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John Stewart

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At a time when the number of employers planning to re-evaluate their long-term retiree health strategies is at an all-time high, a new analysis by Aon Hewitt underscores the value and significant savings opportunities that retiree health exchanges can offer both plan sponsors and retirees.

A new Aon Hewitt survey of 550 companies covering almost 4 million retirees shows more than 60 percent of employers are reassessing their long-term retiree health strategy in response to rising health care costs and mandated changes from the Patient Protection and Affordable Care Act (PPACA). Approximately 20 percent of employers currently offer guided access to the individual Medicare retiree plan market through an individual health exchange and another two-thirds are considering this strategy for the future. According to Aon Hewitt, employers can potentially reduce their gross retiree medical spend by 20 to 50 percent per year by transitioning retirees to this type of model.

“The economics of providing traditional employer-sponsored retiree health coverage are changing, and employers are seeking the most cost-effective and tax-efficient delivery models,” said John Grosso, a senior vice president in Aon Hewitt’s Health & Benefits practice. “Retiree exchanges provide access to these individual market efficiencies, along with a wider choice of health plans than exists in the traditional employer-provided retiree health plan. Very often, retirees can purchase individual Medicare Advantage, Medigap or Medicare Part D plans at lower rates than the employer can offer for comparable coverage due to the federal subsidies, Medicare Part D program enhancements and market-based competition found in the individual market.”

In addition to having access to a wider range of options, Aon Hewitt estimates that retirees can save an average of $1,000 each year when purchasing their health benefits through individual retiree exchange. For example, Aon Hewitt Navigators, a comprehensive retiree health care exchange that has serviced more than 250,000 retirees since 2010, offers access to more than 80 insurance carriers and 3,300 different plans, plus personalized support to ensure participants choose the best plan to meet their individual needs. To help retirees navigate among the hundreds of plan choices and combinations available in the individual marketplace, Aon Hewitt Navigators offers seasoned benefits advisors who not only help retirees choose a plan during open enrollment, but can assist them if they have questions or concerns throughout the year. Of the retirees Aon Hewitt Navigators served in 2012, 92 percent indicated they were satisfied with their overall experience.

“In our experience, retirees appreciate having more options and more money in their wallets,” said Matt Mann, general manager of Aon Hewitt Navigators. “At the same time, employers are looking to balance retiree needs with cost and other business pressures. Retiree health exchanges enable employers to successfully do both, which is why they are becoming an attractive delivery vehicle for plan sponsors to consider now and going forward.”

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Members of the CII’s London Market Faculty ‘New Generation’ group have called for the implementation of a new internship programme in the London insurance market to help encourage younger people to consider a career in the London Market.

The group, which was put together by the Chartered Insurance Institute (CII) to support the retention of talent and the development of tomorrow’s leaders, set about researching how much provision there is currently to help individuals – without necessarily the right network of contacts – to get their foot through the door of the London insurance market. Their conclusion was that for many people breaking into this highly rewarding and exciting profession is a challenge and there does not appear to be any formal framework for internships currently available. It was also evident that not all employers know how to attract highly talented staff members from diverse backgrounds.

The CII’s New Generation group’s response was to devise an internship framework for the sector to implement within the London market to raise awareness of careers in this space among young people – specifically 16-18 year olds – who would not otherwise have ever considered profession in this space.

The proposed internship programme includes time spent experiencing broking, underwriting and claims in order for the full cycle of trading in the London insurance market to be properly understood. There is also time spent focusing on soft skills and networking to give participants the most rounded experience possible.

Amar Sumaria, spokesperson for the London Market New Generation group, said: “The London market has been very slow to react to the need of refreshing the talent pool and thinking outside of the typical recruitment process, and we feel the scheme we have set out in our report serves to change that. We starting by looking at our own routes into insurance, which are detailed in the report, and it was clear we are typical of most of those who enter the market. Not only will the programme benefit younger people trying to break through we also believe the London insurance market will benefit from tackling social exclusivity and therefore better serve an increasingly diverse client base.”

Ant Gould, director of faculties at the CII, added: “The work of the London Market New Generation group has drawn attention to the need for a system of attracting talent into the London insurance market from all walks of life.  The group looked at the existing schemes and then worked hard to put together the only London insurance market-specific internship framework. It’s now up to the market to rise to the challenge set by its future leaders and for companies to take the next step and implement the programme.”

The CII’s New Generation initiative aims to complement existing company talent programmes and give individuals additional exposure to market issues and tools to equip them for future leadership. There are four groups to choose from, depending upon specialism – London Market, Claims, Broking and Underwriting – and each group has the opportunity to make its mark on its sector of the profession by being involved in an industry project of their choosing.

