Shareholders To Pay

The City watchdog has told insurance companies they must no longer find compensation from their with-profits investment funds.

Operational failure fines and compensation my previously have come from surpluses and policyholders’ funds, but now the Financial Services Authority (FSA) has said that, from July 31st, shareholders must pay these off instead.

According to consumers’ association Which?, these rules have been somewhat diluted compared to the original proposals. It also says it wanted the rules to cover retrospective cases of mis-selling.

Surplus funds, or inherited states, have been built up over decades in the ‘with profits’ funds of life insurance companies. They are used to pay compensation and fines of millions of pounds, that are imposed on companies fined for mis-selling policies.

Consumers Paying For Mistakes

According to a spokeswoman from Which?, consumers are therefore effectively paying for the companies’ mistakes.

However, after 31 July, any mis-selling will no longer result in compensation using funds from inherited estates according to the FSA.

The FSA’s director of retail, Dan Waters said: “It is essential that with-profits policyholders are treated fairly. In future, the liability for compensation and redress payments will rightly fall to shareholders as the owners of life companies.”

However, compensation for mis-selling that occurs before July 31st can still be paid using the funds.

No Back-Payments

According to Which?, this is very different from previous proposals made by the FSA, which planned the ban regardless of when the mis-selling occurred.

The company’s chief executive, Peter Vicary-Smith said: “This is an unbelievable betrayal of consumers who are taking hits from all sides again. It appears the FSA is allowing the financial services industry to dictate policy once again.”

There are currently very few with-policies sold, and several insurers have greatly cut the value of their giant with-profits investment funds recently, along with the payouts being given to savers when their policies mature.

This is primarily because of last year’s fall in share prices and the value of commercial property.

What Do You Think?

Is the new policy fair? Should it have been back-dated? We would love to know your thoughts and opinions. Leave your comments here.

Insurers are trying to force accident victims to settle their claims just hours after the accident occurred according to shocking research by road safety charity, Brake.

The group is concerned that people involved in accidents are being pushed into taking pay-outs before getting medical or legal advice. Therefore, solicitors are calling for tighter rules on how companies treat third parties involved in accidents.

The insurance industry claims that victims should receive their compensation as quickly as possible without resorting to lengthy court proceedings.

If a driver is involved in an accident, which was not their fault, they are expected to deal with the other person’s insurer, but Brake says it is concerned that insurance companies are pushing crash victims to settle too quickly.

One victim of such behaviour is Ms Harrison who suffered severe facial injuries when another car crashed head-on with hers last March. She received phone calls from an agent of the other drivers insurance company the day after she got out of hospital.

She explains: “From the day I got home, the insurance company phoned me and were pressuring me not to take it any further – not to seek legal advice. I was really shocked.

“He was really forceful, like a bully – really trying to push me to close a deal.”

Deception

Once she instructed lawyers, Ms Harrison explains how the insurance company was able to get hold of her medical records: “They poised as someone working for my solicitor in order to obtain my medical records. I had no idea insurance companies would behave in that way.”

Jane Horton – spokesperson at Brake says that insurers should not make this kind of direct and unsolicited contact.

She says: “It’s as if having been made a victim once… you’re then being made a victim twice by then being approached when you’re not really equipped to deal with it.”

A former claims handler from the same company that contacted Ms Harrison said: “My sole job was to capture those clients – to stop them getting independent legal advice, ant try to settle direct in their living room.”

But his previous employer denies this claiming it has a pro-active approach that is based on paying fair compensation quickly so that third parties appreciate their service.

Respecting Claimant’s Rights

The company added that it “completely respects a claimant’s right to appoint a solicitor.” They are also investigating how their company got hold of Ms Harrisons medical reports.

However, personal injury lawyers say that this kind of behaviour is widespread across the industry.

The Association of British Insurers insists that its members only contact the injured third party drivers to help them get their compensation more quickly.

Assistant Director of ABI, Justin Jacobs says: “It is the right thing for insurers to be doing, rather than requiring claimants to drag them through the courts.”

However, the Motor Accident Solicitors’ Society and Brake are calling for tighter restrictions and regulations to be put into place.

What Do You Think?

Leave your comments here.

Treasurer Alistair Daring has introduced a taxpayer-backed scheme to insure banks’ riskier assets from further loss.

The scheme hopes to help clean up banks’ balance sheets and also aims to encourage more lending, as well as restore public confidence in the banking sector.

The RBS has already signed up to the scheme and has said it will put in £325billion of toxic assets, and Lloyds has also admitted a willingness to join the scheme.

Broken Banks – Broken Economy

Mr Darling has said: “We want to rebuild confidence and provide certainty to enable banks to maintain and extend their lending.

“If we don’t fix the banks, we won’t fix the economy,” he added.

George Osborne, the shadow chancellor, has said that other government schemes hadn’t worked yet, and wants the public to know how much of taxpayers’ money will be put into the scheme.

He said: “British taxpayers are insuring the car after it has crashed.”

All banks that sign up to the Asset Protection Scheme, it will bear an initial loss on its protected assets, but the government will be paying the remaining losses.

