Response to coronavirus outbreak - Insurance sector - Lansons
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Insurance sector response to coronavirus outbreak As of 18th May 2020
Insurance Sector Summary
01 Summary and backdrop
02 Policy initiatives impacting Insurers
03 Media and commentator sentiment
04 Insurtechs and smaller firm updates
Individual company summaries are
available on request
lansons.com | Insurance Sector Summary 18/05/20 2
Summary and backdrop The controversy related to business insurance has seen significant media coverage again this week, led by the news that the FCA plans to bring the first trial instance to the High Court as early as July. Alongside this, news out on Monday (18.05) confirmed that the Hiscox Action Group has been given the go-ahead from lawyers and funders to start legal action against insurer Hiscox. W hile criticism has focused heavily on the providers of business interruption insurance, the reputation of the insurance industry as a whole continues to be called into question, with headlines like those seen in the Telegraph – “Insurers become villains of the Covid-19 crisis” - encouraging wider scrutiny. In an off-record briefing a journalist from another publication also pointed to the insurance industry as looking like “villains of this crisis”, particularly those who have built a brand on paying out in a timely manner. Importantly, no distinction was made between business interruption insurers and the providers of other types of insurance. Elsewhere, conversation continued on how insurers should support more vulnerable customers, as the FCA’s guidance came into force. The new measures outline how insurers should support customers that are struggling financially when they contact their provider - reassessing their risk profile to see if their existing policy needs tweaking and consider if other products would better meet customers' needs. In anticipation, most insurers had already adapted policies to better support these customers, and as such, media coverage was relatively balanced and neutral in tone. In most articles, journalists used it as an opportunity to provide a round up of the measures taken by insurers to date. In these, it was clear that Admiral and LV= were the only insurers who have made a clear commitment to returning some/all premiums to car and van insurance customers. The challenger insurer ByMiles, has continued to apply pressure on insurers who have not committed to offer some form of refund to customers, claiming: “The big firms should be doing more to help customers through difficulties.” Meanwhile, consumer champion Martin Lewis has cautioned against customers using payment circumstances, unless they are absolutely necessary, as “hideous interest” rates would still apply, which could see overall costs increase. For the most part car insurance providers have limited their proactive media engagement, though this week saw the release of research from Co-op Insurance who used telematics data to highlight how the number of drivers under the age of 25 caught going over the speed limit had increased by a sixth since lockdown started. W illis Towers W atson and comparethemarket.com also issued data driven stories to highlight how lockdown is impacting the car insurance industry. Car insurance premiums were reported to be at their lowest in four years because of a dramatic fall in claims as a result of the lockdown (Compare the market); and by mid-April, volumes of new work instructions being sent from motor insurers to UK repair shops dropped by 80% compared to the first three months of the year (W illis Towers W atson). lansons.com | Insurance Sector Summary 18/05/20 3
Summary and backdrop As the government starts to ease some of the lockdown restrictions, travel and consumer writers continue to look into what this means for travellers, especially if there is a “travel bubble” in Europe. Journalists at the Sun, Telegraph and Mail were quick to point out that most travel insurance providers stopped accepting new customers from early March, which means those without cover before that point are likely to struggle to find an insurer who will cover them if travel restrictions ease. One commentator suggested that insurers should provide new types of policies, which incorporate the new risks of the current situation. An expert of mature travel, Debbie Marshall was quoted in a piece in the Mail Online: 'Perhaps insurers will come up with new-style policies with optional surcharges for Covid-19 cover, or a standalone policy which only covers for the disease and can be bought separately.’ Travel insurers are also under pressure to address the lack of transparency in their cancellation policies. Research from Fairer Finance which was published in an op-ed in the Telegraph noted that only seven of the 68 largest travel insurers clearly disclose the cancellation terms in the purchase journey. However, customers that do cancel their travel insurance could be caught out if they decide to travel at a later point and cannot find a provider to cover them – something that needs to be made abundantly clear to customers considering looking into a pro rata refund. Continued… lansons.com | Insurance Sector Summary 18/05/20 4
Summary and backdrop
This week also saw a release from Lloyds of London which claimed that the cost of
coronavirus could be the largest loss on record – it estimates that the global industry
insured losses will be $107 billion as a result of the virus and lockdown.
Finally, research from Consumer Intelligence indicated that the number of people in
the UK who identify as vulnerable customers has doubled in a year due to
coronavirus, as concerns about health and personal finances significantly increased.