To read the Generation Risk report in full, please follow this link: http://www.cii.co.uk/media/4330235/generation_risk_-_london_market_group_new_generations.pdf

Members of the London Market Insurance New Generation group 2011/2012 include:

Amar Sumaria, ACII, claims adjuster at Brit Insurance

Christian Bennett, Dip CII, underwriter at Mitsui Sumitomo

Alastair Bigg, Dip CII, property underwriter, major accounts practice at IAG Europe Limited

Edward Gregory, Cert CII, underwriter at SwissRe Ben Warren, Cert CII, underwriter at OIM Underwriting

Clarissa Franks, ACII, placing broker at Marsh

Sam Drysdale, ACII, claims adjuster at RenaissanceRe

Helen Troman, ACII, Chartered insurer, UK/Ireland ICT practice leader at Chubb Insurance Company of Europe

Kate Alderman, ACII, Chartered insurance practitioner, assistance vice president, global casualty, at Lockton Companies

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AXA announced that its asset management subsidiary, AXA Investment Managers (“AXA IM”) has received an irrevocable offer from an investor group for its entire stake in AXA Investment Managers Private Equity SA (“AXA Private Equity”).

The proposed transaction would be structured with a view to protecting AXA Private Equity’s investment expertise and performance-driven culture, and to ensuring that its clients continue to benefit from the outstanding service and performance they have enjoyed over the past several years. The transaction would enable AXA to monetize its interest in AXA Private Equity, a business successfully developed by the Group since 1996, and would provide a strong foundation for the next growth phase of one of Europe’s leading private equity firms.

The acquiring investors would be composed of AXA Private Equity’s senior management, led by Dominique Senequier, a group of institutions and French family offices and AXA Group. AXA Private Equity’s 298 employees would be given the opportunity to participate in the transaction through a dedicated vehicle. Post-transaction, AXA would continue to invest in private equity through AXA Private Equity funds.

Upon the completion of the proposed transaction, AXA Private Equity’s voting share capital would be held as follows:

– AXA Private Equity’s management and employees: 40.00%

– External investors: 33.14%

– AXA Group: 26.86%

The transaction would value AXA Private Equity at Euro 510 million for 100%. The sale of AXA IM’s entire stake would result in AXA IM receiving a total consideration up to Euro 488 million. The consideration would be divided into an upfront payment of approximately Euro 348 million and deferred consideration up to Euro 140 million, to be paid in installments subject to achieving certain targets and meeting certain conditions.

“We believe that private equity is an attractive asset class for the diversified investment portfolios of the Group operating insurance companies. We intend to continue to invest in AXA Private Equity funds, with an expected total commitment of approximately Euro 4.8 billion between 2014 and 2018, as the firm pursues its purpose of supporting the growth of French and European companies and investing responsibly for clients around the world. The potential new shareholders in the capital of AXA Private Equity are strongly aligned in their commitment to ensuring that AXA Private Equity would be positioned to continue creating value for its portfolio companies and investors. I am convinced that going forward, thanks to Dominique Senequier, Vincent Gombault, Dominique Gaillard and their team, the company should continue to grow and foster its potential to the full of its ability” said Gérald Harlin, Group Chief Financial Officer of AXA.

“The new structure for AXA Private Equity would deliver continuity valued by our clients, keep entrepreneurialism at the heart of what we do, and build a platform for new opportunities and broader horizons” said Dominique Senequier, Chief Executive Officer of AXA Private Equity. “We promised to develop a structure that keeps our talented team together and reinforces our investment approach, which is particular to AXA Private Equity. As we embark on this next phase of our story as an independent firm, our future will be one of capturing new opportunities borne out of the renewed confidence and vigour that will come with this deal.”

The proposed transaction would enable AXA Private Equity to become an independent private equity firm, with a powerful international network and reach. With USD 31 billion (or Euro 24 billion) assets under management raised from investors worldwide, the firm would offer its 255 investors a broad spectrum of asset classes: Funds of Funds, Direct Funds (comprising 160 portfolio companies), including Mid and Small Market Enterprise Capital, Infrastructure, Innovation & Growth, Co-Investment and Private Debt.

The proposed transaction is subject to customary conditions, including the completion of the works council consultation process and obtaining required regulatory approvals and should be finalized before the end of Q3 2013.

AXA Private Equity’s underlying earnings were Euro 59 million in 2012, based on AXA’s group share.

Estimated impacts on AXA expected at the closing date:

– Euro 0.2 billion exceptional capital gain, which will be accounted for in Net Income;

– Euro 0.2 billion cash expected to be remitted to the Group, net of reinvestment;

– Decrease of AXA’s group share in AXA Private Equity from 95.80% to 26.86%.

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Capita Insurance Services announces Project Turing, its initiative to improve and transform risk capture and related underwriting support services across the London market.

As the leading provider of risk capture services in the London market, Capita Insurance Services has been collaborating with a number of leading managing agents to design a market-level platform that will improve processing efficiency in the subscription market. Capita Insurance Services has engaged closely with the market to refine Project Turing’s key design principles and end user requirements. Discussions over the past 18 months have demonstrated increased market appetite to explore the delivery of services on a shared basis.