However, the banks will also pay participation fees and enter into a legally binding agreement that aims to increase the amount of lending they provide to homeowners and businesses alike.

Taxpayers May Become Liable to £billions of Bad Loans

The scheme also means that taxpayers may become liable for £500 billion of bad loans and investments.

The RBS has already agreed to pay the participation fee of £6.5 billion to get into the scheme and has pledged to lend another £25 billion to the plan this year - £9 billion of mortgage lending, and £16 billion of business lending.

According to the agreement, the RBS will therefore be liable only for the first £19.5 billion of its losses.

In reward for this, the Treasury have announced it will inject £13 billion of capital into the bank, along with the £20 billion already promised. It will also make an extra £6 billion available if the RBS ever need more capital.

Government Could Gain Controlling Interest in RBS

All this extra funding could take the government’s stake in RBS up to 80%.

According to Mr Darling: “we will have shortly 70% of the voting shares, in other words we have a controlling interest. In terms of the economic interest, what is the taxpayer interest, the figure goes up to just over 80%, so we do have a significant holding in this bank.”

The details of Lloyds terms are expected out later today.

All British retail banks with more than £25 billion in eligible assets hae until 31st March to join the scheme which will remain running for at least 5 years.

Investors are welcoming the scheme, especially as the terms are more favourable than were initially expected.

What Do You Think?

Do you think the scheme is a good idea? Will it help or have an adverse effect on the economy? Comment here.

I can remember how Direct Line changed how we bought car insurance a few decades ago by bring the whole operation under one roof and selling their policies over the phone, rather than through several bricks and mortar businesses throughout the UK, with the high costs of maintaining these units. It worked because unlike other products, it does not need to be seen or touched and the quality is in the brand name or words written within the policy.

But as the internet came upon us, little by little we were bombarded with web addresses to visit to buy our cheaper car insurance, little did we know there was going to be another step forward, in the car insurance comparison website.

Within a few minutes of filling in one form, our request can be checked against several insurance companies at once and deliver quotes on hundreds of policies, in the time it takes me to take a sip of my coffee. It hasn’t just stopped with cars, the insurance comparison route has extended into travel, home, pet, travel, breakdown cover and now even utilities such as you gas and electricity suppliers. Never before has so much information been available within a few clicks and without the need of a
professional adviser.

There are still things to consider though, as it is almost impossible to have all of the small print from every car insurance policy, presented to the customer. You tend find yourself been given “top line” information rather than the “nitty gritty” small print. Within 50 or so words you will know what the benefits of the insurance policy are, but alas what is not covered, or even some of
the conditions to the sale are often not presented until your purchase or during the click to accept offer process, which is not always the most convenient time.

It is ironic that Direct Line who I remember from all those years ago are the main insurer who chooses not to be involved with car insurance comparison websites, but most do knowing full well that these sites can deliver far more traffic than their own can and as many people stay with insurers, the initial can often be very competitive to get future business at renewal time.

Insurers of UK are facing insurance claims worth millions of pounds from householders affected by this week’s storms as the damage is heavy. The storm that started a few days back had damaged many homes and cars in West Country and Wales. So, the affected people are making claims on their motor and home insurance policies which normally cover storm damages. Last Year, when Hurricane Kyrill hit the UK, the claims made by the affected householders were around 350 million pounds. So, it is estimated that this year’s storm insurance claims can cost the insurance companies millions of pounds.

The wind damage which is habitually referred as storm-surge damage is covered under a householder’s insurance policy and the flood damage is generally covered by the government issued insurance. Weather forecasters have already warned insurance companies about the storm and hence many insurers have prepared themselves to face the situation. It is said that some insurers have started communicating with their policy holders living in the worst affected areas and providing them assistance with their claim.

But, the question is whether the claims made by every householder will be granted as the amount of damage caused by the storms are not clearly estimated so far. Also, the insurance companies never mention wind damage in their offers and hence they may not pay to those who claim for wind damages. However, many insurance companies are hiring additional work force to handle the large number of incoming calls they are receiving day to day. Norwich Union Legal & General stated that they have also employed extra people at call centres to tackle the huge volume of incoming calls. The company also said that they are getting more calls from policyholders of West Country as the area is severely affected.

Some other insurance companies like Direct Line are also offering aid to their customers through their representatives. The emergency home response team has started offering help to clients whose property were affected by the storm. The company is also offering advice on how to get claims processed quickly. Halifax Home Insurance claims that they had received more calls from the south-east part of the country and they have prepared themselves fully for the storm claims. Many people are calling insurance agents to buy cover for their home and cars as they have witnessed the damages done by the storm.

Last year Gloucestershire and Yorkshire had seen a 300 percent rise in applications from householders after the worst floods that damaged several properties. It is said that a particular affected area received more than 1700 percent applications for home and car insurance as only one fourth of the total population of UK have home and car insurance cover. The bad weather is a natural phenomenon that affects almost every part of the world at some time or the other. But, the insurance companies state that the bad weather is a more powerful tool of advertising than the pricey advertisement campaigns as more and more people are taking insurance covers to protect them from damages caused by natural disasters.