This could have major implications for the insurance industry if the FCA chooses to
place greater emphasis on insurers’ responsibility for supporting vulnerable
customers.
Top 5 pieces of coverage w/c 18 May:
► This is Money (Will Kirkman): Hope for Covid-hit firms left high and dry by insurers:
Rejected business closure claims COULD pay out by autumn as financial
watchdog heads to High Court
► Telegraph (Michael O’Dwyer): Insurers become villains of the Covid-19 crisis
► The Sun (Helen Knapman): PAY BACK Insurers to give three month payment
holidays and refunds to struggling coronavirus customers
► Mail Online Rob Crossan: Some countries hope to open up to tourists this summer,
but travel insurance could be tricky - here's how the main providers are reacting
► Telegraph (James Daley): Travel insurers must start giving us refunds for policies we
will never be able to use
lansons.com | Insurance Sector Summary 18/05/20 5Policy and regulatory initiatives
impacting Insurers
► [12.05] The Government has announced that it will support businesses through
Trade Credit Insurance guarantee. The government will temporarily guarantee
business-to-business transactions currently supported by Trade Credit Insurance,
ensuring the majority of insurance coverage will be maintained across the
market.
► [09.05] A letter to the Association of British Insurers signed by almost 700 business
owners accuses the industry of an “abrogation of responsibility”. The ABI has
said that most policies will not provide cover for the impact of Covid -19, but
industry experts said some companies had left themselves open to claims
because certain policies were poorly drafted. Hiscox, QBE, Allianz, RSA and
Zurich are among insurers that have been threatened with legal claims,
including group action lawsuits, from policyholders.
► [08.05] The Financial Conduct Authority (FCA) aims to get business interruption
insurance policies examined by a court as soon as July.
► [07.05] Figures released by the Association of British Insurers (ABI) and Group
Risk Development (GRiD) show that the insurance industry paid out more than
£5.7 billion in protection claims in 2019 - a year on year increase of over £470
million on 2018 - with the percentage of claims paid rising to 98.3%. This is the
highest percentage of claims paid on record. The need for the financial safety
nets and support services provided by protection insurance has become more
important in recent weeks. Insurers have pledged to help customers, the NHS
and companies who are likely to be making higher than usual claims in the
future.
► [05.05] Research commissioned by the) Association of British Insurers (ABI) has
found people rarely contact their pension provider when they move house. It
has been estimated that there are around 1.6 million pension pots worth £19.4
billion unclaimed – the equivalent of nearly £13,000 per pension pot. The
Government predicts that there could be as many as 50 million dormant and
lost pensions by 2050. In 2017 more than 375,000 attempts were made to
contact customers, leading to £1 billion in assets being reunited with them.
lansons.com | Insurance Sector Summary 11/05/20 6Policy and regulatory initiatives
impacting Insurers
Please find below a summary of the general updates and announcements:
► [18.05] The ABI announced that the UK insurance and long-term sav ings
industry has launched a new fund to help support some of the people
hardest hit by the Cov id-19 crisis. The Cov id-19 Support Fund aims to raise
£100 million, w ith £82.5 million already hav ing been pledged.
► [18.05] The Financial Conduct Authority (FCA) has confirmed a series of
temporary measures to help insurance and premium finance customers
who may be in financial difficulty because of coronav irus.
► [14.05] The ABI has responded to the FCA announcement, commenting that
“since the start of the pandemic, insurers have taken wide-ranging action to
support customers who may be facing financial difficulty. We have also set -up
industry wide pledges in motor, home, travel, pet and business interruption
insurance to assist customers during this difficult time.”
► [14.05] The FCA has confirmed a series of temporary measures to help
customers who hold insurance and premium finance products and who may be
in financial difficulty because of coronavirus (Covid-19). Following a short
consultation, the targeted measures being implemented require firms to
consider what options they can provide to customers including:
– Reassessing the risk profile of customers. This may have changed because
of coronavirus and there may be scope to offer customers materially lower
premiums.
– Considering whether there are other products they can offer which would
better meet the customer’s needs and revise the cover accordingly. For
example, a motor insurance customer might no longer need associated
add on cover such as key cover or could be moved from fully
comprehensive cover to third party fire and theft.
– W aiving cancellation and other fees associated with adjusting customers’
policies.