Project Turing will be delivered using the expertise of Capita’s Gloucester based underwriting support team under the leadership of Kath Gioiosa. The Gloucester team are highly skilled and experienced insurance professionals with an established reputation for service quality and reliability.

Capita Insurance Services is already proving its ability to develop and deliver an effective market level risk capture programme, through its on going work for managing agents with service companies in Singapore.  The work there has assisted in the development of Project Turing and will run in conjunction with it once it is fully established later this year.

Andrew Beer, Managing Director, Capita Insurance Services commented: “It is a privilege to be working with our market partners to deliver the services they want and need to become more efficient.  Risk capture is the first step in the process but in close collaboration with the market we will together develop transformational market level services.”

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A study by AXA Business Insurance among small business owners reveals that insurance fraud is a real issue with one in three admitting they have inflated, or would inflate a claim while one in ten would bend the truth when applying for a policy.

Research carried out by the company among hundreds of small British businesses suggests that, while the majority of businesses are honest, the numbers exaggerating, or even fabricating, claims could run to tens of thousands a year with the average claim value being raised by around 17%, or approximately £640. By clamping down on this behaviour, AXA believes that the insurance industry could save tens of millions of pounds per annum to keep premiums lower.

When asked what they would consider “acceptable” when making a claim, around one in ten small business owners said it was okay to inflate the value of goods stolen and a similar number would lie about having locked up and alarmed their premises.

More seriously, and illustrating the increasing compensation culture in the UK workplace, around one in twenty would consider it acceptable to fake a whiplash claim or a minor accident at work in order to make a claim.

Tradesmen and retailers top the list of sectors where people have exaggerated claims.  Although contrary to personal insurance (where men are twice as likely as women to fake a claim), there seems to be no difference between genders when it comes to being sparing with the truth.

Furthermore, the research revealed that small business owners would be 25% more likely to make a fraudulent claim on their business insurance than their personal insurance.

Darrell Sansom, managing director at AXA Business Insurance said: “Many people may think insurance fraud is a victimless crime but it’s not. Honest customers end up footing the bill through higher premiums as insurers pass on the additional costs of inflated claims.  And in the current economic climate, the last thing any small business needs is additional costs.”

As well as exaggerating claims, some business owners admitted that they would be prepared to tell a few untruths when it came to applying for insurance:

– one in ten said they would deliberately under-value their business to get a lower premium

– a similar number would not mention they used their car for business and simply buy personal cover, again to keep premiums down

– around 5% would not mention previous convictions and 3% would omit to mention previous claims.

Darrell Sansom concludes:  “As an industry we are well aware that these things go on and we do have increasingly sophisticated processes in place to stop them.  However, we also need to educate the minority of small business owners who commit these frauds, whether intentionally or not, that getting caught could mean the end of their livelihood. They not only run the risk of having any claim turned down, but also, in serious instances, they risk criminal proceedings and problems getting any insurance in the future.”

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Following last week’s sale of Canopius Holdings Bermuda Limited and its merger with Tower Group, Inc., Canopius Group Limited announces that its reinsurance platform in Bermuda – Omega Specialty Insurance Limited – has been renamed Canopius Reinsurance Limited (“CRL”). CRL is a Class 3A reinsurance company with $400m of capital.  It writes structured reinsurance business for third parties and provides capital support to Canopius Group’s underwriting operations at Lloyd’s.

The Canopius Bermuda platform now comprises CRL and Canopius Underwriting Bermuda Limited, which underwrites excess casualty business on behalf of Canopius Syndicate 4444.

With effect from 1 June 2013 and subject to necessary consents, Canopius Bermuda will be overseen by Stephen Hartwig who will succeed Susan Patschak as Chief Executive Officer.

Michael Watson, Executive Chairman of Canopius, commented:  “Our platform in Bermuda remains a vitally important part of Canopius’s global presence. We have increased the Group’s capital commitment to CRL, which will assist in the development of its business. We have also recently increased our excess casualty capacity from $25m to $37.5m with the support of a global reinsurance panel, and will be expanding our team accordingly. I have every confidence in the future successful development of our Bermuda platform under Stephen Hartwig’s leadership. “

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Bluefin Insurance announces that it has partnered with Arts Quarter LLP to offer the UK arts sector advice and access to insurance deals for their specific needs.

Arts Quarter is one of the most respected management consultancies working within the UK arts community.  It offers a range of services to support arts organisations to develop revenues, reduce costs and gain greater value from their brands and wider assets at this time of increasing financial pressure on the arts.

Kit Strachan, Executive Director, who heads up Bluefin’s charity team, commented: “We are delighted to be working with Arts Quarter on this exciting development for the culture sector. We have a lot of experience in the ‘not for profit’ and arts arenas so it is fantastic to partner with an organisation that lies at the heart of  the UK arts sector. We understand that with pressures on funding, insurance can be the last thing on the minds of those trying to maintain artistic programming in a tough economy but we have an important part to play in ensuring that the insurance they are purchasing is both cost efficient and effective.”

