16 | 13-19 January 2012 | InsuranceTimes

InsuranceTimesInvestigates

Motor’s damaged reputationMarket research commissioned by Insurance Times has some sobering messages for the motor insurance industry. But despite public ire over high premiums, the overall results are not as bad as some expectedBy David Blackman

Last year was an ‘annus horribilis’ for the repu-tation of the general insurance industry, with an un paralleled level of attention focused on its

murkier practices, largely spurred by controversy over the rising cost of motor cover and the August riots.

And this focus looks unlikely to soften in 2012 (see box overleaf) – just days into the new year, the government’s Transport Select Committee published its second highly critical report in less than 12 months into the cost of motor insurance.

But what impact have these brick-bats had on the industry? To fi nd out, Insurance Times commissioned exclusive market research to test the state of public opinion on the sector. The survey, carried out by market research company Consumer Intel-ligence, focused on the extent to which the industry’s reputation has been damaged by the furore sur-rounding the motor market.

On the over-arching question of individuals’ experience of the insur-ance industry, nearly two-thirds (60%) of the survey’s 1,680 respond-ents answered that it was neutral.

Consumer Intelligence managing director Ian Hughes urges the industry not to be disheartened by the response.

“People within the industry will take this personally but they tend to forget that we are just one of the things that consumers have to worry about. It’s to be expected that people don’t have strong feelings about insurance.”

The 40% that had a strong opinion were split 23% negative to 17% positive.

Surprising fi ndingSabre Insurance chair Keith Morris is surprised by this fi nding. He says: “With the price rises people have seen in motor during 2011, if any-thing I would have expected people to be somewhat more negative, so it’s heartening to see the proportion of respondents who are neutral or positive about their experience.”

But Hughes believes the relatively narrow gap between positive and negative ratings means that turning around perceptions should not be diffi cult.

There’s good news too for the industry on the issue of trust, where it scores well. The overwhelming majority agree that they trust their insurance company, with a tiny 3% disagreeing.

But the survey’s fi ndings on motor insurance will be less pleasing for the industry.

Opinion on motor insurance has dimmed over the last 12 month, with 40% having a less favourable opinion compared to 4% with a better view.

Hughes describes this fi nding as “upsetting and depressing”, putting the fi gure into context by pointing that 7% of people will generally have benefi ted from their policies by making a claim.

Lack of understandingA-Plan chief executive Carl Shuker is clearly surprised that the balance of opinion on this question is so unfa-

vourable, arguing that it refl ects a lack of understanding of the benefi ts off ered by motor insurance.

But AXA Commercial claims and underwriting director David Wil-liams is more struck by the fi nding that so many consumers’ opinions are unchanged (56%).

“I am surprised that it has not got even worse if you think of the things that have gone on in the last 12 months,” he says.

Bluefi n chief executive Stuart Reid describes as “rather dispiriting” the linked fi nding that 91% of respondents think motor premiums are too expensive. “There’s clearly a job for us to do in helping people see the value in the premiums compared to the size of the claims we have to pay,” he says.

The survey then examines the roots of this widespread public disaff ection with motor insurance. The media brouhaha surrounding referral fees does not appear to have resonated as strongly with the public as those within the insurance bubble might have expected.

Nearly a third (32%) hadn’t even

‘People within the industry will take this personally but they tend to forget that we are just one of the things that consumers have to worry about’Ian Hughes, Consumer Intelligence

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InsuranceTimes | 13-19 January 2012 | 17

heard about the referral fee debate. Slightly more (38%) were aware of the issue but said their opinion of the industry had not been infl uenced by it. However, 28% reported that their view of the industry had got worse as a result of what they had heard about referral fees.

Williams says that the industry needs to stop shooting itself in the foot. Commenting on the referral fees issue, he says: “We have been directly instrumental in some of the things that have been detrimental to the industry.”

Groupama Insurances personal lines director Kevin Kiernan agrees: “It is obvious that this has eroded trust and it is therefore no surprise that these days even the banking industry enjoys a better reputation. The industry has a lot of work to do to set things right.”

The survey also shows that two-thirds (64%) of respondents said they had received a spam text or phone call from a claims manage-ment company. Of those who had received such communications, most were irritated. Nearly half (45%) said they were extremely irritated compared to a tiny 2% who were not bothered.

“I doubted it was quite as preva-lent as the proportion this survey actually found,” says Morris.

But the good news for the indus-try is that the survey respondents identifi ed fraudsters and uninsured drivers as the two chief culprits for escalating motor insurance costs.

