Rate increases hit WA households after floods

The consumer backlash to compulsory flood cover has spread to WA, where some residents face substantial
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premium increases from insurers that have expanded flood cover.
Householders have told the WA media of contents insurance premiums up to seven times more expensive than last year if their homes are deemed to be at risk of flooding.
IAG’s WA subsidiary SGIO has included flood cover in all home and contents policies since January 9.
“The fact that a particular area hasn’t flooded for a number of years does not mean there is no risk of flooding,” an SGIO spokesman told insuranceNEWS.com.au.
He says flood cover is automatically added to most customers’ policies for “minimal extra cost”, but around 2.5% of WA customers have some flood risk and will pay a premium reflecting this.
“If a customer believes they have [flood risk] data that is more comprehensive or detailed than ours, they should contact us and we’ll review our assessment of their property,” the spokesman said.
The issue has mostly affected insurers such as SGIO that have made flood a standard inclusion in recent months. RAC Insurance has included flood cover for at least 15 years so has avoided the issue.
Brokers say they are able to counter some rate increases by arguing their clients are in a low flood-risk area, with some success.
EBM Insurance Brokers MD Jeff Adams told insuranceNEWS.com.au that arguing against the increases “can be difficult at times, time-consuming and counter-productive”.
He says rates are increasing by 5% in most SME classes and slightly more for householders and private motor because of past natural catastrophes, while premiums are increasing substantially where flood cover is provided.
“Following diminishing returns over the past few years, most insurers are now taking action that they feel will increase their profitability,” he said.
“Not that we would necessarily agree with some of these actions – in fact, we believe some of them will achieve the opposite result.”

New solvency regime for insurance companies

By amending the Solvency Regime, Securities and Exchange Commission of Pakistan (SECP) board
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approved Fit and Proper criteria for the appointment of Chief Executive Officer (CEO) and other officials of the insurance companies’ which requires prior permission of the commission to appoint senior management including public and private sector insurance companies. The SECP Chairman Muhammad Ali while addressing a press briefing on amended Solvency Regime said that Fit and Proper criteria will help in curtailing mismanagement and corruption by only allowing people with relevant experience to hold important positions in insurance sector.
Amended Solvency Regime
While informing about the amended Solvency Regime for the insurance companies he said that the amendments will strengthen the financial position of insurers over time and reduce the risk of volatility in the prices of certain assets, such as equities and properties, which threaten their solvency. The Policy Board of the SECP has approved the Solvency requirements for insurance companies, which would improve the liquidity position of the insurance companies and eventually protect the interests of policy holders.
Solvency is the ability of a business to have enough assets to over its liabilities, and the amendments call for insurance companies to manage their assets with different priority. The changes in the solvency regime calls for non-life insurance companies to increase the value of their admissible assets from Rs50 million by December 2011 to Rs100 million by December 2012, Rs125 million by December 2013 and by the end of year 2014 the net admissible assets have to be Rs150 million.
Limitation of Prior Rules
The solvency regime for the insurance industry was introduced in the year 2002 through SEC (insurance) Rules, 2002. it was felt that the rules then published had certain limitations such as a detailed solvency regime for life insurance companies as envisaged by the insurance Ordinance, 2000 and the admissibility of assets introduced in 2002 had awfully high limits for certain assets in the case of non-life insurers, while other assets commonly invested in, were not covered at all.
Under the current rules the life insurance companies need to have admissible assets of Rs75 million, however after the amendments the companies need to have admissible assets of Rs105 million by the end of 2012, they have to be Rs135 million by December 2013 and Rs165 million by the end of 2014.
The SECP officials said that currently the total insurance base in the country is worth Rs107 billion but the non-life segment was dominating at Rs59 billion. It is expected that the new solvency regime for the insurance companies will further strengthen the financial position of insurers over time and reduce the risk of volatility in the prices of certain assets, such as equities and properties, which threaten their solvency.
Considering these issues, in year 2006 a group of experts from relevant stakeholders including insurance Association of Pakistan, Pakistan Society of Actuaries, Pakistan Banks Association and SECP as the regulator, engaged in an exercise to analyse the provisions relating to solvency requirements for both life and non-life insurance companies.
Mandate of the Committee
The mandate of this committee was not only to recommend the rational solvency requirements, but also to examine the existing practices and policies of insurers with respect to the investment of their funds. The committee presented its recommendation relating to admissibility of assets, valuation of assets and liabilities, solvency requirements of life insurers, solvency requirements of non-life insurers, minimum valuation basis for life insurance, reporting on solvency by insurers and investment guidelines. These recommendations were approved by the commission earlier in 2010 for publishing in the official gazette and eliciting public opinion to be received in subsequent 30 days.
The SECP thoroughly reviewed the comments received on the draft amendments and the suggestions found to be consistent with the regulatory framework and the enabling provisions of the law, without prejudicing the rights and duties of any stakeholder, were suggested to be accommodated. It has been noted with satisfaction that while preparing these new provisions of Solvency, the SECP complied with the due process i.e. taking into consideration the stakeholders’ comments, engaging industry experts in the deliberations and seeking advice from the Legal experts. Accordingly, the amendments in the SEC (insurance) Rules, 2002 related to Solvency provisions were presented in the SEC Policy Board meeting held today and the same was approved by the Board for final promulgation.
The more substantive changes are to be implemented in a phased manner so as to allow the industry to implement these changes at a reasonable pace. The new regime is therefore not anticipated to cause any material difficulties to insurers, although the increases in absolute amounts and the introduction of life insurance solvency regime is likely to result in increasing the capital base by some new companies. There is, however, adequate time allowed for this increment.