John Nicholls, Managing Partner, Arts Quarter, commented: “There continue to be many challenges for arts organisations following the global recession and our role has been one of supporting individual organisations and the wider sector to adjust to this new economic order.  In our continuing role of helping organisations to cut core costs so that they can continue to thrive creatively, we are pleased to appoint Bluefin as our insurance broker of choice for the arts sector. Due to the diverse nature of our sector we have looked for a partner that is flexible and one that can respond to the needs of arts organisations and we are pleased that we have found that in Bluefin.”

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Following the recent review by the FSA into brokers’ premium finance deals, Premium Credit has announced support for this investigation and outcome. Commenting on the announcement Andrew Doman, Chief Executive Officer at Premium Credit said:

“The FSA has said it will not be taking any further action into brokers’ premium finance deals but has cautioned for intermediaries to be transparent. Premium Credit fully supports the FSA and believe there should always be full transparency when it comes to any financial product, including premium finance.

“Premium finance plays a very important role in helping small and medium sized businesses throughout the UK by providing financing for their growth. We offer businesses method of financing a bundle of insurance policies from multiple underwriters. Premium Credit alone lends approximately £2 billion per year to UK businesses, out of our total advances – which last year totalled £3.3 billion.

“Premium financing is vital in allowing brokers and their clients immediate access to funds at APRs that may be lower than rates from other sources. At Premium Credit we offer a very rapid loan approval, often at the point of sale. We support growth in the UK economy and want to play our part in the creation of new jobs. We have funds immediately available and are prepared to support brokers and insurers who wish to source premium finance from a third party.

“The FSA also reinforced the need for brokers to act in their client’s best interest in particular by recommending insurer installment options if in the interests of the insured to do so. This is already recognised by Premium Credit and has been made clear in our trading agreements with brokers. We always make it clear to brokers that as they are the agent of the borrower, it is their duty to act in their client’s best interests.

“Another emphasis by the FSA was the need for brokers to communicate clearly the cost of insurance separate to premium financing. This again reinforces the current policy at Premium Credit of requiring brokers to provide financing terms to clients in a timely and clear manner.

“Treating customers fairly (TCF) is central to regulation and ensuring an efficient and effective market and helping consumers achieve a fair deal. Disclosure and transparency will continue to be the key in achieving TCF. As the market leader in the premium finance business we are committed to ensuring our industry has the appropriate processes and controls in place and transparency is a number one priority for all.

“We have a long standing relationship with BIBA, and will continue to support the industry in ensuring that we work with them on key industry and regulatory issues in the premium finance market, and sharing best practice and guidance to protect and support their insurance broker members and customers. Premium finance is a vital source of funding for UK business”

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Allianz Global Corporate & Specialty Africa has embarked on a major expansion drive to boost the company’s massive growth plans across Africa.

Four new heads of business have joined the company since the beginning of this year and will be based in the Johannesburg office. These new roles reinforce the company’s commitment to growth sectors and increase its footprint within the region. The appointments are:

– Wolfram Schultz has joined with the role of Head of Liability. He joins from Guy Carpenter in Germany where he was Managing Director responsible for placing worldwide liability reinsurance treaty strategies for German, Swiss, Austrian and central European clients, including AGCS.

– Alexandra Grant is appointed Head of Financial Lines, where she brings experience within both the UK and European financial lines sector. Ms Grant was previously Corporate Manager Financial Lines at insurer AIG UK. Her financial lines experience includes industries such as pharmaceuticals, mining, manufacturing, retail, construction and private equity.

– Seelan Naidoo has started with the company as Head of Engineering & Property. Mr Naidoo previously worked for AIG South Africa as Energy and Engineered Risk Profit Centre Manager – South Africa. Mr Naidoo career has extended across liability, property and energy sectors of the South African insurance market.

– Geoffrey Tanton has joined the company as Head of Package & Multi-Line. He was previously Group Underwriting Manager of Omnicover (Pty) Ltd, responsible for both personal and commercial lines having worked for the majority of his career in commercial lines underwriting roles.

– Mark Govender has been appointed Head of Marine. He joins from Chartis Insurance SA where he was Marine Underwriting Manger with responsibility for developing portfolio strategies and policy wordings.

Background

AGCS is not just focussing on SA but is keen to expand throughout the continent, particularly Sub-Saharan Africa. The Sub-Saharan economic area is forecast to grow by more than 5% over this year. The growth trend is expected to continue given the region’s economic potential, requirements for infrastructure development and particularly its richness in natural resources.

