulent insurance claims made last year: Household insurance A customer’s coal fire exploded, showering her living room carpet with coal, but causing no damage. Several weeks later she claimed under her household policy for a large burn mark on her carpet, which it is alleged was caused by the explosion. However the burn was under her sofa. When asked to explain how a large ball of flame travelled past her and lodged under the sofa, the claim was withdrawn. Bogus or exaggerated injuries A man received £9,000 in compensation for a broken angle he claimed resulted from tripping over a pothole. However, further investigation revealed that the injury was actually incurred while playing football. He was jailed for nine months. A woman reported her husband for exaggerating his injuries following a car accident hours after he left her having collected a £385,000 compensation settlement. A keen amateur footballer claimed to be unable to work following a back injury. His fraud was exposed when a local newspaper carried his picture after he was named as his football club’s player of the year. Fake vehicle theft A policyholder claimed that his car had been stolen from a car park. The car was found at the bottom of the cliff, with no signs of forced entry. A local newspaper carried a picture of the car at the bottom of the cliff two days before the alleged theft. The policyholder admitted that he had pushed the car over the cliff, and planned to use the insurance payout to pay of his debts. Deliberate damage A claim for replacing a lounge suite following accidental spillage of paint was rejected when forensic tests showed that the paint had been deliberately applied. Medical costs that are not covered The ‘recovery expenses’ claimed by a man following an illness while holidaying in West Africa, were declined, as they were for ‘services’ at a local brothel!

GAB Robins denies sale is imminent

Loss adjustor says no due diligence is being carried out on the business. GAB Robins has moved to deny reports that due diligence is currently being carried out on the business. A spokesman for the loss adjustor said the business was not close to a sale and denied that it had reached due diligiance with a potential acquisitior. It followed earlier reports that Gab Robins was put up for sale by private equity owners Brera. Stone Point Capital, the private equity firm with a controlling stale in rival firm Cunningham Lindsey, has been widely tipped to merge the two companies.

Further job cuts at Allianz

Warning of redundancies as insurer plans move to internet-based direct sales model. Allianz Insurance could cut as many 90 roles as it looks to refocus its direct insurance operation. The insurer said it was looking to move away from its outbound telephone sales model towards online new business. The proposals would involve a reduction of around 90 roles at Allianz Retail’s offices in Bristol affecting call centre, HR, marketing and other operational support functions. This is likely to involve around 50 redundancies and the termination of 40 fixed-term contracts, the company said. Jon Dye, general manager of Allianz Retail Division said: “The capability to offer direct home and motor insurance has a central role to play in our strategy if we are to achieve our Retail objective of profitable growth to £1bn premium by 2013. These changes represent the best way to deliver that capability.” Allianz said its broker activities would be unaffected by any changes and Cornhill Direct policyholders would continue to be serviced through the call centre in Bristol. Dye added: “We will do everything we can to minimise the impact on our people and will seek to find suitable alternative employment for those affected. However there will inevitably be some redundancies and the termination of fixed term contracts. We will implement the changes in a way which supports our business partners and policyholders.” These plans are subject to consultation.

Government owns 58% of RBS

Troubled banking and insurance group RBS sold less than 1% of the new shares it offered meaning the UK government from today owns a controlling 58% share of the company. RBS sold just 55,977,458 new shares, representing approximately 0.24% of the total offered to shareholders. HM Treasury will take up the remaining 22,853,798,818 new shares, giving it 57.9% of the enlarged share capital of RBS.

Norwich Union to slash up to 1,800 jobs

A tenth of UK workforce to go in operational overhaul. Aviva-owned Norwich Union could cut up to 1,800, or 10 per cent, of its staff by the end of 2010 as part of plans to revamp its operating model. The announcement, which is part of plans first announced in October, will see a restructuring of the company’s operations function, a simplification of processes, and improvement of customer services. It is the second time in three years Aviva has announced a massive reduction in headcount, and comes just a day after rival Zurich announced cost cutting measures that could see up to 900 UK staff lose their jobs. In 2006, Aviva said it would be cutting 4,000 jobs by the end of 2007, with half coming from compulsory redundancies and the remained from staff turnover, redeployment, and voluntary redundancies. Norwich Union axed 200 IT staff in October, and 30 directors the following month. The company employs around 18,000 personnel in the UK. In February, following a £475m hit from the summer floods, the insurer posted a 2007 combined operating ratio of 106 per cent - the highest among the major insurers. Commenting on the latest developments Igal Mayer, chief executive of Norwich Union, said: "We are a very strong business that has grown over the years into a complex organisation. We want to deliver excellent, consistent and reliable customer service with market leading efficiency. To achieve this we will need to fundamentally simplify our business, consolidating our expertise into seven insurance centres of the future in the UK. “We need to fundamentally simplify our business, consolidating our expertise into seven insurance centres of the future in the UK.” Igal Mayer, chief executive, Norwich Union "This is a transformation that will take place over the next two years and will provide our employees with the products, processes and technology to give our customers and business partners excellent service, right the first time, every time." Norwich Union Insurance currently has offices in 52 towns and cities in the UK, 22 of which will be affected by these changes. In some cases specific buildings will close, with staff moving into smaller accommodation in the same towns and cities. The company said that after a number of mergers and acquisitions, its operations function has become complex, with too many products, processes, systems and locations. It said this makes it difficult to provide service excellence to customers and business partners and to optimise economies of scale. The seven new centres of excellence will be based in Norwich, Perth, Bishopbriggs, Stretford, Manchester, Leicester and Southend. Its operations function will be withdrawing from Dundee, Glasgow City Centre, Leeds, Sheffield, Liverpool, Cheadle, Birmingham, Bristol, Southampton, Basildon, Ipswich, Exeter and Worthing. This will happen a two-year period, the insurer said. The company will continue to maintain its broker trading presence across 40 UK sites.

Fighting fraud

More than one million Britons think it is not wrong to lie when making an insurance claim, according to a recent survey by RSA. It is time the insurance industry tackled this misconception. As everyone in the market knows, insurance fraud is not a victimless crime – it adds an estimated 5% onto every policy holders’ bill. As RSA’s counter fraud manager John Beadle says, the industry is now prepared to take a tougher line on fraud and, as technology develops, will be able to take greater punitive measures. He says: “If a person commits fraud on an insurance claim and is detected, other financial services companies, such as mortgage lenders and credit card providers, will know and that will have an impact on the success of the application.” The more such consequences are publicised, the more effective they will be. Hear more from John Beadle at the Fraud Question Time on the 12th of June

UK anti-fraud measures below global avg

Private UK companies employ fewer people to detect fraud than foreign firms. Only 37% of private UK companies employ specialists to detect fraud, compared with a global average of 45%, according to new research. Figures, released as part of Grant Thornton’s annual International Business Report, reveal that just 7% of UK businesses said they had increased staff involvement in fraud prevention in the past 12 months. This was one of the lowest rates in the world. The number of people involved in anti-fraud activity had increased by 12% globally. The survey covered 7,400 owners and senior managers in 33 countries, including 600 in the UK. Phil Crooks, head of assurance services at Grant Thornton, said it was well documented that in times of economic downturn fraud tended to increase and the figures should be a wake-up call for both the accounting industry and business owners that fraud prevention must be a greater priority. “The coming 12 months will be a good indication of whether the UK has been complacent, or has matched the threat with the appropriate level of resource,” he added. In another recent Grant Thornton survey of UK audit partners, internal controls were deemed the most common fraud detection measure, but many UK companies appeared not to be heeding this advice. Crooks said: “People often associate fraud with the theft of cash or assets, but it is far more common to see accounting fraud caused by managers under pressure to deliver a certain result – beyond trying to protect their jobs.” Ken Sharp, Grant Thornton international global leader for assurance services, said: “Globally, fraud costs businesses billions of dollars each year. Whether specialists are employed or not, processes should be in place to ensure that potentially fraudulent activity is caught in the early stages.”