Suncorp quits flood towns and calls for mitigation action

Suncorp has withdrawn from writing new cover in parts of Queensland following last year’s floods,
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with Personal Insurance CEO Mark Milliner telling governments to get moving on disaster mitigation.
Mr Milliner says Suncorp has resisted following other insurers in ceasing to offer insurance in very high risk areas.
“However, the lack of progress means we now feel that we have little choice but to proceed down this path unless clear decisions are made to build or implement improved mitigation to protect the residents of these towns,” he said.
Mr Milliner says Suncorp has stopped writing new business in Roma and Emerald in western Queensland after paying out $150 million in claims and receiving $4 million in premiums in the last two years.
He says Queenslanders can expect premiums to continue to rise and cover to be restricted if there is no urgent action on disaster mitigation.
“The reality is, with increasing global reinsurance costs and repeated flooding there is real potential for pricing to rise drastically to the point of being too expensive for those most at risk,” he said.
Suncorp’s assessors and repairers are visiting some homes in Roma for the third time in as many years due to continued flooding.
“Not building a $2 million levee in Roma seven years ago has come to a $500 million public and private sector repair bill, and this comes back to local residents through increased rates, increased utility costs and higher insurance premiums,” Mr Milliner said.
He says recent flooding in Wagga Wagga highlighted the power of levees, with estimated damage costs reduced by $100 million due to work completed there.
If mitigation takes place, Suncorp will reassess premiums and has already done so in areas such as Goondiwindi, where premiums for high-risk customers were reduced by $1000 after a levee was built.
“Our preliminary examination shows that, on average, appropriate mitigation lowers premiums by about 50% in towns at risk of flood,” Mr Milliner said.

Most Americans Have Faith in Life Insurers

WINDSOR, Conn., April 24 -- LIMRA issued the following news release: Part1  Part2  Part3
Seventy-five percent of all Americans have confidence in life insurance companies and the percentage jumps to almost 90 percent when looking at Americans who own individual life insurance, according to a new survey conducted by LIMRA.
In its most recent consumer sentiment survey, LIMRA found that consumers who have seen life insurance make a positive difference -- either directly or indirectly -- were more likely to feel confident in life insurers than those who had no experience. (chart)
"This study further confirms what I have believed throughout my career: life insurance provides the financial security that allows families peace of mind if the unthinkable happens," said Robert Kerzner, president and CEO, LIMRA, LOMA and LL Global.
In this survey, eight in 10 consumers who have had a positive experience with life insurance say that the life insurance industry plays a critical role following the death of a loved one. The study also revealed that nearly two-thirds of all Americans feel that life insurance give people peace of mind. Looking at those Americans who have had positive experience with life insurance, the number jumps to 76 percent who agree that life insurance gives people peace of mind.
'The good news is, majority of people understand the value of life insurance and what our industry offers," noted Kerzner. "But even better, our customers and those closest to them, who can look to their own experience, recognize the good our industry does."
LIMRA's most recent life insurance ownership study found that fewer American families are insured adequately (58 million households are uninsured or underinsured). "As an industry, we have got to find a way to reach these American families and help them understand the value of life insurance -- not just economically but emotionally -- so when they are confronted with the death of a loved one, they too can experience the peace of mind and financial security that life insurance offers."
Since 2008, LIMRA has conducted quarterly surveys of adult 1000 Americans, weighted to represent the general population. The most recent survey was conducted in January 2012.

MPs call for “Presumption of Death” Act

The House of Commons Justice Committee is calling for new legislation to help families when someone goes missing.
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MPs want a “presumption of death act”, modelled on existing legislation in Scotland and Northern Ireland, to clarify the legal position of spouses and others who might otherwise suffer serious financial consequences over an unexplained disappearance.
Having examined the current law and processes the Committee found:
1. A legislative patchwork of bewildering complexity.
2. The inability to administer the financial situation of missing relatives.
3. A lack of information about the actions relatives are able to take.
4. Ignorance of the correct procedures to be followed by police, lawyers, banks, insurers and others.
MPs have concluded that industry guidance alone cannot solve all the problems families face when trying to resolve a missing person’s affairs.
However, guidance could alleviate at least some of the difficulties and the Committee is therefore encouraging organisations to develop this, as it will benefit the institutions concerned as well as families.

Aviva pays 99% of protection claims

Aviva paid 99% of all protection claims (life insurance and critical illness cover) in 2011, having settled 99.7% of life and 94.1% of critical illness claims.
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Overall 0.4% of protection claims were declined due to non-disclosure, breaking down as life: 0.3% and critical illness: 1%.
According to the insurer, 2011 payments totalled £439 million across 10,495 life and 1,568 critical illness claims.
Other key statistics for 2011 include:
The average sum paid to critical illness customers was £73,591.
The average age of critical illness customers was 44 years for women and 46 years for men.
Cancer remains the most common cause of critical illness claims at 67%, followed by heart attack (10%), stroke (7%), multiple sclerosis (6%) and benign brain tumour (2%).
Over the last five years, the same top five conditions have accounted for more than 92% of Aviva’s critical illness claims paid overall.
Commenting on the figures, the firm’s chief underwriter, Robert Morrison, says: “Aviva is a company that wants to pay claims and our latest figures clearly reflect this.”
Last year, the insurer introduced partial payments for new critical illness customers for two early forms of cancer: low grade prostate cancer and ductal carcinoma in situ (an early form of breast cancer).
For these conditions, claimants can receive a lump sum of up to £20,000.