Delphine Maidou CEO of Africa Pty Ltd comments: “As part of AGCS’s global growth strategy, South Africa and Sub-Saharan Africa are important markets. I am pleased to welcome the new additions to the team. We are clearly stating to the market that AGCS is committed to building strong roots for the future. AGCS Africa is looking to grow significantly and being able to bring in further expertise will help us achieve this. Our plan is to use our established team in Johannesburg as the hub for sub-Saharan Africa in general. We will continue to focus on working with local brokers and having an active team of people on the ground in countries where the business is generated. As we continue to grow I look forward to strengthening the team further.”

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Prolonged low interest rates in Europe would threaten the viability of savings products with investment guarantees, traditionally a fundamental part of many life insurers’ business models, Fitch Ratings says. The impact of low rates was highlighted as a key concern recently when the European Insurance and Occupational Pensions Authority called for feedback from local regulators on the scale of the risk.

The investment guarantees that insurers can offer to new customers are driven by the yields on the bonds that they can invest in. Low yields make these products unattractive to customers, hitting sales volumes and potentially making the business unviable. Some insurers have told us that they plan to shift their business towards protection products and annuities, where profits are driven by pricing for insurance risks, rather than by financial markets.

A prolonged slowdown in sales could also make insurers’ existing books of guaranteed-return business increasingly uneconomical as declining books become insufficient to support their fixed costs. Ultimately, insurers are likely to put the legacy business into run-off in closed funds, which they may then offload to consolidators. Fitch expects further consolidation of closed with-profits funds in the UK and significant closed-fund consolidation in the Netherlands, where there has been a dramatic fall in insurers’ savings business due to tax changes that allowed banks to compete on equal terms with insurers.

A prolonged period of low interest rates would also hurt life insurers by cutting the returns available when they reinvest assets backing their existing guaranteed-return business. However, this impact would vary significantly depending on how closely they have matched the duration of their assets and liabilities. Insurers often hold assets with a shorter duration than their liabilities because of a lack of assets available with duration long enough to match the liabilities, which may be 20-30 years or more.

Fitch believes good risk management, close regulatory scrutiny and a supply of long-duration assets means assets and liabilities are relatively well matched in some markets, for example the UK and the Netherlands. Moreover, the running yields on many insurers’ existing asset portfolios, together with other non-investment earnings from mortality and expense loadings in policyholders’ premiums, are more than sufficient to cover investment guarantees on the existing blocks of business.

For German life insurers Fitch simulated a run-off scenario for a typical life insurance book, with the assumption the investment portfolio is wholly in fixed-income assets and that proceeds of maturing bonds are reinvested at 1.5%. Under this scenario it would take until 2027 for the return on investment to fall below the required rate.

Insurers in the Nordic region may have less closely matched assets and liabilities because of the relative scarcity of longer-term assets in the region. Some have addressed this through buying sovereign bonds from other countries such as Germany, although this leads to further complications such as foreign exchange risk.

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In their recent Health & Protection Survey, Drewberry Insurance found that workers significantly underestimate their chance of passing away during their working life, which could provide a significant explanation as to why life insurance is so underutilised.

The sample of 2,000 workers estimated the chances of an 18 year old passing away before age 65 at 1 in 70, whereas the actual risk is closer to 1 in 9. This means that the actual chance of working age death is 7 times higher than workers perceived.

If workers underestimate the chances of death so significantly then it may not be surprising that the take-up rate for life insurance is so far below an optimal level, leading to a significant life insurance protection gap in the UK.

The survey also found that workers estimated that the leading life insurers’ only payout around 50% of all claims made, when the actual payout rate is closer to 98% of all claims made.2 Thus, the combination of a low expected payout rate and an underestimation of their mortality risk could be key explanations for the protection gap.

Chance Of Incapacity 3x Higher Than Workers Perceive

The workers surveyed were also asked to estimate the chance of being off work for over 6 months due to ill health during their working life. The sample estimated this incapacity risk at 1 in 30, when in fact the chance is closer to 1 in 10.3

This finding could also help to explain why as few as 8% of our sample hold income protection insurance, even though 54% of the sample either receives no sick pay or up to 3 months full pay and as much as 61% of the sample would not be able to survive living from savings for longer than three months.

Tom Conner, Head of Protection at Drewberry Insurance, says, “These survey findings really demonstrate that the insurance industry needs to do far more to educate workers on the real risk of death and incapacity.

“It is often argued that people consider protection to be expensive but this could down to the fact that consumers are far more likely to need to claim on these products than they realise. It is only through educating consumers on these risks that we can hope to encourage people to protect themselves sufficiently.”

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Bespoke insurance cover provided by day-rate expert and automotive software developer, DCML, enabled BMW MINI to run its innovative, complex MINI Mission test drive programme.

Concluding last month, the three-month, social media-led campaign put more than 600 university students – each requiring specialist cover – in the driving seat to complete various challenges.

With the participants all aged between 21 and 24, DCML’s ability to provide practical logistical solutions to organise short-term cover was key in allowing BMW MINI to insure a high volume of drivers in the young, high-risk category, at short notice and for brief periods.