Over 90% of those who answered the survey agreed that these two groups were “mainly to blame” for the high cost of motor insurance. In third place, 85% named insurance companies followed by lawyers.

Williams says: “They don’t quite get referral fees, but they under-stand the impact that fraud and crime are having.”

Fingering fraudstersMorris, who also chairs the ABI’s motor committee, argues that the survey fi ndings show that the indus-try’s eff orts to fi nger fraudsters and uninsured drivers as the cause of soaring premiums is paying off .

“It’s heartening to see the mes-sage getting through that issues such as fraud, uninsured motoring and legal costs are contributing signifi -cantly to the rising cost of motor insurance. I would hope that both the industry and the government would take this as a sign of public support for their actions in counter-ing these problems.”

17%

23%Negative

44.6%respondentsfound spam

texts and phone calls extremely irritating

Positive

How would you describe your experience of the general insurance industry?

MOTOR INSURANCEHas your opinion of the motor insurance industry changed over the past 12 months?

IRRITATIONOn a scale of 1 to 10, to what extent were you irritated by these communications? Where 1 = not bothered and 10 = extremely irritated

39%Yes Less favourable

57%No change

4%Yes More favourable

2%Yes improved opinion

32%Don’t know about

claims referral controversy

36%No I haven’t received any spam texts or phone calls

64%Yes I have received a

spam text or phone call

Not bothered

1

1.9%

2

0.5%

3

1.9%

6

5.3%

4

1.9%

7

10.4%

9

12.7%

5

5.0%

8

16.0%

10

44.6%

Extremely irritated

23%Negative

17%Positive

60%Neutral

28% Yes worsened opinion

38%No not infl uenced

opinion

Have you ever received any spam

texts or phone calls from claims

management companies?

DATA: CONSUMER INTELLIGENCE FOR INSURANCE TIMES

REFERRAL FEESHas your opinion of the motor insurance industry been infl uenced by the controversy over claims referral fees?

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18 | 13-19 January 2012 | InsuranceTimes

InsuranceTimesInvestigatesMotor’s damaged reputation

Allianz retail general manager Jon Dye says: “The fact that 94% of people blamed fraudsters for the high cost of motor insurance is a surprising but welcome fi nding. Fraud at point of application and claim is a huge issue so it is pleasing that consumers recognise its signifi cance.”

Lanson public aff airs and regula-tory consulting director Richard Hobbs believes the fi ndings show that if the industry can show it is tackling claims costs, it can keep customers on-side. “Motor insurance buyers are pretty rational people and they want to be treated fairly. They get that insurance companies

need to be profi table.”But customers clearly do not

want to see their premiums feather-ing the nests of fraudsters and what Hobbs calls “avaricious lawyers”.

Insurers not off the hookMeanwhile, ex-justice secretary Jack Straw believes that the fi ndings do not let insurers off the hook.

“It is time the insurers themselves, whom 85% of the public blame for the level of premium, bring their own house in order and curb practices, such as credit hire, which are clearly counter to the public interest.“

But Williams detects a potential silver lining in the survey’s fi nding that the vast bulk of respondents expect to see motor premiums rise over the next year. If the govern-ment’s changes to legal costs start to deliver benefi ts within the next 12 months, motor insurance cus-tomers could start to see the benefi ts during 2012.

He says: “If everybody is expect-ing increases, we may have an oppor-tunity to pleasantly surprise people.”

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Market views

‘The fact that 94% of people blamed fraudsters for the high cost of motor insurance is a welcome fi nding’Jon Dye, Allianz

Government must take action“The fi ndings of the recent survey by the Insurance

Times excellently highlight the public’s anger at the

state of the car insurance market and the current level

of premiums. With 91% of respondents answering

that they feel premiums are too high, there is clearly

a strong desire for action to curb rising costs. With a

sizeable chunk of people blaming lawyers for the level

of premiums, it is vital the government presses ahead

with its ban on referral fees, reduces bloated legal costs

and gets to grip with the whiplash epidemic.”

MP for Blackburn and former secretary of state for justice Jack Straw

Get rid of parasitic practices“The results of the research are no great surprise. The

public are quite rightly unhappy that claims fraud and

referral fees have pushed up premiums for the honest

majority. Our reputation as an industry has suffered

by association and we need to ensure that the law

is changed to get rid of the parasitic and unethical

practices that plague the sector.”

LV= managing director John O’Roarke 

Message to claims fi rms“There’s a clear message to claims management

companies to review their marketing tactics, with the

vast majority [of respondents] fi nding their texts and

phone calls intrusive and irritating.”

