The guidance has been developed by the ABI, the British Insurers Brokers Association, the consumers’ association Which?, and leading insurance comparison websites.

Key areas covered by the guidance include:

·        Policy information. Customers should be able to review key features of their selected policy before they commit to buy. 

·        Add-ons. It should be made clear what cover is provided as standard, and which features are  being sold as any add-ons, such as home emergency cover under household insurance.      

·        Excess levels. The level of any voluntary or compulsory excess should be prominently displayed and clearly explained.

·        Referrals. Customers to whom a quote cannot be offered should be directed to possible alternative sources of help, such as specialist providers. 

Nick Starling, the ABI’s Director of General Insurance and Health, said:

“Using the internet can enable consumers to get the best policy at the most competitive price. But the ease and speed of going online must be balanced with ensuring that people understand the terms, conditions and cover of the policies they are comparing. These guidelines will help ensure that customers get the best possible deal when buying general insurance products online, and we urge all online insurance providers to adopt them without delay.”

Hayley Parsons, Chief Executive Officer of Gocompare.com, said:

“We welcome any initiative that will ultimately enhance the buying experience for the consumer. Comparison sites have added a new level of transparency for the consumer and buying insurance online has never been easier. However, comparison sites are very much dependent on the information that the insurance company provides, so establishing industry standards that all insurers, brokers and comparison sites can adhere to when displaying product information can only be a good thing.”   

 Dan Moore, from Which? said:

“Which? supports measures that will lead to greater transparency and trust, and will therefore benefit consumers. The ABI good practice guide is a step in the right direction, providing the recommendations made are monitored and enforced.”

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Latest ABI figures show that trade credit insurers have paid out a record amount in claims in Quarter 3 (Q3) 2009.  The total amount paid in claims was £125m, an increase from £38m in Q3 2008, a 227% increase year-on-year.  This is a reflection of the global recession and the liquidity crisis affecting UK businesses.

These latest figures demonstrate the real value trade credit insurers add to businesses that are facing particularly challenging times during the recession.

Nick Starling, the ABI’s Director of General Insurance and Health, said:

 “This year has seen a record number of claims and payouts by insurers, with trade credit insurers continuing to insure well-managed businesses.  This provides reassurance to clients that they could cope if a company they are supplying to gets into difficulty, especially vital for trading in a recession.  Trade credit insurance often makes the difference between a good business staying afloat or going under.”

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The number of CI insurance claims being paid has risen significantly. In 2008, 90% of CI claims were paid, up from 80% in 2005. This is a result of the success of the ABI Code of Practice on CI Insurance that has led to less claims being declined due to non-disclosure of medical information. To reduce the number of declined claims still further, the ABI is working with its members to tackle the number of claims declined due to not meeting the definition of Total Permanent Disability on a CI policy.

In addition, 97% of term life insurance claims were paid in 2008. 

Nick Starling, the ABI’s Director of General Insurance and Health, said:

“The insurance industry pays out £5.9m every day in life and critical illness insurance claims, making a real difference to people’s lives at the most difficult of times.

“Insurance companies want to pay all valid claims, which is why the ABI is not complacent and continues to look at ways to reduce the number of claims declined even further.”

“The new ABI code is making a dramatic improvement to the number of critical illness claims we pay.  We have been working with the Law Commission so that the principles of our Code are embedded into law.”

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Responding to the release of the FSA’s latest Consultation papers on the Retail Distribution Review (RDR), Maggie Craig, the ABI’s acting Director General, said:

“We welcome the FSA’s continued emphasis on increasing the professionalism of financial advisers.  It is particularly good news for consumers that the FSA will formally recognise the benefits of membership of professional bodies in relation to adviser competence and professionalism.”

Protection

“We are pleased that the FSA has accepted our arguments that adviser charging should not be applied to the protection market purely for the sake of consistency.” 

Group Personal Pensions (GPP) – Consultancy Charge

“It is appropriate that the FSA has applied similar adviser charging rules for individual and group pensions, ensuring a level playing field.  We welcome that the FSA has recognised that this will have a knock-on effect for occupational pension schemes which will have to be addressed.”

“We now need the FSA to work with the industry on a simplified advice process, that will meet the needs of consumers who are unable to afford, or do not require, full advice. “

The ABI has supported the objectives of the RDR since it began in 2006 and continues to believe these changes are essential to rebuild consumer confidence in the retail investment market.