Solicitors face fraud probe

The Insurance Fraud Bureau is investigating ten solicitors’ firms along with dozens of accident claims handling companies for alleged fraud, the Times newspaper reports today. The alleged fraud involves law firms paying kickbacks to claims handling companies for work. A move that is legal if carried out in an open and transparent way, however some of the claims processed turn out to be fraudulent. The law firms involved may be unaware that the claims being made are fraudulent but could still be found guilty. The Insurance Fraud Bureau's head of unit Sue Jones has urged the partner of law firms to keep accurate records of clients and cases referred to them by the claims companies.

Is it the end of RBS Insurance?

Ever since it initiated a restructuring that resulted in the cull of over 100 managers and the realignment of its competing brands, it was all too tempting to conclude that RBS putting its insurance division up for sale was an inevitable move. All that was required, sources said, was a catalyst. A £6bn sub-prime writedown, followed by the largest rights issue in UK banking history should suffice. Yet what is much more difficult is to demonstrate with any degree of certainty which elements of RBS' £5.2bn GWP division will be off-loaded, to whom, and for what price. Given that RBSI includes two of the strongest brands in the UK market in Direct Line and Churchill (and with it, almost a third of the £10bn private motor market) it being linked with virtually every insurer on the face of the planet is not surprising. Certainly, under fire chief Fred Goodwin’s statement that he receives a phone every month from prospective buyers has put the rumour-mill into overdrive. Not that he needed to say anything. No one disputes the overall quality of RBS' insurance assets. And from strategic fits (along either new or existing lines) to building a stronger presence in the UK, it is easy to build a case for all those with which it has been linked. But at this stage, no one candidate is an overwhelming favourite to buy the business as a whole. Should the business be split and sold, however, it is a different matter. “RBS are hedging their bets on how much of the business it is has to sell. At this stage, it looks as though it could just be NIG.” Source close to RBS The group’s broker-only arm, NIG, has been on the block for the some time. The front-runner in the race appears to be AIG, keen to grow its presence in the small-end commercial market, in which NIG is a key player. Despite two years of instability caused by senior staff departures, questions over its service to its brokers, and its reported business losses last year, it still has a strong reputation. Given that RBS has assets across the globe it is more willing to divest than RBSI, hiving off £500m GWP NIG could be a natural play for them. “RBS are hedging their bets on how much of the business it is has to sell," A source close to the company says. "At this stage, it looks as though it could just be NIG.” "NIG’s separation from the rest of the insurance division would make it an obvious target for a sale," an analyst at a major consultancy adds. “NIG is not as well established as Churchill and Direct Line. It has gone through about half a dozen owners in a 20 year period. It’s very unsettling for an organization." “AIG are blowing hot and cold on the UK market,” says another. “Europe is a big gap for them. They have a commercial lines hub in Paris, and could be looking to add one in London. They should not be ruled out.” “RBS do not want to sell an asset that they value.” Chris Hitchings, Keefe Bruyette & Woods On the other hand, Direct Line’s early – and extremely successful – forays into the SME market could tempt AIG to make a play for the whole business. It will certainly perk the interest of other suitors, such as private equity, who see a big upside in building new distribution models. All that being said, it is important to note both analysts' and RBS’ language. The bank has said it needs to raise £4bn in tier 1 capital; a chunk of that will come from the proposed £3.5bn sale of Angel trains. Goodwin also told the press on Tuesday that other options could be to sell a stake in the business; again, see private equity, or perhaps an investor from the Middle or Far East. Then there is the less glamourous option of not selling it at all. Chris Hitchings, analyst at Keefe Bruyette & Woods, says: “RBS don’t want to sell an asset that they value. And they need the cash now. It would take months to conclude a sale.” But other sources suggest that the bank may not necessarily have a choice. Ironically, when RBS bought Chruchill from Credit Suisse for £1.1bn in 2003, it was to shore up a hole in its own balance sheet. Whether it wants to or not, RBS may have to pass the torch. Ultimately, however, the majority of experts suggest that RBS has enough irons in enough fires to allow it to hold on its heavyweight insurance brands. Despite its needs to raise the capital, precious few suggest it is in a weak bargaining position. Furthermore, were it to sell the division it would fetch a price of £5bn at the very least, and closer to double that sum. In the meantime, then, it looks a given that both Goodwin’s and Direct Lines' phones will remain engaged.

Zurich’s view of the future

Following the release of Zurich’s 2007 UK results, which revealed flat premiums of £2.06bn, flood-hit profits of £91m and a combined operating ratio of 104.8%, Tom Flack asked chief executive Guy Munnoch 12 key questions. 1. What is your feeling about Zurich UK’s results? “Our premium result was strong. But for the change in your pocket, it’s a level movement. In a market that is shrinking by around 4%, that is relative growth. “But for the floods, we would have improved our profits and our combined operating ratio on the previous year. A benefit for us is that we took our time in assessing our flood losses, whereas some of our competitors are adjusting their results because of theirs. “There is no embarrassment in terms of the UK performance. It’s been a good year for the group, for the European business, and for the UK business – and we want to shout about it.” 2. Do you see any signs of the market hardening? If so, how will it affect Zurich’s rating strategy? “I see no evidence yet of hardening. On the personal lines side, post-flood consumers will acknowledge that movement is appropriate. On the commercial front, I would like to think fleet will be the first to move; my sense would be in the second half of this year. “The Zurich attack on underwriting has been measured and controlled, and has gained an upbeat reputation. The market has gone into a deep trough, but we haven’t taken it down to the point others have. When the upturn comes, our pricing upturn will be less than theirs. It’s good for the market and the shareholders. “Looking forward, the onus is on both broker and insurers alike. If we do not take action, it will become totally unsustainable.” 3. Zurich has been criticised for its lack of focus, in particular its distribution strategy. Can you set the record straight? “Our strategy is multi-distribution, multi-segment. If you say it is unclear, I would say actually it is the market that is unclear. Ask the question of AXA or Allianz and their answer would be the same. Only the likes of Tesco and Direct Line have pinned their tails to the donkey. “The real opportunity is making bold assumptions as to how distribution will emerge. My sense is that with brokers, direct writers, portfolios, MGAs – all the various routes to market – then the future of distribution compared to how it currently stands will be significantly different in three years.” 3. Zurich was recently ranked 14th out of 17 major insurers in Newsquest Specialist Media’s research on broker service. Has the Broker Alliance Programme, launched last year, improved service? “Over the past two to three years, most insurers have decreased the number of brokers to whom they give differentiated service. In the past 12 months, we have bucked that trend. “Zurich works with 3,000 brokers – 600 of them are part of the Broker Alliance Programme. We have broken it down so those brokers that do not fit into the community to which most insurers pitch we provide with a differentiated service – for both them and each successive level down. We have spent a lot of time segmenting brokers, then creating a value proposition applicable to each segment. “Service to brokers is about renumeration, service, support and access. It’s one thing, for example, to have access to an account manager. But all 600 members of our programme have access to an underwriter as well. The ‘flash to bang’ of information tends to be slow. Until this programme was in place, the view of Zurich could have been one of confusion because of our expertise in different fields – but the response over the past year has been excellent.” 5. In recent years, Zurich has struggled to grow its personal lines business. Is that still the case? “That’s a fair point. In the past six to eight months we have created a focus, I would agree, that was not evidenced in the past. That focus, both in terms of leadership and proposition, delivered strong growth in the second half of last year. Our motor book is now worth half a billion pounds. “To deliver that we put in place full-cycle EDI, added new home products. We created the infrastructure to support the leadership. In the past 18 months, we have also created a single sales force and we’re seeing opportunities for our commercial clients to use us for their personal lines. “So we’re on the front foot – and delighted how it’s gone in the second half of 2007.” 6. Looking to 2008, in terms of growing the business will you continue what you have started, or do you have other plans? Does this include acquisitions? “Our focus is on organic, not inorganic growth. But if a strategic opportunity arises, we shall exploit it. “In terms of growing the business, our property investors, construction, private clients, navigation and general – where we are market leaders – will continue to grow. “Other areas where we see an opportunity is where we can sub-segment the business. This includes food and beverage, sports, leisure and entertainment, and charities. It’s about not wishing to spread our underwriting footprint too broad, but recognising that where there is a need, we will fill it.” 7. You talk about segmenting the business further. Is there not a danger you are attempting to be all things to all men? “No, no – quite the opposite. That is what sub-segmenting is all about: you focus on a distinct part within a market. We do not enter markets where we do not feel there is a growth opportunity to be found. “Take our new marine cargo business. We recognised a gap in our armoury. The business has already gained significant traction in a small time. “Overall, in the past 12 months, we have seen double digit growth in all areas where we have that focused approach.” 8. Are you concerned that more and more power is being channelled into the hands of distributors? What are your thoughts on tied agencies? “The clarity of the environment in which we insurers operate is changing. Is this good or bad? Well, recognising there is vertical integration, there is an opportunity for both manufacturers and distributors to enjoy the proposition. It’s just a changing relationship. If that comes with a higher commission, so long as distributors are providing more service, the system can work. “I’ve seen more change in the past year, and there is more change to come in the next two or three years, than will have been evidenced in the past 30 years. That cannot be bad for the industry. Buying behaviour has changed, and so distribution must change. Insurers that are creative, innovative and nimble will be the ones to succeed. That is why we are clear about which spaces we chose to occupy. “As for tied agencies, though they haven’t taken root in the UK to date, there is no reason why this movement should be denied, as long as conflicts of interests are clearly mapped out. For some insurers, it may be a route if that is the natural progression of changes in distribution.” 9. In this current climate, is there a chance that there could be a high profile insurer casualty down the line? “I think that’s a fair assessment. I also think it is a European question. If you look at the number of large European players, one could speculate that there are too many insurers with too little market share. So there could be consolidation on a European basis. Insurers buying insurers has been talked about for as long as I’ve been in the industry – though it hasn’t happened.” 10. Looking at the market from a European perspective, is there a distinction between Zurich UK and European businesses? What can be learned from the European insurance model? “We have absolute alignment with UK and Europe, where we now serve in 11 countries. “I sit on the European board. You can be more informed about distribution when you have the broader European lens to look through. Naturally, you will have different elements in different countries. “You have to recognise that the UK is a mature broking community. We also have a different business make-up in the UK from Europe: in the UK, the business is split 40/60 in favour of commercial lines; in Europe it is the opposite. When you talk about the distribution landscape is changing, you always think UK. But if you lift up a level, you recognise that across Europe it is different, where you find tied agents, not brokers. Across Zurich’s European business, the split is 50/50.” 11. If you could be a superhero who would it be? I would have to say Ranulph Fiennes. There’s a lovely quote: ‘The definition of leadership is that perfect blend between nobility and humility.’ To me [Fiennes] has both in spades.” 12. What do you do to relax? “I like to exercise. If it’s in the blood, you can’t get rid of it. I survive on Mars bars. I’m going to run 16 miles in the morning.”