► [13.05] ABI backs Government plans for a temporary reinsurance scheme so
businesses can continue to access trade credit insurance commenting- “The
scheme could help protect the supply chain, safeguard jobs and kick start the
economy, boosting business confidence as we begin to emerge from the dark
shadow of COVID-19. The priority now is to urgently work through with the
Government how this scheme will operate in practice so that it can support
businesses through the difficult trading environment, now and in the months
ahead.”
lansons.com | Insurance Sector Summary 11/05/20 7Media and commentator sentiment Overview Several well-known commentators continue to dominate criticism directed at the insurance industry. Consumer champions James Daly from Fairer Finance and Martin Lewis from Money Saving Expert have been journalists’ “go-to” to provide comment and analysis around the issues facing insurance customers. Similarly, the CEO of the challenger insurer ByMiles has been a vocal critic of general insurance providers’ response thus far, using it as an opportunity to highlight the benefits of flexible insurance policy providers, such as themselves. Media commentators: [18.05] James Daley of Fairer Finance, “Unfortunately, unlike in almost all other parts of the general insurance market, most travel insurers don’t offer refunds when you cancel…The City regulator needs to take another look at this issue – and ban insurers from being able to keep all premiums after the cooling-off period.” [17.05] James Blackman, CEO of insurance challenger ByMiles said, “Really the big car insurance, you can say with Admiral but what about Direct Line, what about Hastings Direct, what about Aviva. These are really big, pure car insurers in many of those cases, where are their refunds. I do think it is better for car insurers to be proactive in what they are doing than it is to be reactive and being sort of doing it as they are forced to.” [16.05] Mark Killick, a director at PR firm Media Zoo, which is part of the Hiscox Action Group said, “the insurance industry has so damaged its brand and its reputation.” [15.05] Debbie Marshall of Silv er Trav el, a trav el rev iew site aimed at mature trav elers, 'Perhaps insurers w ill come up w ith new -style policies with optional surcharges for Cov id-19 cov er, or a standalone policy w hich only cov ers for the disease and can be bought separately,' says. [11.05] Sir John Vickers former chairman of the Independent Banking Commission has expressed concern about the Bank of England’s decision to abandon stress tests for insurers and said that Legal & General’s imminent dividend of more than £750 million should be blocked. He said, “If stress tests are on pause, then so too should be insurance company dividends, notably L&G’s, until the future is clearer.” lansons.com | Insurance Sector Summary 18/05/20 8
Media and commentator sentiment [11.05] Martin Lewis has issued some advice for those considering cancelling their car insurance policies during the coronavirus lockdown. Martin Lewis revealed it was “difficult” to know whether motorists should cancel an agreement as no one knew how long the lockdown would last. However, the Money Saving Expert confirmed motorists “could save” money by cancelling an agreement if they were not planning on using their cars. [06.05] James Blackham, CEO of By Miles, said: “Direct Line stated they saw a 70% reduction in claims in April, which we’ve calculated adds up to a Covid-19 windfall profit of £60million. A profit that is a direct result of fewer cars on the road, due to people being instructed to stay home during lockdown. Their offer to refund premiums to motor insurance customers who contact the insurer directly asking to update their mileage is not enough. Refunds should be automatic and based on reduced usage month by month, not reliant on customers recalculating and asking to update their annual mileage." lansons.com | Insurance Sector Summary 18/05/20 9
Insurtechs and smaller firm updates
Overview:
[13.05] Global law firm Norton Rose Fulbright has launched pro bono legal clinics for
UK-based FinTech and Insurtech start-ups that may be impacted by current market
conditions. Asia Insurance Review
[13.05] James York, deputy chair of Insurtech UK, and Liz Foster, non-executive
director at the Society of Insurance Broking, have pledged to create Totus Re, to
assist the insurance sector and government plan future coverage for catastrophic,
pandemic events. Insurance Business UK
[11.05] A new report from W illis Towers W atson have confirmed that global insurtech
investment has fallen by 54% in the first quarter compared to 2019 as a result of the
recent pandemic. Insurtech news.
[01.05] Fintech magazine awarded AXA Next the number 9 spot in their “Top Ten
Fintech Innovation Labs”. They highlighted AXA Venture Partners: AXA’s dedicated
fintech and insurtech investment fund. Endowed with €600 million, this international
fund invests in companies at different growth stages. Fintech magazine
[30.04] Insurtech startup funding hit three-quarters of a billon dollars in the first quarter
of 2020 before the coronavirus crisis put the brakes on deals, according to Forrester
Research. According to their research, funding is the lowest since 2018. Digital
Insurance
Individual company summaries are
available on request
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