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The ABI advises people likely to be affected by the proposed industrial action that:

• If you have not already done so, contact British Airways (BA), as they are responsible for flight arrangements, to discuss the options available.
• If you make alternative travel arrangements, then you can normally transfer your travel insurance to cover the new arrangements.
• In the event of your flight going ahead but being delayed, then you may be able to claim under your travel insurance, providing that you booked your travel before the prospect of a strike could have reasonably been foreseen. If any delay forces you to abandon your travel plans, then some travel policies may cover you for a fixed lump sum.
• Cover under travel policies for cancellation in these circumstances can vary. Some policies cover against specific risks such as illness, redundancy, being called to jury service, but not industrial action, while other policies may provide this cover. 

Nick Starling, the ABI’s Director of General Insurance and Health, said:

“People affected should speak to BA, who are responsible for flight arrangements and, if necessary, their tour operator or travel agent. Where alternative arrangements are made, travel insurance policies can usually be transferred to cover these. Customers should check their travel insurance, and talk to their travel insurer if they need clarification on the extent of cover provided.”

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insurance law, Nick Starling, the ABI’s Director of General Insurance and Health, said:

“We share the Law Commission’s desire that customers should be treated fairly. The insurance industry is committed to ensuring that customers understand their rights and obligations, and have their genuine claims paid quickly. We are pleased that The Law Commission recognises that best practice throughout the industry, supplemented by FSA regulation and the approach of the Financial Ombudsman Service, already protects the consumer. The Commission’s proposals give legal status to existing best practices, and brings them together in one place in a clear format.”

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“Yet again, the Government is suggesting sweeping reforms of the financial sector with no recognition of the differences between banking and other financial organisations. Insurers and banks have very different business models and should not be treated in the same way.  Insurers did not cause the financial crisis and have emerged from it with their business intact and with no disruption to its customers.

“It is particularly worrying that a proposed ‘systemic risk scheme’ would look for contributions from non-banking financial organisations to pay for future bank rescues.  This is despite no UK-based insurers having received Government money in this crisis.  We dispute this idea is workable or to the benefit of insurance industry customers or shareholders.

“The Treasury is right to stress that a Tobin tax can only work if adopted internationally.  Without global agreement, this could harm the UK economy.”

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‘Wake-up’ packs contain vital information for people with defined contribution pension policies, aimed at helping them decide how to take their benefits.  This includes key messages such as the right to shop around using the Open Market Option (OMO), and sets out in simple language the different types of annuity available.

The new guidance builds on the success of a 2008 ABI guide, and incorporates feedback from extensive customer testing of ‘wake-up’ packs and their impact on consumers’ understanding of the OMO and key retirement options.  The enhancements include:

·         Clear prompts for customers about the importance of reading the wake-up pack.

·         Greater emphasis on the importance and benefits of shopping around.

·         Clarity on the timeline for taking benefits, whether through the OMO or not.

·         Prominent promotion of the Pension Advisory Service’s online financial planner.

·         Encouragement for providers to consider earlier customer communications, at an earlier stage than the usual four or six month wake-up pack.

·         New standards to improve OMO transfer processes.

Maggie Craig, the ABI’s acting Director General, said:

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“The challenging economic climate is having a significant impact on the fire danger. While the numbers of fires may have been falling, the increase in large-scale fires is increasingly putting lives at risk, and puts more pressure on businesses in these already difficult trading times.”

This disturbing picture emerges from the ABI’s analysis of fire trends launched today (10 December) at a reception at the House of Commons. ‘Tackling Fire: A call for Action’ highlights that:

·         Fire damage claims in the first half of 2009 cost £639 million - £3.6 million each day. This follows on from the £1.3 billion fire losses in 2008, a 16% rise on 2007 and the most expensive year ever.

·         Between 2002 and 2008 the cost of the average fire claim for both commercial and domestic fires doubled, to £21,000 and £8,000 respectively.

·          Arson, which tends to increase during a recession, accounts for half of all commercial fires. Socially deprived areas and schools are especially vulnerable: arson rates are 30 times higher in poorer areas.Twenty schools a week suffer an arson attack, disrupting the education of 90,000 schoolchildren, causing damage costing £65 million.

·          More open plan buildings, which allow more rapid spread of fire, and the increase in out of town developments, where fires can go for longer unnoticed, are among factors contributing to the doubling of fire costs since 2002.