UK earthquake costs at £30m

The earthquake that struck Market Rasen in Lincolnshire yesterday is likely to cause insured losses of between £15m and £30m, according to initial estimates by Risk Management Solutions (RMS). Despite the location of the earthquake’s epicentre, most of the damage was sustained some 18 miles away in Gainsborough, where residential and commercial properties were affected. The concentration of damage in the southern area of the town is likely to be a result of poor soil conditions, which are known to amplify the impact of earthquakes, and weaknesses in the buildings. The magnitude 5.2 earthquake could be felt across a wide radius, but created relatively low-level ground motions. “The damage caused is largely a reflection of the vulnerability of buildings, rather than the strength of the earthquake,” commented Dr Andrew Sorby, model manager for Europe earthquake at RMS. “Had the same event occurred in an area like California, where earthquake risk is high and properties are built to withstand ground-shaking, the damage would have been minimal.” For example, a similar magnitude earthquake in California in October caused very little damage, with only a few cracked windows reported. Many UK properties are made of masonry, which makes them more prone to severe cracking during earthquakes compared to wood-framed buildings, for example. The damage resulting from the Folkestone earthquake in April last year – reported to be between £20m and £30m - was concentrated in a small residential area consisting of mainly Victorian properties, which tend to be more prone to damage. Earthquake insurance is included as standard in most homeowner and commercial business policies, together with wind and flood risk. “Since the summer floods, which affected many of the same areas impacted by the earthquake, more people are likely to have taken out insurance to protect their properties, so most of the damage from this earthquake should be covered,” added Sorby.

Zurich global net income soars by 22%

Zurich has reported an increase in net income of 22.3% to $5.6bn. The company's general insurance business saw gross written premiums and policy fees of $35.7bn up 4% on the previous year. It's combined ratio of slipped by 1.7% to 95.6%. In a statement Zurich said it had experienced strong growth in its personal lines business and had continued to enhance its distribution capabilities. Despite softening rate environments in the US and UK, the insurer said it had succeeded in improving its business operating profit 6.4%, aided by a retention rate of 90%. Zurich said: "While overcoming extreme weather in Europe, General Insurance leveraged selective growth and continued application of 'The Zurich Way' to increase its business operating profit by $220m to $4bn." The inusrer said that winter storm Kyrill and the UK floods had led to a 2.5% increase in loss ratios, while increased investments, changes in business mix and higher commission levels had added 1.3% to the expense ratio. It said: "Reserve releases from earlier years had a favorable impact of 2.8 percentage points compared with 2006, leading to an overall combined ratio of 95.6%, an increase of 1.7 percentage points." The company said that it expected the ongoing execution of transformational changes to its business and "conservative reserving practices" to have a positive impact on both the loss and expense ratios. Zurich’s chief executive officer James Schiro commented: "We may be operating in a difficult market environment, but the strength of our balance sheet, the diversity of our risk portfolio and our ability to execute on our strategy delivered excellent results in 2007, and make us confident in our ability to continue driving success going forward."

Crash annual turnover rises to over £7m

Accident management company Crash has announced an increase in turnover of 60% to £7.1m. The number of non-fault accident cases that the Northern Irish based company handles have increased to 100 per week, up from 60 per week in 2006. Last year, the company announced a three-year investment plan worth £750,000. Managing director Michael McKeown said: “Our increased business is a result of heightened awareness about what we do. Our message is simple - we are not an insurance company – we work on behalf of motorists and manage the claim on their behalf. We are on their side.” Tony McKeown, sales and marketing director added: "There has been a major shift of attitudes in the insurance market here. Many Insurance companies have reduced their claims staff in Northern Ireland and this has created an opportunity for us. "The FSA is putting a greater emphasis on its treating customers fairly’ initiative."

ABI reiterates flood plain warning

The ABI has said that a third of the three million new homes the government plans to build by 2020 will be built on flood plains. Last summer's floods have cost the industry over £3bn. The ABI said that 13 major developments have been approved by the state in the past year, despite Environment Agency advice against it. Seven of the sites have been deemed high flood risk. The ABI's assistant director of property, Justin Jacobs said: "The government's ambitious housing plans are in jeopardy unless we reduce the flood risk." The association repeated its call that the government should intervene in the event a local authority plans to ignore flood risk advice, and publish their decisions. Jacobs added: "Insurers want to continue to provide flood cover, but poor planning decisions will lead to more homes becoming unsaleable, uninsurable and uninhabitable."

