The Insurance Act – 2 years on

It’s been 2 years since the Insurance Act came into force. In our latest blog, our Claims Director, Jody Thirkell, talks about whether he felt the act had actually produced any tangible changes.

Before the act was introduced, I told people there was no cause for early panicking. It had taken over 100 years of legal precedent to work out what the duty of disclosure under the Marine Insure Act 1906 actually meant, so nothing drastic was going to change overnight.

In reality, it seems like I’ve been proven correct.

We’re still finding out as much as we can about our clients and their risks and presenting that information to insurers as normal. Insurers are still writing business on the same information they always have.

The insurance world keeps on turning.

That may seem glib, and it’s still crucial that a Broker gets to know their clients and their risks to ensure a fair presentation of risk to insurers. But the main changes we’ve seen so far have been very positive.

Insurers can no longer avoid paying claims for breaches of warranty that are not relevant to the claim.

Before the Insurance Act, an insurer could avoid a fire claim for a breach of a burglar alarm warranty. This always seemed perverse and the Act has restricted insurers’ remedies for breaches of policy conditions in a positive way for policy holders.

A further positive is that if the insurer alleges that there has been an innocent non-disclosure of a material fact, they also have to prove that the underwriter had been induced to write the risk due to the lack of fair presentation. This may be simple to prove in personal lines insurance where there is clear underwriting criteria available, but not so easy when looking at complex commercial risks.

This is where your Broker comes in and Romero’s have had great success in using cogent arguments based on the Insurance Act to achieve excellent results on claims for our clients. Are you confident that your Broker has the requisite claims expertise to do likewise should you find yourself in a difficult situation following a loss?

If you’d like to pick Jody’s brains a little more on the impact of the Insurance Act, you can find him on LinkedIn. Alternatively, if you’d like to find out how Romero can save you money and make sure you have the complete tailored policy, call us today on 0113 281 8110.

Unrated Insurers: Why quotes that seem too good to be true, just might be

The insurance market is built on stability and trust. The trust that you will do all you can to prevent accident and injury at your business, and the stability that the insurer will provide by paying out on claims.

That’s why name and reputation have always been big factors in deciding which insurer to place your business with. It’s also why so many people use insurance brokers to get the best insurance packages; they’re trusting the broker to use their knowledge of the industry to choose the most trustworthy and financially stable insurer.

Getting your cover through the wrong insurer can be devastating. If the insurer can’t or won’t pay out when you have a legitimate claim, it could mean the end for your business.

How do you know if an insurer is financially stable?

The very best way to know if an insurer is financially stable, is to use a recognised, experienced and respected insurance broker. After all, they know the industry like the back of their hand.

There are a number of insurance industry awards which reward companies for factors ranging from their customer service, claims handling, retention etc. But as good as those are for finding top performers, they don’t give you the underlying confidence that your business is in safe hands.

For that, you need evidence of an insurer’s financial stability.

How do you find out if an insurer is rated?

In the insurance industry, financial stability is graded AA to D, where AA is extremely secure and D is very weak. The gradings are based on an insurer’s ability to repay creditors or pay claims, so in essence, a AA rating suggests that the insurer has large cash reserves or a fantastic credit rating.

There are a number of insurance rating organisations, including A.M Best, Fitch, Moody’s and Standard & Poor’s, but their ratings are largely the same.

You can find these ratings by visiting the websites of the companies listed above.

What is an unrated insurer?

An unrated insurer is a company that hasn’t been given a rating by the rating organisations. This can happen for a number of reasons, but primarily it’s because they either; a) have requested not to be ranked or b) can’t be ranked because of restrictions in the country in which they’re based.

Both of these reasons should ring alarm bells with any company looking for insurance. Choosing not to be rated suggests they have something to hide, and not being rated because of location could suggest they’re based in an unstable economy.

If an insurer is unrated, it doesn’t necessarily make them bad, it just means that their stability can’t be proven.

Why would anyone place business with an unrated insurer?

Although it may seem like a risky move, many businesses do intentionally buy their insurance policies from unrated insurers. Primarily, this is because they’re usually cheaper than rated insurers (they have to be, they wouldn’t be able to compete if they weren’t as their cover isn’t usually as comprehensive). But they also tend to offer cover for businesses who couldn’t get cover elsewhere, much like a payday lender lending to people with a poor credit rating.

Some businesses, especially those who have never had to make a claim, see insurance as an irritation – money they pay out for nothing in return. For that reason alone, a much cheaper policy is far more attractive to them.

If it’s cheaper, what’s the harm?

If your business never has to make a single claim, unrated insurers and their cheap prices may look ideal. Unfortunately, real life doesn’t work like that. Accidents, by their very nature, can’t be completely eradicated and so all businesses may have to make a claim at some point.

If your insurer can’t pay out on that claim, the result can be catastrophic.

There have been a number of examples in recent times of unrated insurers collapsing and leaving their customers in extremely difficult circumstances.

In 2014, the European Risk Insurance Company (ERIC) suddenly announced to brokers that they could no longer comply with regulations relating to minimum solvency requirements. In 2016, unrated Gable collapsed, leaving policyholders down £161m in unpaid claims. Two years later, unrated Alpha also collapsed. That left 10,700 taxi drivers without insurance and thousands of new-build homeowners without critical structural defects cover.

Cheap policies with unrated insurers may seem like a good idea, until you’re left to pick up their tab after a claim.

How do I know that an insurance broker won’t place my business with an unrated insurer?

Quite simply, it depends which insurance broker you choose. Admittedly, there will be some smaller and lesser known brokers who will look to place your business with unrated insurers to keep costs down. But for experienced brokers with reputations to maintain, it wouldn’t be a risk worth taking. Money isn’t made by saving a few quid on a certain policy. It’s earned over years of offering a great, trustworthy service to customers.

We show every customer exactly who they’re insured with, so they can verify the rating themselves. And we only ever insure with unrated insurers if the customer asks for it (although we would try to convince them to change their mind).

If you’d like more information on how the rating system works, or how we assess whether an insurer is trustworthy, you can call us today for a no obligation chat. Just click on the ‘contact us’ button of this website and fill out the form.