MINI recruited 14 ambassadors from 14 universities across the UK. Each ambassador was loaned a car for a nine-week period, during which they completed MINI road trip adventures, enlisting the help of hundreds of fellow students for the chance to win a car for a year.

The average annual premium for a young driver is more than £1,800 and current figures suggest that the single biggest cause of accidental death among 15-24-year olds is car crashes.

Vince Powell, managing director of DCML, said: “Bespoke campaigns require bespoke solutions to make them happen. We are experts in tailoring our suite of services and products to suit the needs of potentially challenging schemes and MINI Mission was a good example of what we can deliver.

“Customised marketing programmes like MINI Mission are being used increasingly by manufacturers to target specific demographics, but insuring that target market to drive is one area where short-cuts are not an option. With our help, BMW MINI was able to outreach to its chosen sector of young drivers.”

Recognised for its market-leading courtesy car and fleet management tool, Dealer Car Manager, DCML has developed a breadth of automotive software expertise, allowing it to provide custom solutions to a wide range of challenges, including app development, fleet management and specialist insurance.

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The First Tier Tax Tribunal ruled on 11 March 2013 that organisers of broker clubs, which help member brokers gain access to better terms with larger insurers, must charge full UK VAT at 20%.

Westinsure acts as service promoter for small brokers

Westinsure Group provides a paid-for membership service for smaller brokers through its online brokerage system.  Services include:

– Negotiating with insurers to secure improved rates of commission, product range and services

– Reduced premium charges

– Negotiating with businesses which provide premium instalment finance to achieve improved finance rates

– Regular seminars and direct visits for brokers to learn about new opportunities

– Negotiating improved terms with the Chartered Insurance Institute for products and services

For the above services, brokers pay an annual membership fee.

HMRC questions VAT liability

Westinsure took the view that it was providing the services of a broker or agent, which are exempt from UK VAT at 20%.  However, HMRC challenged this.  Their view was that this was simply a marketing and promotion service.  In 2011, it issued a ruling that Westinsure should have been charging VAT since 2005.

First Tier Tribunal backs HMRC

The FTT reviewed this question of whether Westinsure was providing brokerage or promotional services.  It ruled that Westinsure was in fact too far removed from individual insurance agreements, and that their services are closer to support services.

Richard Asquith, Head of VAT & IPT, TMF Group commented

This case shows how closely the tax authorities are scrutinising services in support of brokers, and that they are looking to close off the VAT exemption.  We can expect more of these cases as HMRC probes the limits, and looks to raise fresh revenues for the pressured Exchequer.

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Impact Forecasting, the catastrophe model development center of excellence at Aon Benfield, has launched a suite of new scenario models to generate loss estimates for specific historic or hypothetical events. Aon Benfield is the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON).

Loss estimates for events such as the storm surge by Superstorm Sandy in 2012, the 2011 Thailand floods, and the highest insured loss European windstorm, Kyrill (2007), can now be calculated to gauge the financial impact of their potential reoccurrence.

Equally, scenarios can be generated for possible future events, for example, based on maximum possible magnitudes of a flood or earthquake. The scenarios are generated by integrating footprints (maps highlighting the extent of the area affected at a given intensity) from either Impact Forecasting, insurers and reinsurers or third party organisations such as PERILS.

The scenario models enable insurers and reinsurers to validate existing probabilistic models and examine specific events in territories where no models currently exist. In addition, firms can monitor exposure in key areas and provide more detailed information for reinsurance purchase and claims management.

Available through ELEMENTS 7, Impact Forecasting’s loss calculation platform, footprints already available for key peril and regional hotspots include:

– US: Superstorm Sandy storm surge footprints by Impact Forecasting (developed by the SLOSH model) and PERILS (produced by SERTIT). In addition, footprints are available for hurricanes Katrina and Ike

– Japan: 15 event scenarios for tsunami, based on events defined by the Japanese government and USGS

– Europe: PERILS windstorm scenario events for Klaus, Xynthia, Joachim and Andrea (produced by the MeteoSuisse, German Weather Service (COSMO-EU) and EuroTempest)

– Flood: Thailand (2011), Switzerland (2000, 2005, 2007), Slovakia (2010), Austria (2002, 2005), Poland (2010)

– Storm Surge flood: Netherlands (1953), Germany (1962, 1976, 1994, 1995, 1999)

– Earthquake: Morocco (Agadir 1960, Al_Hoceima 1994, 2004), Algeria (Boumerdes 2003, Djidjelli 1856, El Asnam 1980), Turkey (Erzincan 1939, Kocaeli 1999, Sultandagi 2002, Van 2011), Israel (Galilee 1837, Safed 1927, Red Sea 1995, Dead Sea 2004) and Kazakhstan (Almaty 1911)

Steve Jakubowski, President of Impact Forecasting, said: “Any insurer or reinsurer Impact Forecasting licensee can use ELEMENTS with any event footprint to estimate scenario losses. The ELEMENTS platform unlocks the full potential of event footprints to estimate losses, computing in minutes work that would take hours to complete using Geographical Information Systems and databases.”