Bluefi n chief executive Stuart Reid

We’re getting the message across“It is pleasing to see that the work being done by

the industry is getting the message across about the

impact of fi nancial crime. The fact that over 90% of

respondents blame fraudsters and criminals for the

rising cost of cover shows that we are on the right track

and we need to ensure that our efforts continue.”

Groupama Insurances personal lines director Kevin Kiernan

Industry faces some critical issues “The survey provides some interesting and useful views

and opinions that can help guide the industry on the

important matter of our image. Perhaps the biggest

challenge for the industry is to turn people’s ‘neutral’

scores on the industry to ‘positive’ ones. There are

a number of critical issues that will develop this year,

including debates around the cost of motor insurance,

alternatives to the Statement of Principles for fl ood

insurance and the introduction of the gender pricing

ban. These issues need proactive and joined

up answers that are fair, and equally important,

are seen to be fair by our customers.”

Ageas UK chief executive Barry Smith

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InsuranceTimes | 13-19 January 2012 | 19

2012 looks set to see continued political focus on

insurance as the Offi ce of Fair Trading’s ongoing

investigation (see below) into motor gears up. But

the focus is likely to shift to fl ooding over the next

few months as the June 2013 expiry of the state-

ment of principles agreement approaches.

FloodingJust before Christmas, the government snuck out

a long-awaited announcement on how its plans

to deal with insuring fl ood plain areas after next

year when the Statement of Principles agree-

ment  expires. Flood minister Richard Benyon told

the House of Commons that the focus was on

preventing fl ood risks rather than subsidising

premiums. Ministers said they would continue

talks with the industry, but a stand-off becomes

increasingly likely the longer that the issue is

unresolved.

OFT motor investigationThe Offi ce of Fair Trading has instigated the

second stage of its wide-ranging investigation

into the motor insurance industry. The good news

for the industry is that the watchdog will be

focusing on its ‘bête noire’ – credit hire companies

and legal expenses providers. But the OFT’s deci-

sion to probe insurers’ third-party vehicle repair

arrangements could be an uncomfortable

experience for the industry.

Health and safetyOne of prime minister David Cameron’s fi rst acts in

the new year was to announce the latest stage in

his drive to clamp down on the so-called ‘compen-

sation culture’. In a speech to small businesses in

Berkshire, the prime minister said that he had sum-

moned insurance bosses into No 10 Downing

Street to quiz them on whether they are requiring

businesses to exceed health and safety law require-

ments when securing insurance cover. For Cam-

eron, tackling health and safety issues is a good

way of appeasing his hard-line backbenchers.

Jackson ReviewThe government’s Justice Bill, which implements

the bulk of the 2009 Jackson Review, has reached

the House of Lords. There, peers are expected to

give the proposals a rougher ride than their coun-

terparts did in the House of Commons. A debate

before Christmas gave the government a taste of

the hostile reception that its proposals, including

the mooted referral fee ban, are likely to encounter

in the upper House. With the Lords generally in a

mutinous mood, the legislation is unlikely to emerge

completely unscathed. The issue for the industry is

whether or not opponents of the bill will focus on

the civil litigation cost elements of the bill.

Financial Services Compensation SchemeThe next few months will see the launch of the

postponed review of the way the FSCS is funded.

The review will look at whether the scheme’s

cross-subsidy of different types of fi nancial services

businesses by one another will continue.

The year ahead

A QUESTION OF TRUSTDo you trust your insurer?

SATISFACTIONOn a scale of one to 10, how satisfi ed are you with your insurer?

MOTOR COSTSDo you think that current motor insurance premiums are too expensive?

LOOKING FORWARDWhat do you expect to happen to the cost of motor insurance premiums this year (2012)?

WHO’S TO BLAME?Who do you think is mainly to blame for the high cost of motor insurance? Please select ‘agree’ or ‘disagree’ for each answer

32%FSA

63%Insurance brokers

85%Insurance companies

95%Uninsured

drivers

68%Lawyers

94%Fraudsterscriminals

51%Government

91%Yes

9%No

88%Increase

2%Decrease

10%No Change

20%Strongly agree

55%Agree

2%Neutral

2%Disagree

1%Strongly disagree 7.58

PURCHASE FACTORSHow highly do you rate the following factors when buying insurance products?

Brand reputation

Customer service

Price

Very important Important Neither important nor unimportant Unimportant Very unimportant

31.6%

57.4%

81.7%

17.6%

5.8%

1.8%

0.5%

0.1%

1.3%

0.7%

0.7%

45.5%

35.5%

15.5%

DATA: CONSUMER INTELLIGENCE FOR INSURANCE TIMES

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