Myclaim Market Update September 2010
Claims Regulator Shuts Down 200th Firm
The Claims Management Regulation unit of the Ministry of Justice has recently closed down the 200th rogue firm. The unit’s function is to monitor and if necessary intervene with claims management companies to ensure the customer is protected. Breaches of rules include unwarranted cold calling, including text messages, and demands for upfront fees.
The work of the unit, set up in 2007, also involves investigations into alleged “cash for crash” fraud schemes that have become prevalent recently. These schemes are, according to motor insurance companies, the main factor in the spiralling rise of motor insurance premiums.
Lifetime ban for insurance broker
David Marriott, an insurance broker, has been banned for life by the Financial Services Authority for working in the sector following an investigation into his business affairs.
This investigation revealed that, in breach of FSA rules, he had failed to segregate client money from other money held by the business. He had used, according to the FSA, client money to purchase a vehicle for £35,000 for himself and one for £27,500 for a colleague whilst also paying bonuses to himself and staff. This was at a time when the business faced challenges due to a decline in turnover.
Direct Line due to be up for sale
A recent ruling by the European Commission has meant that RBS, mostly owned by the UK taxpayer, is required amongst other things to sell its insurance division including Direct Line, Churchill and Green Flag. A recent beauty parade by RBS to arrange for advisers on the sale has lead to speculation that Warren Buffett, the famous American billionaire investor, and his company the Berkshire Hathaway group may make an offer.
The recent increase in the amount that Direct Line has had to pay out for motor insurance claims has complicated the possible sale. RBS is also having to make a large number of workers redundant as a further implication of the ruling under European law.
Green Insurance profits rise 19-fold
New insurers The Green Insurance Company have seen profits increase greatly recently thanks in part to expansion of their business. Part of the Kwik-Fit insurance group, the company’s green policy centres around planting trees to offset its customer’s carbon emissions. The company was launched three years ago and plans to plant its millionth tree by the end of 2010. It now has thirteen panel insurers rather than just one initially when the company commenced trading.
British insurance industry set for mergers
Following the recent move towards RBS selling its insurance subsidiaries and the ongoing efforts by Resolution to buy further companies after its previous purchase of Friends Provident, it appears that the UK’s insurance industry is set for a period of mergers, acquisitions and possible consolidation.
A further target for this activity is Aviva (previously trading under the name of Norwich Union). It previously rebuffed a hostile takeover by RSA for £5 billion but there are now rumours that French rival AXA could be interested in a takeover bid. This new period of possible consolidation also follows on from the failed bid by the Prudential to buy the Asian insurer AIA.
Worker Dies During Demolition At School
The Health and Safety Executive prosecuted a trust running the Moor Park School following the death of a worker whilst a large wooden classroom was being demolished during August 2007. As the roof was being removed it collapsed on the workers, leading to the death of one of them by suffocation. Four other works escaped serious injury purely by the chance positioning of a dumper underneath the roof which provided an escape route.
The school had arranged for a general building worker, who was already engaged on some minor roofing work, to carry out the substantial building work involved in demolishing the classroom and had not investigated their suitability to do the work. The prosecution by the Health and Safety Executive lead to the school being fined £25,000 along with having to pay £15,000 in costs.
Admiral insurance salutes driving profits
Admiral, the insurance group that includes the confused.com website, has recently been enjoying profits after a strong performance in the UK motor insurance sector. Profits were up 21% as the core UK business increased its number of customers. Whilst the Spanish business was showing profits other areas of the group were still “in their infancy” with profits yet to be achieved.
This has been positive news for the FTSE 100 listed company but there are concerns that future growth remains in doubt without more good results for its expansion into other areas, including home insurance and the non-UK businesses that form part of the group.