The ABI identifies two key steps needed to tackle spiralling fire costs which, if unchecked, will increasingly put lives at risk, and damage the economy:

• A review of the case for making sprinklers mandatory in all new buildings, and
• A zero tolerance approach to arson, through better co ordination and liaison between the Government, the fire services and other agencies, to improve the detection and prosecution of arsonists. The arson detection rate is only 8%, compared to 24% for other offences.  

Nick Starling added:

“Our analysis shows grounds for concern over fire trends. The continued recession is likely to have a significant impact on the number and cost of fires, and potentially on the number of fire-related deaths and injuries. That is why we urge the Government, working with other stakeholders including the fire service the police and insurers, to adopt our proposals to reduce the impact of fire.”  

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“While we welcome the commitment to the role of the financial services industry in restoring growth and employment, as an employer of over 300,000 people the insurance industry is disappointed at the increase in national insurance rates which is a tax on employment.

“Once again there is little here to encourage saving, something badly needed to develop a more balanced economy as the country emerges from recession.”

Pensions tax relief

In the Budget 2009, the Chancellor announced higher rate tax relief will be restricted for high earners. He today clarified that this will include employer pension contributions, affecting those who earn over £130,000. Peter Vipond, Director of Financial Regulation and Taxation at the ABI, said:

“We are disappointed at this further change to the pensions tax relief system, which the Red Book confirms is designed to raise £500 million. This can only do further damage to pensions and will not encourage people to make a long-term commitment to saving.”

“Incentives for Higher rate tax payers are not about perks for the rich, but encouraging people to defer income now to ensure they don`t have to rely on the state when they retire.  This is in everyone’s interest. Given the demographic challenges the UK faces, we actually need more measures to encourage long-term saving.”

Increase in employee and employer National Insurance

Peter Vipond, Director of Financial Regulation and Taxation at the ABI, said:

“The insurance sector employs over 300,000 people and as large employers our members will be disappointed at this tax on employment. This will be bad for the economy and will not help the UK recover.”

Tax on bankers bonuses

Peter Montagnon, the ABI’s Director of Investment Affairs, said

“We welcome the fact that insurance company employees are not included in this measure, but we still have to beware the risks to competitiveness and other unintended consequences of this tax. This measure will not help banks in the long run if salaries are increased to replace bonuses. This tax should also not lead to additional cost to shareholders - themselves taxpayers - who own the banks, either directly through the government stake or indirectly through pensions and other savings schemes.

“We support the G20 principles, which agreed that bonuses should be deferred and largely paid in shares.”

Delay to Pensions reform

Maggie Craig, the ABI’s acting Director General, said:

“We remain extremely disappointed with the delays being introduced to the new pension reforms. We need to get a move on to improve pension provision and help people save for retirement. The Government’s plans involve phasing in at the speed of the slowest which saves the Exchequer money in the short-term at the expense of long term pension saving. What we really need is voluntarily early auto-enrolment to private schemes to help people start saving as soon as possible, and the pension industry is ready to deliver that now.”

Taxation of foreign profits

Peter Vipond, the ABI’s Director of Financial Regulation and Taxation, said:

“There is still a key “gap” in the competitiveness of the UK - the taxation of foreign profits.  We are therefore pleased that the Chancellor has today signalled progress on reform of rules around Controlled Foreign Companies, which will help firms with subsidiaries abroad.  However, we need action as soon as possible, as good intentions alone will not help the UK become competitive. 

“We also welcome a review of taxation of profits made in branches abroad.  Reform here would mean that all aspects of foreign profits taxation are as competitive as possible and would be consistent with the dividend exemption introduced in the Budget 2009.”

Trade Credit

The Chancellor confirmed that the Government’s top-up scheme for trade credit insurance will end 31 December 2009.  Nick Starling, the ABI’s Director of General Insurance, said:

“The Government’s top-up scheme was launched too late and priced too high to make a difference. Nonetheless we did our best and with our members worked hard with the Government to help it develop the scheme; however the root problem has been the drying up of bank credit and many companies turning to pre-pack administrations that leave unsecured creditors and trade credit insurers unable to reclaim any money owed.

“Trade credit insurers increased the total value of turnover insured £302.5bn in 2008, up from £282bn in 2007.  Meanwhile in the first quarter of 2009 the total value of claims was £316m, an increase of 166% from £119m in Q1 2008.”