Adam Podlaha, international head of Impact Forecasting, added: “ELEMENTS not only runs Impact Forecasting models but, as a completely universal catastrophe modelling platform, can run any model or any footprint for any peril or territory. This is what differentiates ELEMENTS from other tools in the market.”

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Specialty Lloyd’s insurer Jubilee has announced the promotion of Piers Faulkner to Deputy Active Underwriter of its Life Syndicate 779 at Lloyd’s.

Faulkner will work with Jon Clarke, Active Underwriter Syndicate 779 utilising his affinity expertise to develop new products and scheme opportunities, complementing Jubilee’s niche Life business.

Johnny Rowell, CEO of Jubilee said: “Piers promotion reflects his strong track record in building successful affinity relationships and developing innovative products and reflects our commitment to investing in the future of our life franchise.

“He will play an important role in the delivery of strong growth in the Life business which represents an important part of our broader consumer products strategy.”

Jon Clarke, Active Underwriter of Jubilee Syndicate 779, said: “Piers joins the Syndicate at a very important time in its development. Jubilee’s commitment to the specialty life market will now see us look to expand our offerings and product distribution opportunities taking advantage of his expertise.”

Faulkner will assume his new role on 29th April and is currently undertaking an orderly handover of his responsibilities as Deputy Head of Affinity and Special Risks within Jubilee Syndicate 5820.

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Xchanging, the business process, procurement and technology services provider and integrator has signed Novae Group PLC as the first customer of its enhanced Fees Direct offering, Fees Direct+.

The new service, available to companies in both the London and international insurance markets, offers a unique, integrated, end to end expert management processing solution, which can be implemented for clients within three weeks.

Novae, part of the original user group that helped to shape Fees Direct+, has now taken the service to gain the benefits of improved management information and control over spend on third party experts.

Rob Myers, director of business processing services said:“We are grateful to Novae for their participation in helping to shape a product that responds to a long-standing market wide need to manage expert spend and fee payments more efficiently. The effort and innovation that has gone into Fees Direct+ is designed to give customers greater control in this area.”

Jonathan Boyns, group claims director at Novae added: “Novae is committed to embracing technology that can have a demonstrable and positive impact to our business and Fees Direct+ fits directly with that. Managing expert fees can be a complex process and we are pleased to be the first to start gaining the benefits of this unique, integrated, end to end processing solution.”

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Aviva’s announcement this morning of a second major cut in dividend payouts since 2009 – taking the opposite course from its peers – highlights the contrasting fortunes in the UK life insurance sector, Fitch Ratings says.

The dividend cut will help reduce Aviva’s debt leverage and strengthen its capital. This is positive for the group’s credit profile, which has suffered in recent years from lower capital strength relative to its peer group.

In contrast, the other major life insurers that have reported their 2012 results so far – Old Mutual, Legal & General and Standard Life – have all raised their dividends after strong results and capital surpluses. Prudential will report next week. As well as having more resilient balance sheets, we believe other life insurers are more sheltered from peripheral eurozone countries.

Aviva continues to suffer from its exposure to southern European economies, with the value of new business in Italy falling sharply to GBP29m from GBP75m in 2011 and sales of long-term savings products in the country dropping by 30%. Aviva’s GBP3bn loss for 2012 was mainly driven by a GBP3.3bn writedown on the disposal of its US business.

We believe the dividend cut also reduces the likelihood of further cuts after the 2013 interim dividend. This is something that new CEO Mark Wilson will be keen to avoid following a similarly large cut under former CEO Andrew Moss.

The transformation of Aviva under new management is progressing rapidly as it continues to strengthen its balance sheet and narrow its focus on selected core markets. As a composite insurer with significant non-life operations to complement its life business, Aviva has one important advantage over its major UK-based peers – the diversification benefit that arises from having these two different types of business.

We will comment further on UK life insurers’ results after the main insurers have completed their announcements. We do not rate Aviva, but monitor the company as part of our coverage of the UK life insurance sector.

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Two fraudsters who made thousands of pounds from fraudulent insurance claims have been jailed.

Shakir Javid was sentenced to three years in prison at Newcastle Crown Court on March 1, 2013 for masterminding the scams. His accomplice, Amjed Malik Iqbal, will serve two years and four months behind bars.

An investigation was launched after a complaint was made to police back in 2006 into claims handled by Newcastle-based company Accident Claims Specialists (ACS) and the two company directors, Javid and Iqbal.

Northumbria Police detectives, working with the Insurance Fraud Bureau (IFB), raided the business premises and homes of Javid and Iqbal in October 2010. Thousands of documents and accident claim files were seized. Officers discovered evidence of claims for fictitious accidents and inflated personal injury and credit hire claims following genuine incidents.