AXA calls for police focus in fraud

Police do not have suffcient resources to reduce fraud effectively, says insurer Insurance giant AXA is calling on the Government to treat fraud more seriously and to focus police resources to fighting this problem. The insurer argues that at a national level the police do not have sufficient resources to deal with fraudulent cases and that many are being pushed down to a local level where they are all too often dealt with ineffectively. The announcement was made at fringe meetings held during the Labour and Conservative Party Conferences held by the insurer on 23 and 30 September, to promote discussion and raise awareness of the issue of insurance fraud. Advertisement Insurers are making big investments to address fraudulent activity, exposing and stopping frauds worth over £400m in 2005, an increase of 50% compared with the previous year. However, organised insurance fraud continues to thrive with AXA’s analysis of industry data suggesting that suspected induced motor accidents or “cash for crash” scams are continuing to increase and could number 40 per day over the next 18 months if left unchecked. The fringe meetings, which were chaired by Keith Vaz MP, the new chairman of the Home Affairs Select Committee, and Henry Bellingham MP, shadow minister for Justice, looked at the growing threat of fraud and the efforts being made to combat it. There was particular focus on the government’s reaction to the recommendations of the Attorney General’s 2006 Fraud Review, and on the impact the Insurance Fraud Bureau (IFB) has had a year on from its inception. Richard Davies, fraud risk manager at AXA and one of the speakers at the event, said: "In the last twelve months there have been some significant developments in the fight against fraud, but we don’t think they’ve gone far enough. The purpose of these events is to stimulate further debate and draw attention to what still needs to be done. "At the moment the police do not have the resources to deal with fraud at a national level. Cases of fraud are therefore pushed down to local resources, where for logistical reasons investigations are often not pursued. We think that the most serious fraudulent activity needs to be dealt with more severely and that prosecution of fraudsters needs to become more commonplace. The fact our events were so well attended is testament to how important an issue fraud has become for insurers and their customers."

Motor claims inflation fear

Claims inflation for motor personal injury claims could rise to unsustainable levels, a report by the IUA and ABI has warned. Massive increases in government clawbacks for health and social care have already prompted rises. Advertisement The Fourth UK Bodily Injury Awards Study showed that awards for personal injury have increased at a rate of 9.5% per annum over the past 10 years, to almost £2bn per year. Though the rate of claims inflation has fallen to 7% over the past three years, impending legal changes – including the law on damages, rising costs of care and rising numbers of whiplash-related claims – could see the bill rise further. Government reimburse-ment for all personal injuries, the majority of which are motor related, have increased from £105m in 2002/03 to £128m in 2006/07. In addition, for every £1 paid out by insurers, a further 43p goes on legal fees – up from 30p in 2005. The report also found that the number of claims has increased by 3% per annum, between 1996 and 2006, despite the total number of road traffic accidents falling by 20% in the same period. Claims over £5m have also increased by 30% per year since 2002.

Motor body claims rise over £2bn per yr

Research shows continuing claims inflation despite fall in deaths and injuries The total cost of bodily injury claims paid by UK motor insurers has significantly outstripped inflation over the past decade, according to the fourth UK Bodily Injury Study. Claims inflation was 9.5% a year between 1996 and 2006 – more than double the growth in average earnings. Over the last 20 years, claims costs have risen by 840%. The report, commissioned by the International Underwriting Association (IUA) and Association of British Insurers (ABI), also reveals that the number of claims jumped 3% a year between 1996 and 2006. This is despite government statistics showing the number of people killed or injured on British roads fell by 19% over the same period. Advertisement It is the cost of the largest motor bodily injury claims that is increasing most dramatically. The decade up to 2006 saw claims inflation of 6% a year for cases less than £80,000, but 10% for claims of more than £80,000. Furthermore, costs per insurance policy for claims of more than £5m have jumped by an estimated 30% per annum over the last five years. There are now more and more very large claims emerging with the market currently handling three cases greater than £15m and one uninsured driving claim estimated at £20m. The rising cost of claims has resulted from various legislative and legal changes including the introduction of insurers having to routinely reimburse the NHS for the cost of treating motor bodily injuries, increased life expectancy in calculating compensation and growing amounts awarded to fund care regimes. Possible changes to the law on damages and an increased take-up of periodical payments could both lead to further claims inflation in the future. The cost of medical treatment has also risen faster than average inflation. Dave Matcham, Chief Executive of the IUA said: “Our latest research shows that the increasing cost of motor bodily injury claims is not a recent phenomenon. This is a trend which has now been sustained for decades and shows little sign of abating. Ultimately, however, such increases are unsustainable.” Stephen Haddrill, Director General of the ABI, said: "These figures underline the urgent need for reform of personal injury compensation. Genuine claimants need to get their compensation and have access to rehabilitation more quickly. Key to achieving this is reducing legal costs, which now account for 10% of every motor premium. The Government needs to implement its reform proposals quickly so that the genuine claimant is placed at the heart of a streamlined, cost-effective process" Other findings from the Fourth UK Bodily Injury Awards Study include: Legal costs funded by insurers have continued to rise much faster than National Average earnings. Insurers pay lawyers 43 pence for every £1 of compensation that goes to claimants. A growing use of rehabilitation by insurers has gone some way to helping control the cost of claims, but rehabilitation is still far from being a routine part of the bodily injury claims process. The speed of settlement of claims above £100,000 has increased substantially to the benefit of claimants and insurers alike. Uninsured driving costs around £500 million a year, or around £30 for every motor insurance policyholder.

Insurers count the cost of earthquake

Insured losses from the earthquake which struck Kent in the early hours of Saturday morning are expected to result in tens of millions of pounds worth of insurance claims, while homeowners in the affected area face the prospect of higher premiums. At around 8:18am on Saturday 28 April the largest earthquake to hit the British Isles since 2002 struck Kent. The quake reached a magnitude of 4.3 on the Richter scale causing serious damage and disruption. The quake’s epicentre was a few miles off the Dover coast but damage to property was centred on the Black Bull road area in Folkestone (an area which is also prone to flooding). Loss adjuster GAB Robins reported emergency instructions from a number of clients as far out as the M20 and tremors were felt across East Sussex, Essex and Suffolk, with cracks appearing along the Hampshire seaside cliff top. The tremors caused damage to hundreds of homes as well as vehicles. Partially collapsing chimney stacks damaged roof coverings and triggered falling debris which struck vehicles parked on the street below. Most internal damage was confined to very minor cracking (usually at the junction of the ceiling and walls on the first floor). Earthquakes, like tornadoes and floods, fall under the category of natural disasters, and as such will be covered by standard insurance policies. Many of the major insurers are thought to be involved. Lloyds TSB insurance said that it has over 2,000 customers in the affected area and has so far received claims for collapsed chimneys and damage to outer walls, driveways and pathways. According to the ABI, the earthquake could result in tens of millions of pounds worth of insurance claims. Previous estimates of similar earthquake damage have put the cost at between £2,000 and £3,000 for each property. Stuart Sealey of Davies loss adjusters, who assessed the damage over the weekend, said he expects around 100 claims varying between £3,000 and £30,000. “I wouldn’t be surprised if the damage reached £50m,” said Ray Johnson, proprietor of Folkestone based Independent Insurance Services. “The damage is a lot greater than people think. My own house has quite a few cracks. One dentist in the area had his chimney pot fall off his house and the top of his building is now cracked. My colleague’s father, who lives in Hawkinge, has a crack running right up the front of his house.” Johnson thinks homeowners could see an increase in rates following the disaster as some insurers lump the affected zone (postcode CT19) in a higher risk band.

Earthquake claims

The earthquake which struck Kent in the early hours of Saturday morning could result in tens of millions of pounds worth of insurance claims, according to the Association of British Insurers. The earthquake, which hit 4.3 on the Richter scale, caused structural damage to hundreds of buildings in the Folkestone area of Kent, with many homes currently uninhabitable. Damage was also caused to a number of vehicles. Early estimates suggest that claims from the disaster could reach the “low tens of millions” with the majority of the losses stemming from the Folkestone region. Earthquakes, like tornadoes and floods, fall under the category of natural disasters, and as such will be covered by standard insurance policies. Six people were injured and a number of properties damaged when a freak tornado tore through a street in North London, in July 2006.