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The guidance, External Reviews of Internal Actuarial Advice: Best Practice for Life Insurers, recommends that boards consider seeking an external review when actuarial advice is critical to a decision that has significant implications for the company.  This could include where there are major changes to the running of life insurance policies, the regulatory environment and established industry and actuarial practice.

The ABI guidance is not prescriptive and recognises that external advice may often be unnecessary.

Peter Vipond, the ABI’s Director of Financial Regulation and Taxation, said:

“This guidance is designed to assist boards in making informed decisions based on sound advice. We urge boards to assess each case individually, and to consider the advantages and disadvantages an external review would have.”

“If an insurer contacts an injured third party it will be to ensure that they get fair compensation and the best possible rehabilitative care more quickly than through the legal process. In doing so, insurers will ensure that the person is fully aware of their legal rights and options.

“The FSA’s guidance, combined with our own code of practice which we will be publishing shortly will ensure that claimants get the best possible deal as quickly as possible. It will also reduce legal costs, which all customers end up paying for through higher premiums” 

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Options recently won a prestigious Innovation in Business Improvement award from Scottish Financial Enterprise for its developer, leading e-commerce provider Origo. The number of transactions now going through Options for Open Market Option (OMO) and Immediate Vesting Personal Pensions (IVPP) transfers has increased, with 10,879 in Q3 2009. 15 companies are now using Options for OMO and IVPP transfers, with a further eight now live for the pension-to-pension transfer service launched in August. More providers are expected to join both parts in due course.

Maggie Craig, the ABI’s acting Director General, said:

“The latest Options data shows that performance remains steady, with even more transactions going through the system both on annuity and pension-to-pension transfers. Although the headline figure remains at 11 days, the increased volume of transactions shows the continuing progress being made by providers on OMO and pension transfers.

“Options proves the industry’s commitment to deliver excellent service to its pension customers. More companies are going live with Options each month as the initiative’s strong performance continues, and we expect to announce further joiners shortly.”

“The ABI has always been a strong supporter of a flexible comply-or-explain approach to corporate governance. The Code has worked well in focusing attention on the value of good governance and raising standards in the UK. The review extends this important tradition.

“The proposed amendments highlight some important issues, including director accountability, board evaluation and risk management. The ABI has expressed reservation about the annual election of Chairmen alone, because this can be too blunt an instrument. We will talk to our members about whether they would prefer annual re-election of all directors, and will respond to the consultation in due course.

“We have for some time seen a role for the FRC around the new ISC Code on the responsibilities of institutional shareholders, but it is important that we get the details right. We will be talking to the FRC about how to achieve this.  Conditions that undermine the critical mass of support for the Code must not be imposed on investors.”

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The ABI consultation was focused on measures to improve customer understanding of TPD, and therefore to reduce the number of declined claims. The vast majority of consultation respondents, consisting of insurance companies and other key stakeholders, agreed that the work the ABI was doing to improve TPD was worthwhile.

Following a stakeholder workshop to take this important work forward, the ABI has agreed to:

·         Propose a set of clear and easy to understand standard definitions that build on the concept of TPD (for example, removing use of the words ‘total permanent disability’ that cause so much confusion for consumers).

·         Produce a standard set of educational materials for insurance companies and advisers to use, explaining clearly the changes and what customers can expect from their policies.

·         Test the proposed definitions with consumers.

·         Consult all stakeholders on the new definitions.

·         Issue a new Statement of Best Practice for Critical Illness Cover that will include the new set of definitions.

Nick Kirwan, the ABI’s Assistant Director, Health and Protection, said:

“It is vital that customers understand what their Critical Illness policy does and doesn’t cover. The approach we are adopting builds on our previous work to create more descriptive headings and clearer definitions. 

“We were very pleased with the level of response to our consultation. We heard that people want standard definitions, and that education and clarity are key to improving understanding.  We have more work to do, but we now have a clear view of how to go forward and achieve these aims.”

“There is a real danger of throwing the baby out with the bath-water with this Directive.  Those who invest in financial markets on behalf of European savers need to be able to make sensible decisions within a well-regulated global market and not, as proposed, be excluded from key markets.

