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Insurance sector on the ropes

It's been a tough few weeks for the insurance industry, as multi-million pound fines stunned one of the UK's largest brokers and job cuts elsewhere continue to damage morale. In this week's roundup, Premextra considers where the dust may settle.

You would think that any other must-have utility or grudge purchase pushing through a 15% annual price drop might yield a little more goodwill in this day and age, but such sentiment has been tricky to locate for the insurance industry. Despite news on 17th July that the average annual premium paid by consumers for comprehensive motor cover fell by almost 15% last year, according to actuarial consultancy Towers Watson and insurance aggregator site, that week's dominant industry story ended up being the £7.4m fine inflicted upon broker Swinton, by the Financial Conduct Authority.

The FCA found that the high-street broker hadn't given enough information to customers who were sold personal accident, home emergency and motor breakdown covers between April 2010 and April 2012 and blamed the company's "aggressive sales strategy" in its telephone sales of monthly add-on products. The trade press' coverage of the story carried reminders from FCA chief executive Martin Wheatley who suggested this was always likely to happen. "I recently told the insurance industry that we were taking a strong interest in the area of add-ons, and our first competition study will take a far-sighted view of the impact of current practice on consumers in this market."

This increasing regulatory spotlight arrived fairly quickly off the back of a string of redundancy stories as Aviva added its name to the list of major insurers whose' crew complement has been deemed too large in 2013. The UK's largest insurer is cutting 2000 jobs globally; 650 in the UK and this follows similar news from Direct Line (2000) and Axa (450), earlier in the year.

Telematics' first crash?

News hit in early July that a Coroner from Gloucestershire would be contacting the insurer of a young driver fatally injured in a car crash, to blame its nighttime driving curfew for his accident. Acting Gloucestershire coroner David Dooley said at an inquest into the accident that the driver, Oliver Pain, had been rushing to try and beat his curfew, which rendered his insurance invalid after 11pm. Under Rule 43 of the Coroners Act, Dooley said he would write to Towergate Smart Motor to voice his "real concern of future deaths" if the telematics system was not amended, according to reports in the Daily Mail.

Pressure on insurers as liability time cut?

Personal injury professionals are unlikely to have missed the fact that only one week remains until the RTA claims portal extension takes effect. As of 31 July 2013, the Ministry of Justice has extended the road traffic accident (RTA) claims portal to include EL and PL personal injury claims of up to £25,000. The timeframe for insurers to admit or dispute liability has also been slashed from 90 days to 30 days for EL and 40 days for PL.

John Spencer, vice-president of the Association of Personal Injury Lawyers says the pressure will be on defendants "Time is the most pressing problem, as the whole timeframe has been incredibly compressed and rushed," he told Insurance Times. "I think it has been a real challenge and that insurers will find it fundamentally harder to adapt than lawyers, as bigger organisations can find it hard to change quickly."

And finally…Law Society adverts 'misguided' says Bessemer

When the Law Society unveiled its six week £300 000 advertising campaign to encourage greater use of its members' services last month, it wouldn't have taken a rocket scientist to imagine what criticism to expect. Entitled 'Don't get mugged by an insurer' the posters pointed out claimants may receive greater compensation than if they go direct. However Forum of Insurance Lawyers CEO Laurence Besemer, called the campaign "unfortunate and misguided on several levels". Besemer said the Law Society existed to represent all of its members but by deliberately setting out to offend the entire client base of a significant section of its membership, defendant insurance lawyers, it was "acting contrary to that brief".

FOIL's anger was then replicated by the Association of British Insurers, who took up the fight, telling the new Law Soc President, Nick Fluck in a letter, that the campaign was "a gross error of judgment" and said that it is "little more than public name-calling".