Insurance fraud seen as a serious crime

Nearly one in ten adults (8%) admit to making fraudulent insurance claims, according to a recent consumer survey by Experian. The survey aimed to uncover consumer attitudes towards insurance fraud and has found that the majority of the population (91%) firmly believes that insurance fraud is a serious offence, but only a relatively small proportion (14%) would definitely report someone who had actually committed insurance fraud. David Murby, managing director of Experian’s Insurance Services division, said: “The survey revealed that people are well aware of what constitutes insurance fraud and consider it a fairly serious crime, which is not victimless, but they see it as a crime against an organisation rather than an individual and, as a result, appear less likely to report it. Overall, there is a perception amongst the public that the cost of insurance is high and the benefits are rarely seen. Consumers feel that they want to get value for money from their insurers so many, when making a claim, are likely to exaggerate it in the belief that the chances of getting caught are minimal. David Murby added: “Fraud is a relatively new specialist area in insurance companies, with fraud itself previously being viewed primarily as exaggerated claims. However, insurance fraud is evolving, and there has been a significant upsurge in organised fraudulent activity with complex fraud rings, new types fraud, such as ‘slam-ons’ and staged accidents, contributing to higher premiums and greater pressures on the insurer-customer relationship.”

Co-op singles out young speeders

Two in three young people say they have been a passenger in a speeding car, and more than half of those put their lives at risk by not asking the driver to slow down, new research has found. The Brake and CIS Co-operative Insurance (CIS) research questioned 4,500 young people aged 15 to 25 and 65% said they had been a passenger in a car driven at more than 40mph in a 30mph limit or more than 70mph on a rural road. Of these, only 42% asked the driver to slow down. The government recently identified the issue of young driver safety in its Road Safety Strategy Review and indicated it would be overhauling the driving test. Jools Townsend, head of education at Brake, said: “Too many people have died due to a deadly combination of inexperience and recklessness among many young drivers. More will die if positive steps are not taken immediately to educate young people and reform the learning to drive process.” David Neave, CIS director of general insurance said: “As a responsible insurer our role isn’t just about picking up the pieces when dealing with the resultant claims. Our message is clear – let’s stop the growing number of fatalities.”

Fortis begins new whiplash study

Fortis is to begin a further study to determine whether physiotherapy has a positive effect on whiplash claims after an earlier study found there was no benefit. The insurer's claims director, Rob Smale told Insurance Times that the company was to undertake a second pilot programme examining the impact of the treatment on 500 whiplash claims. An earlier study on 1000 claims found that physiotherapy did not provide any commercial benefits and in fact increased claims costs. Smale said: "The earlier study revealed that it costs us more, as the claims settlement was not reduced." He said the second study would look to determine whether the same results were found. There have been mixed reports from other insurers on the benefits of physiotherapy on whiplash cases. Alliance Cornhill found little cost benefit from using the treatment as the medico-legal reports "did not reflect the intervention". In contrast, Norwich Union reported "tangible" benefits on the treatment of whiplash claims using rehabilitiaton techniques from its million pound study. Last year, AXA also said its studies showed that rehabilitation improved settlement times in whiplash cases, although it did not reduce claims settlements or legal fees.

Equity launches household policy

Equity Red Star has developed a new household insurance policy. The insurer’s Coral product is bedroom-rated and offers buildings cover of up to £400,000, with £40,000 on contents for properties of up to five bedrooms. Equity is making the policy available to Open GI and SSP users via full-cycle EDI. Jane Coppard, Equity household manager, said: "Brokers also will benefit from easier processing and the associated time savings provided by full-cycle EDI."

Biba rejects separate claims regulator

Biba has come out against a two-tier regulatory system for claims management companies. The industry body was reacting to the parliamentary debate about the draft Compensation (Exemptions) Order. Biba chief executive Eric Galbraith said: “While the regulation of claims management companies is to be welcomed in today’s environment, it seems nonsensical to create a second tier of regulation for an intermediary sector that is already regulated by the FSA. “Biba has already raised this with the DCA, and will continue to campaign for better regulation. However, while the Department has recognised this issue, the Act continues to place an unnecessary burden of regulation on intermediaries.”

Allianz creates claims team

Allianz Cornhill has established a team of claims business consultants. Following a successful pilot, the insurer has appointed Nick Collins and Nicola Erskine to the team, with three more appointments coming over the next few months. Operations manager, Emma Louise-Knight said: "The creation of these roles means that we can help our colleagues win and retain business by ensuring we fully understand our customers' individual claims handling needs." Sharon Collins, of car dealer Dixon Motors, an Allianz Cornhill client, has endorsed the improved service offered by the claims business consultants. She said: "Since Nicola Erskine has taken on the role of claims business consultant, I have seen a great improvement in our broker/insurer relationship. She works very hard to ensure that information is made available in time for claim review meetings and any queries arising from these meetings are acted on very quickly and efficiently. "In creating this role Allianz Cornhill has demonstrated that the relationship with their clients is important to them and ensuring clients are happy is a priority."

Equity hire new claims MD

Equity Insurance Group has appointed Phil Anderson as its new Claims Managing Director. Anderson has joined Equity from Royal Bank of Scotland Insurance (RBS Insurance) where he was Director of Customer Assistance Services. He will be responsible for more than 3,000 staff and will also become a member of the company’s executive committee. Anderson said: “Effective claims management is vital in delivering a professional, fair and responsive service. Neil and his team have placed outstanding customer service at the centre of their strategy, and I am pleased to be joining them at this time.” Neil Utley, chief executive of Equity, added: “We are delighted to welcome Phil to Equity at this important time in the development of the Group. Phil’s experience of the claims sector will support our expansion plans. Phil will work closely with the existing claims management in order to improve still further our strong claims record.”

R&SA appoints global broker director

Royal & SunAlliance (R&SA) has appointed Mark Holweger to the newly created role of global broker director, with immediate effect. Holweger, who was previously director of personal intermediated business at the insurer, will be responsible for the business from the major national brokers. He began his career in insurance with Commercial Union on their graduate recruitment programme, working across the commercial and personal arena. He moved to AXA in 1999 as director of corporate partnerships. In 2005 Mark was appointed as director of personal intermediated business at R&SA. Brendan McManus, managing director of R&SA's broker division, said: "With his background in both commercial and personal lines insurance, Mark will bring his wealth of experience to help us achieve our challenging growth targets. "Mark's appointment follows the reorganisation of our Commercial business in May this year, moving towards an integrated broker relationship structure with single points of contact."

MMA appoints head of underwriting

Paul Hodgson has left Royal & SunAlliance to join MMA as head of underwriting. In his new role, Hodgson will lead MMA's development within commercial lines, with particular emphasis on diversifying the insurer's property portfolio.

NU attacked over injury claims

Claimant law firm Russell, Jones and Walker has launched a scathing attack on Norwich Union (NU) over its proposals to raise motor rates. This week NU announced it will increase motor rates by an average of 16% blaming rising personal injury costs for the move. But Russell, Jones and Walker managing partner, Neil Kinsella, said this was a "knee-jerk reaction" caused by the fact that NU, he claimed, had failed to engage with the government's moves to reform the compensation system. Kinsella called on NU, Britain's largest motor insurer, to be more transparent in how it makes money from personal injury claims. "Are NU extensively involved in encouraging claims capturing and therefore benefiting from the system it now criticises?" he told Insurance Times. "They dare not explore legitimate alternatives for fear of being found out about how huge revenue streams are derived from fees gained from selling cases to solicitors to sue other insurers." NU hit back at the accusations and said it had seen significant increases in the amount it was paying in legal fees on personal injury claims in the last six years. A spokesman said: "In 1999, 25% of the money spent was for personal injury claims. In 2005 this had risen to 45% - of that figure 35% goes on legal fees." Dominic Clayden, NU technical claims director, said the insurer was looking across the market at "offerings for tactical means" of changing how it handles personal injury claims. Clayden said: "We are working at a system level with government, increasing the number of claims we handle without lawyers, and looking at our claims process. "We would like to see lawyers removed from all claims below £5,000, and would be delighted if Russell, Jones & Walker supported that move."