Ben Fletcher, Director of the Insurance Fraud Bureau (IFB), said: “These convictions conclude several years of joint-investigation by Northumbria Police and the insurance industry. Given that many of the fraudulent claims submitted did not look overly suspicious in isolation, the fact the scam was exposed is testament to the industry’s ‘zero tolerance’ stance towards fraud.

“As honest policyholders, we all pick up the bill for these insurance scams, with around £50 added to every premium just to cover the costs of fraud. Today’s verdict sends a clear message to fraudsters – you will be caught and face the consequences of prison sentences and a criminal record.

“The IFB was set-up in 2006 to detect organised insurance fraud and we continue to work with police to dismantle scams up and down the country.”

A third man, Zaffa Hussain, pleaded guilty to one count of fraud by false representation after a fictitious insurance claim for which he arranged to crash two cars into each other. The details of an unsuspecting member of the public were used to make the false claim. An insurance company was defrauded of almost £14,000 as a result. Hussain was fined £800.

Detective Inspector Gary Stephenson from Northumbria Police said: “This was a widespread and complex fraud investigation which led to three men being convicted for their roles in this scam. There is no such thing as a victimless crime and this enquiry shows we will target those who seek to defraud organisations and individuals out of thousands of pounds.”

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Towergate has entered into a five-year agreement with Lorega, the pioneer of Loss Recovery Insurance, to exclusively provide its range of products to the broker’s clients.

Lorega has successfully worked in partnership with Towergate since 2006, to provide specialist policyholder claims services, branded as Towergate Assist.  Customer feedback consistently shows that policyholders, who purchased Loss Recovery Insurance, feel that they received a very high level of service following a claim.

Under the terms of the new agreement Towergate will continue to own brand the Lorega products and will aim to significantly increase distribution.  This will include the new Lorega 10 product, which will also be introduced to the Towergate SME client during the first quarter of the year.

Paul Williams, Broking Director of Towergate said: “We have been very impressed with the professionalism that Lorega has brought to the vital claims handling process and believe their products provide a real competitive advantage. In the event of a claim our policyholders benefit from immediate access to the very best advice, which both increases retention and enhances our own reputation in the market.”

Neill Johnstone, Managing Director of Lorega said: “Lorega is 100% focused on putting the policyholder first and we are therefore delighted that Towergate’s clients value our support and advice following an insurance loss. By entering into a five-year agreement we are ideally placed to continue to drive the penetration of our Loss Recovery Insurance products and deliver the quickest and fairest claims settlements possible for policyholders.”

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LegaCare is the UK’s first charity to provide free legal advice and support to patients diagnosed with a life limiting or life threatening illness. LegaCare are a small, specialist team of pro bono solicitors based in the North East who work in close collaboration with Macmillan Cancer Support; also a partner of Legal & General.

LegaCare give advice and support often at very short notice, any time day or night on any legal issues that may be worrying a client as a result of being diagnosed with a serious illness such as guardianship of children, employment, housing, mortgage and debt problems as well as powers of attorney, advance care planning and will writing.

LegaCare is unique in offering this service, which is free to anybody in receipt of state benefits and/or earning less than £30,000. Clients must be referred by a health professional or Macmillan professional and considered to be suffering from a life limiting or life threatening illness. Clients consult with experienced solicitors and receive ongoing unlimited advice to resolve any legal issues and support for family and carers.

Duncan Finch, Managing Director, Retail Protection, Legal & General said : “ I am delighted that we are supporting LegaCare to help them expand their services in the North East and beyond. Our partnerships with charities such as Macmillan Cancer Support and LegaCare help us to improve our understanding of the challenges that our customers face when they are dealing with a serious illness and how we can better support them. What matters to our customers, matters to us and we use this insight to help inform how we improve and develop our products and services to meet their needs. We are particularly interested in helping LegaCare to deliver their services across the UK so that more people can benefit.”

Margaret Kirby, Solicitor and Founder and Director of LegaCare (UK) Ltd said : “I am thrilled to receive support from Legal & General. We are a small charity based in the North East and want to be able to expand to help more people who need our services. I have seen first hand how distressing it is for people, at what is a very harrowing time, to have to sort out legal problems, however simple or complex they may be. We help take this worry away so they can take some comfort from knowing their affairs are in order. Our service is unique and demand is huge, and the last thing we want is to let anyone down – that is why clients are referred by health professionals and Macmillan professionals. Therefore the financial support from Legal & General to fund the recruitment of two additional solicitors is so vitally important. It will allow us to double the amount of clients we can help in 2013.”

Karen Stenlund, Macmillan Development Manager, North East said “ We’re pleased that people affected by cancer have this additional support available to them. Cancer can be the toughest thing most of us will ever face – you don’t need additional worry about legal issues.”

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