Job fears in Link & Zenith review

Staff at personal lines insurer Link and Zenith face an uncertain future after the company announced that it intends to close two of its six offices. The insurer will consolidate both its Maidstone and West Malling offices under one roof as well as two offices in Haywards Heath. The company said that all staff would be affected by the restructuring, which will be implemented by early 2007. Steve Tidd, chief executive of Link and Zenith, said: "It is too early to say who will be affected in terms of individuals or teams. But, what I can say is that we are going to review the company's entire operations, and we will be restructuring and streamlining operations to better position our business to ride out the ups and downs of the UK insurance cycle." The restructuring is part of a review programme of Link and Zenith's entire product range following the acquisition of Rubicon Insurance Solution's Maidstone operations. Link and Zenith currently offers 21 different products to intermediaries with many targeted at similar markets. Tidd said the intention was to merge some of those products, including motor and home, which would halve the insurer's offering while moving specialist products on to full cycle EDI. "Now that our administrative operations are under the control of Zenith Services UK, we need to give greater focus to our product range," Tidd said. "We are committed to providing quality products at competitive prices for our intermediaries. "It is important that we review and re-engineer our current product range to create a highly competitive offering that not only meets the needs of our partners, but also provides strong returns," he added.

AIG Affinity pushes into health

AIG Affinity is set for a major push into the health and protection affinity sector. The insurer is gearing up to grab 10% of the market, which is expected to be worth £660m within three years. "In the modern market you need to have the breadth of distribution," Mike Caidan, head of AIG Affinity, said. "We see the UK affinity market as a major opportunity for growth." The company plans to target growth across the banking sector by persuading them to sell low cost cover. Caidan said there had been a gap in the market for low cost premium with many banks preferring to focus on personal lines. The push on health and protection will see the insurer relaunch a range of products, including health cover and female cancer income protection. "These are not full blown private medical insurance products. What we are offering is peace of mind," added Caidan. Emphasis was on the need to retain a strong customer base, Caidan said. "We want to drive revenue growth through expertise and innovation, and resolve our customer issues through researching their needs."

Equity in affinity deal with Ryanair

Equity Insurance Group has announced an affinity deal with Ryanair to provide its customers with car and home insurance products. Ryanair's UK customers will have access to the insurance products via the website. The deal represents a further expansion for Equity in the affinity marketplace, following a number of recent announcements, including partnerships with brands such as Chevrolet, Skipton Building Society, and Cardif Pinnacle, as well as the recent deal to acquire the rights to renew Legal and General's entire car insurance customer base.

AIG Q1 profit slips 16%

AIG has reported that first quarter net income was $3.2bn, down 16% from a year earlier when it made $3.8bn. Excluding net realised investment gains and losses and certain accounting changes, AIG said it made $3.38bn, up from $3.23bn in the same quarter of 2005.

R&SA Q1 profits rise 29%

Royal & SunAlliance (R&SA) said pre-tax profit for the three months to 31 March, surged 29% to £207m, overthe same period last year, and ahead of the average analyst forecast of £193m. R&SA said the improvement reflected an efficiency drive that has so far reduced annual costs by £250m. R&SA said it had also benefited from a 4m insurance profit at its discontinued US operations, reversing a £14m loss a year earlier. Net written premiums for the quarter were unchanged year-on-year at £1.4bn. The combined operating ratio stood at 91.6% in the first quarter, little changed from 91.8% a year earlier. Chief executive Andy Haste, said: "Our key objective is to deliver sustainable profitable performance and each of our core businesses have again delivered strong results". R&SA shares are currently up 1.96% at 143p.

Crashed jet insured at Lloyd's

A commercial airliner that crashed into the Black Sea early Wednesday morning, killing all 113 on board, was insured in the London market, according to reports. The Armenian Airbus A-320 was covered by Lloyd’s Syndicate 318, the MSF Pritchard syndicate, which is managed by Beaufort Underwriting Agency. The plane’s hull was insured for $25m, according to market sources. The cover includes a combined liability limit of $750m. The broker for the policy was London-based United Insurance Brokers, sources noted.

New 'back to work' rehab service

Back to work provider PMA has established a joint venture operation with rehabilitation experts Independent Case Management Consultancy (ICMC) to offer a rehabilitation and 'back to work' service. Fit2Work will initially be provided to the payment protection claims sector of the insurance market, "targeting those claimants where a case management approach will make a positive difference in achieving an earlier return to employment". The company said the service would "substantially reducing accident and sickness-related absence and reducing claims costs". PMA’s managing director Mike Ison said: "By combining our skills and services we’re providing claimants with a managed solution – getting the claimant physically ready to work and providing him or her with the opportunity to work."

Let FSA regulate claims, say insurers

Pressure is mounting on the government to name the FSA as the new claims regulator, after two of the UK's largest insurers backed the body. Amid rumours that the Claims Standards Council (CSC) will not become the statutory regulator, Norwich Union (NU) and AXA have backed the financial services watchdog extending its remit to regulate claims management companies. This is the first time that NU has publicly given its support to any body to become the claims regulator. NU head of technical claims Dominic Clayden said: "The FSA has credibility and there is the tie-up with insurance, such as after-the-event insurance. "It would also give consumers the opportunity to go to the FOS [Financial Ombudsman Service], as it is not clear under clause two [of the Compensation Bill] where a consumer goes to get redress. Under the FSA there is a clear model for where consumers can go." AXA claims director David Williams, who has been a supporter of the CSC, said this week: "I would love the FSA to take over as regulator tomorrow. It has the rigour and ability to impose penalties, which is what the sector needs. But an FSA source said it appeared unlikely that the body would be made the regulator. "There have been no pre-meetings with government which would indicate this was on the cards." An FSA spokesman said the body would "implement and develop a regime if required to". The Department for Constitutional Affairs is expected next week to present to the House of Lords the findings of an independent report on the suitability of the CSC to be the statutory regulator. As revealed by Insurance Times (News 7 Feb), the report, written by former ABI director-general Mark Boleat, is expected to recommend that the CSC distance itself from commercial operations, which could lead to conflicts of interest.

FCSC announces £42m compensation refund

The Financial Services Compensation Scheme (FSCS) has announced its intention to refund a surplus of £42m to relevant firms in the general insurance contribution group A31 before the end of the financial year 2005/06. The FSCS said this is a result of significant recoveries made from general insurance estates and lower than anticipated compensation payments in the sector. The FSCS also announced that, based on current information, it is unlikely to need to raise a levy on this contribution group during 2006/07. This is said to be due to a short-term reduction in the funding requirements for general insurance compensation claims during 2005/06 and into 2006/07. Loretta Minghella, chief executive said: “This is great news for insurance firms. In recent years, the general insurance sector has had to pay significant amounts for compensation payments relating to the defaults of insurers such as Independent, Chester Street, Drake and KWELM. Whilst our primary role is to pay valid compensation claims we work hard to secure recoveries wherever we can. The timing and actual amount of any recoveries is difficult to predict, and during 2005/06 we recovered significantly more in the insurance sector than we anticipated. "In the general insurance area our costs are largely dictated by the liabilities that emerge in relation to insolvent insurance estates and the timing of any recoveries made are dependent on the insolvency practitioners. We are experiencing a short-term reduction in funding requirements, which means we should have sufficient funds to pay general insurance compensation claims during 2006/07 and up to the next expected levy collection in the Summer of 2007. "Although we currently estimate that a significant levy will be required to fund general insurance compensation claims in 2007/08, possibly over £100m, it was clear after discussions with the ABI that a refund now would be appropriate.”

Ex-Tottenham Hotspur player receives £2m

Ex-Tottenham Hotspur footballer, Dean Richards, has received a record £2m in compensation for an illness that ended his career. The claim, which is the highest amount ever paid to an individual player in the UK, was handled by Aon. Richards, 30, retired from professional football in March 2005 after doctors warned he could potentially suffer a brain haemorrhage if he continued playing. Steve Talboys, development executive for Aon Private Clients, has managed Richards’ insurance policy through to settlement of the claim. He said: “There’s little you can do to prevent an accident or illness, but you can protect yourself against loss of earnings and this case should demonstrate to other footballers the essential nature of this insurance cover.”

Zurich: compensation costing £250m

Zurich: compensation costing public services £250m Zurich Municipal has published the first indication of the cost of compensation to public services. Zurich said that through public liability compensation claims, which include injury and material damage, it is estimated that local government and insurance companies pay out between £200m and £250m a year. The company said this amount included pay-outs to genuine claimants and fraudulent claims that slip through the net, but not the cost of investigating claims. Zurich Municipal claims director, Iwan Borszcz, said: “Whether a claim is exaggerated or completely fraudulent, it is the genuine claimant that suffers. "Zurich Municipal has been working on behalf of customers to ensure genuine claimants receive the service they deserve, but considerable time is often wasted dealing with what turn out to be spurious, and even imaginative, claims."

Fraudsters guilty of £1.5m motor claims

Six men who obtained at least £1.5m from insurers through insurance fraud and money laundering were found guilty at Harrow Crown Court on 7 December. The trial had lasted 14 weeks, after an investigation which started six years ago. The organised ring had made hundreds of fraudulent claims against motor insurers, alleging fictitious accidents. The London-based fraud was discovered in 1999 by John McCann, then investigations and intelligence manager at the Maidstone office of Miller Pycraft. Two claims against Fortis Insurance were identified as fraud and gradually more and more claims were discovered throughout the market. A major investigation was mounted, funded by Fortis with support from AXA, Direct Line, Admiral, Norwich Union and Zenith Motor Insurance Policies at Lloyd's. In court, evidence of 165 claims was produced which had raised at least £1.5m from insurers. The guilty men are Saad Maki Abdul Jalil and his brother Raad Maki Abdul Jallil; Amjad Hussein; Ali Abbas; Maytham Al Karim and Hassannen Al Hakim. All were charged with conspiracy to defraud and the Jalil brothers were also charged with money laundering. The men's sentences will be delivered on 22 December.

Zenith appointed to join Endsleigh

Zenith, has announced that it has been appointed to join the Endsleigh motor panel. Zenith said it will be making its Distinction product for non standard risks available to Endsleigh customers. Endsleigh’s technical manager, Judy Falding, said: "This valuable new addition to our panel fits extremely well because it targets risks where we already receive high volumes of quotes. We therefore expect this scheme to complement the panel and provide a better deal for Endsleigh’s customers."

NU warns on rising fraud costs

New calculations reveal that fraud now costs the UK a staggering £16bn a year but Britons are still in the dark about the real cost of fraud and its true impact on society. Norwich Union said fraudulent crime has increased by 15% in the last five years and the insurer predicts this will escalate significantly in the next five. Although 80% of people don’t believe that they have ever been a victim of fraud, NU calculated that fraud costs the average household £650 a year or £340 per adult. The company also estimated that over £11bn was lost by the public sector in 2004 due to fraud. Chris Hill, Head of Fraud said: "As long as fraud is perceived as an ”easy crime”, we will consistently see organised gangs of criminal fraudsters escaping prosecution and coming back for a second or third go. "We need a moral change in national perception; fraud must become as unacceptable as any other form of theft in the eyes of the public.” "There is an absence of a cohesive National Fraud Strategy to tackle this. To turn this around, the public and private sectors need to actively collaborate together with Government and law enforcement bodies.”

PI claim falls by £65m

A £77m professional indemnity claim against an accountancy firm due to hit the London market has been slashed to just over £10m. According to Willis, the broker embroiled in the claim, the initial estimate has been reduced to £12m. Although constrained by confidentiality, Willis executive director Joanne Willmore said that despite speculation that a London firm was involved in the claim, it was made against a regional firm. Willmore said the case was an example of the threat that under-insurance posed to professional firms, particularly SMEs. "It may well be that firms need to increase their level of indemnity," she said. Willmore said research by Willis had shown that firms were not using premium savings to buy additional cover, nor increasing indemnity limits to match inflation.

Zurich publishes SME claims cost advice

Zurich’s UK commercial business has published a new guide called ‘Managing the cost of claims’. Zurich said the advice contained in the booklet will help brokers advise businesses on how to keep claims costs down. Zurich also believes the guide contains information not widely available to SMEs in the marketplace.

Zenith claims move

Zenith is the latest insurer to invest in claims assessment technology from Insurance Services Office (ISO). Claims Outcome Advisor cross-references policyholders' injury claim details with a database of over 18,000 injuries and 14,000 occupations to give insurers an accurate pay-out sum. Admiral, Chaucer, Zurich and Highway already use the system. ISO claims it has cut claims costs for Highway and Chaucer by 14% and 16% respectively. Joe Pendle, ISO UK's client services director, said the system gave insurers "an accurate and consistent figure which slashes claims costs by over 10% and allows them to better understand their exposures".

Hiscox ups Katrina estimate to £110m

Hiscox has increased its expected net loss from Hurricane Katrina $110m, up from an original estimate of $100m. The group predicted that it will lose a further $70m as a result of Hurricane Rita. It said the hurricane losses will cut its pr-etax profits for the full year by about £25m. But Hiscox said it planned to raise the 2006 premium limit for its main Lloyd's syndicate to $833m from an original limit of $775m, in order to take advantage of an anticipated rise in rates.

CJC plans will cut claims costs

Insurers could see claims costs slashed under far-reaching proposals to reform litigation funding proposed by the Civil Justice Council (CJC) this week. The CJC report, Improved Access to Justice and Proportionate Costs makes recommendations to streamline the compensation system. Experts predicted the proposals would lead to insurers' legal bills being cut in injury claims. Legal costs currently make up around 40% of insurers' personal injury claims costs. The recommendations could be incorporated into the government's Compensation Bill due to be debated in November. Proposals to increase the fast track limit for all personal injury claims to £25,000 from £10,000 are expected to be the main catalyst for reducing insurers' legal bills. AXA claims technical manager Graham Plumb said: "Undoubtedly this will benefit us in helping to set costs estimates and help drive down legal bills." He said the proposal would "significantly" increase the amount of claims fast tracked. The fast track provides a quicker, less costly route, to handle lower value claims. The CJC also recommended medical reports and police reports in fast tracked cases should be charged at a fixed rate. It concluded that a 'costs council' should be established and charged with setting and overseeing the fixed fees. Past president of the Forum of Insurance Lawyers (Foil) Claire McKinney said if implemented the proposals would "contain costs". and introduce predictable pricing. CJC recommendations There are 21 recommendations proposed by the Civil Justice Council, including: Starting point for recovery of costs in personal injury claims below £5,000 should remain at £1,000 Increasing fast track limit to £25,000 from £10,000 on all personal injury claims with an "opt-in" fast track scheme for cases of up to £50,000 Claimants' lawyers to obtain medical report at a fixed fee Consideration should be given to contingency fees for group actions.

Claims 'scandal' fury

Lord Falconer, the Secretary of State for Constitutional Affairs, has slammed dubious claims farmers who are touring south Yorkshire to sign up claimants and then leaving them with massive bills from loan sharks. Lord Falconer said he had uncovered an "absolute scandal" whereby suspect claims farmers lure new clients with the promise of substantial pay-outs upon winning cases through the courts. According to Lord Falconer potential clients are sought via the employee details of closed down factories, such as textile warehouses. They are approached and told they have a possible claim for potential health issues, such as noise pollution. Once signed up to the process, they are persuaded to take out an inflated insurance premium in the event that they lose the case and are left with huge court bills. Vulnerable claimants who are unable to afford the premiums are encouraged to take out loans at enormous interest rates. Of those several hundred embroiled in the scandal, Lord Falconer said only one had since heard from the claims farmer about the progress of his case. The remainder only receive letters from the loan sharks. He cited these claims companies as the type that the Compensation Bill wanted to remove from the system. "If we don't regulate, advertising will be able to continue, and we will end up in a situation where this kind of misconduct can go on," said Lord Falconer. "People will be left with no compensation, no help and a big loan bill to pay."

Rita latest blow to claim reserves

Loss adjusters in New Orleans have warned that Hurricane Rita's impact will be a huge drain on already depleted claims resources. The hurricane barrelled across the North Atlantic before crashing to land on the Louisiana coast as a category three hurricane. Bud Trice, vice president for catastrophe services at Crawford & Company, said: "Preliminary loss assessments are all over the place. "Loss adjusters now face the challenge of trying to set up operations in badly hit areas with no electricity and housing." Jayanta Guin, vice president of research and modelling at Air Worldwide, added: "We expect to see significant damage to residential and commercial properties near and to the east of Rita's track." The company predicted that the hurricane would cost between $2.5bn and $5bn in insured damages. Beazley's chief executive Andrew Beazley spoke of the need to reassess the rating of natural catastrophe risks at the Houston Marine insurance seminar last week. He described Hurricane Katrina as a "market-changing event" that, in many instances, revealed prevailing premium rates to be wholly inadequate. But Beazley disagreed with views that such risks were fundamentally uninsurable. He said they were instead "more costly to insure and the size of exposures difficult for the domestic and world markets to digest." Beazley said losses from Katrina, currently estimated at between $40bn and $60bn would "test the appetite of many" for such risks, but he added that Lloyd's underwriters "will not run for the hills". Risk Management Solutions said that losses from Hurricane Rita would fall between $4bn and $7bn. Eqecat updated its initial estimate to give a figure of between $3bn and $6bn. Lloyd's said it was too early to comment on Rita's impact, but said it believed Katrina's impact on the Central Fund would be "immaterial".

Industry in peril from new storms

Senior insurance executives have expressed fears that a further hurricane on the scale of Katrina would be catastrophic for the insurance industry. The warning came as it was predicted that a further storm, Rita, will make landfall along the Texas/Mexico coast south of Houston on Friday. As Insurance Times went to press tracking companies predicted that the storm would intensify to a category three hurricane. One senior Lloyd's source said: "The reinsurers haven't stopped paying out on last year yet. If there is another hurricane [on the scale of Katrina] it would be disastrous. "We model for two or three catastrophes a year. If there is another Hurricane Katrina it will knock us over - and several others too." Others questioned whether the insurance industry should continue to insure hurricane-prone areas. Another source said: "Sooner or later the industry will have to take a proper look at this. These kind of events are becoming more frequent and more severe, and questions should be asked about whether the industry can carry on picking up the bill." Meanwhile, Lloyd's has estimated a net loss of £1.4bn due to Hurricane Katrina. In a statement Lloyd's said: "Based on current information, Lloyd's believes any impact on the Central Fund would be immaterial. "There is nothing to suggest that any syndicate would not be able to trade forwards as a direct result of Hurricane Katrina." Ratings agency Moody's agreed that the loss was "containable", saying it considered it would not be an issue for the Central Fund. Fitch also said there would be no immediate impact on the financial strength rating of Lloyd's. Lloyd's however remains under threat of a rating downgrade by Standard & Poor's, which placed Lloyd's on creditwatch with negative implications last week. Loss estimates continue to emerge PXRE - increased max loss to $300m from $235m Arch Capital - £160m maximum loss FM Global - pre-tax loss of $300m Max Re Capital - $60m to $90m loss AXA Re - $200m pre-tax loss HCC Insurance Holdings - $32.5m net loss Olympus Re downgraded to B+ from A- by AM Best

Allianz: mediation saves claims cash

The cost benefits of using mediation to settle claims are now proven, Allianz Cornhill has said. The insurer said it had completed a pioneering study of the use of mediation to settle injury claims. It is now calling on claimants to consider mediation as opposed to litigation. Tony Newman, Allianz Cornhill's claims controller, launched the company's mediation programme a year ago. He said: "We've had a success rate of over 90%. Claimants who have been through the process say they like it because they retain control, it's non-adversarial and therefore less stressful - you achieve settlements far quicker."He said insurers also made savings, but would not be drawn on details, since he argued that this would give lawyers ammunition. He added: "Some lawyers remain the stumbling block. We need to refocus them and as part of our protocol, those on our panel are now required to offer mediation where relevant."Newman said take-up of mediation remains too low. "Around two thirds of those eligible for mediation refuse. It's likely they are told not to do so by their lawyers."New rules set to boost mediation useInsurers' efforts to use mediation in personal injury claims are set to receive a boost with the introduction of new civil procedure rules on mediation in October.The Department of Constitutional Affairs is drafting an amendment to the Personal Injury Pre-Action Protocol which will put greater emphasis on parties to use mediation as a way of settling personal injury claims without a trial.Judges will also be allowed to impose adverse court orders on claimants who refuse to consider mediation or other forms of alternative dispute resolution (ADR).Mediation is often preferable for insurers because it cuts out expensive legal fees and can lead to quicker claims resolution. AXA claims director David Williams said: "This is a step in the right direction, but much still needs to be done to find really cost-effective forms of ADR."

Chaucer improves forecasts

Chaucer has said its overall forecasts for the 2003 and 2004 year of accounts have improved and predicted another strong underwriting result for 2005. The company said total gross premiums for 2005 to date are ahead of last year, with pricing remaining strong. In the year to July, gross written premium was up by 2.7% at £285.4m. The overall forecast for 2003 for Chaucer's four syndicates has been raised by 1.1% to a mid-point of 15.8% on the company's underwriting interests of £266.2m. Chaucer noted that the forecast for its motor Syndicate 587 has improved particularly strongly as a result of a favourable claims environment, with the estimated profit margin raised to 20%-25% from 17.5%-22.5% previously. For 2004, the estimated mid-point profit margin is 11.7%, a rise of 0.1%, on underwriting interests of £317m. The forecast profit margin for Syndicate 1084 remains unchanged at 7.5%-15%, while the estimate for Syndicate 1176 has been raised to 30%-40% from 20%-40% previously. Chaucer said: "Syndicate 1176 continues to perform in line with our expectations for 2003 and 2004 with both premium income and claims experience remaining within budgeted targets,"

ZFS reports record performance

Zurich Financial Services (ZFS) has reported a record operating performance for the first half of 2005 with net income climbing 21% to $1,799m (£990m) The company reported a return on equity of 18.4% (annualised) and a 15% increase in its diluted earnings per share to SFr14.77. The insurer also reported a 17% rise in business operating profit to $2,305m. Gross written premiums in general insurance were reported to see a 1% increase at $18.6bn and the combined ratio was 96.9%.

ABI welcomes Queen's Speech proposals

Government proposals outlined in the Queen's Speech today have been welcomed by the ABI. ABI deputy director general Stephen Sklaroff said on the proposed road safety bill: "Insurers have a direct interest in working to raise standards of vehicle and road safety. "It is important that the bill contains further provisions to tackle uninsured driving by making it an offence to keep a vehicle without insurance." On the regulatory reform bill it welcomed the government's commitment to the recommendations of the Hampton report. And on the tough topic of compensation culture in the UK, it welcomed the government proposals to tackle the perception that the climate exists. Compensation culture perceptions are "getting in the way of ensuring that compensation goes to those who need and deserve it," Sklaroff said. "All efforts to change this perception will be welcomed by insurers and our policyholders."

Insurers fear legal hike cost

Insurers fear that claims costs will rocket after claimant lawyers were given a "licence to print money" by a Court of Appeal ruling on success fees. The judgment in KU v Liverpool City Council ruled that courts have no power to direct that a success fee is recoverable at different rates for different periods of proceedings. This in effect means an end to the 'multi-stage' success fee process, where fees can be varied if the assessment of the risk attached to a case changes. A QC with experience of cost cases said Lord Justice Brooke's ruling was certain to cost insurers. "Where is the incentive for a claimant lawyer to set a lower success fee when he knows the other side can't do anything about it?" It is estimated that the ruling could affect a third of all claims. AXA claims director David Williams said: "There is a strong possibility that this could be used to justify success fees way over what we have been getting at the moment. At day one you rarely know the risks involved in a case." Norwich Union head of technical claims Dominic Clayden said the judgment showed that the industry still did not have full clarity on the application of the Access to Justice Act. But he added that it was too early to say whether the ruling would lead to increased costs.