We will be suggesting amendments to the Directive in this and other key areas, and would urge MEPs to consider the needs of savers.  Pensioners in Europe will be worse off if pension funds cannot diversify their asset allocation because their choices are unnecessarily restricted.”

“This is a well-balanced and useful report, in which Sir David has paid close attention to practical points made by respondents to his consultation.  The result is a useful indicator of the way forward, though there are, of course, some areas where further thought is needed.  It is very important that the overall conclusion is on the side of comply-or-explain, and against statutory regulation, on the way boards behave and how shareholders engage.  We will do our best to deliver as investors.”

Role of shareholders

“Shareholders did not cause the crisis, but they recognise that they could be more effective in their dealings with companies.  They have already taken steps to do so, notably through the recent publication by the Institutional Shareholders Committee of the first ever national code on investor responsibility.

“We are pleased that Sir David Walker is positive about the Code. The ISC is already taking further steps towards implementation. The ISC’s Chairman, Keith Skeoch, has now completed the formation of a committee to review its constitution and role. This Committee will meet in the coming weeks.

“The ABI values the suggested role for the Financial Reporting Council (FRC) in having oversight of the Code, provided this is handled correctly. We will need to talk to the FRC about this. Similarly, we accept the recommendation that the FSA could ask all authorised fund managers to disclose publicly whether they apply the Code.  It is important that oversight of investors is not more onerous than that applied to companies.

“One of our principal objectives for the ISC Code is to build a critical mass of long term shareholders committed to a stewardship approach to owning shares in companies. The ABI notes there has already been positive interest in the new Code from shareholders in Europe and the US.”

Role of directors

“Sir David is right to identify issues around the role of Board members.  We need to think carefully about the implications of creating two or even three classes of non-executive directors in terms of their roles, responsibilities, length of mandate and time commitments. If taken too far this could undermine the unitary board.

“In general we believe that the accountability of directors should be increased. This needs to happen in ways that make Boards more responsive to shareholder concerns and promotes better communication between Boards and shareholders. Sir David’s recommendations need to be considered alongside those due soon to be made by the Financial Reporting Council in its review of the Combined Code.”

Remuneration

“The recommendations around deferral and long performance periods go in the right direction, but we remain concerned about over -prescription and the danger that the UK may move too far away from international practice. Shareholders do not want banks to take excessive risks and remuneration should not encourage this, but banks must also be able to retain the talent needed to keep them competitive and generate long term value for the savers who invest in them.

“Reporting remuneration in pay bands is a sensible idea, and we fully support Sir David’s suggestion that this should include reference to the business activities which are attracting the highest rewards. This will help shareholders in their overall understanding of risk.”

Risk management

“Further consideration is needed on the nature of risk, the role of the risk committee and of the Chief Risk Officer. In particular, everybody needs to understand the fundamental difference between operational and strategic risk. The latter should always be a matter for the entire board.”

Scope

“This analysis derives almost entirely from experience in banking. We remain concerned at any automatic read across to non-banking firms such as insurers, whose business models are different from those of banks and who do not represent the same systemic risks. We welcome Sir David Walker’s recognition of the need to ensure proportionality in applying his recommendations.” 

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·         Call your insurance company to make a claim – insurers will have 24-hour emergency helplines and are on the ground in flood-hit areas to help.

            Arrange alternative accommodation with your insurance company if you are unable to live in your property.

·         It is very important to remember that drying out flood damaged properties can take many months, especially during the winter. Where practical, leave doors, windows and cupboards open. If possible, keep rooms heated and do not rush to redecorate. Your insurance company will advise you on the right steps to take to get your property back in order.

·         Try and keep as many of your flood damaged belongings as you can, but if you do need to throw things out try to take photos of them, and where possible keep any receipts, warranties, handbooks or instruction manuals, as these will help with claims.

Based on claims to date, our initial estimate for the cost of flood claims in Cumbria and southern Scotland is around £100 million, but this may increase as more complex claims, such as those for business interruption, are made.

Nick Starling, the ABI’s Director of General Insurance and Health, said:

“Once flood waters have receded and the damage to homes and businesses is assessed, the hard work begins.  Properties will take a long time to dry out fully and it could be many months before houses and businesses are restored to the condition they were in before the flooding. It’s vital that work does not begin prematurely on damp properties as this can cause problems later on. The good news is that insurers are on hand to react quickly and start the drying out and restoration process as soon as possible, and to help customers cope with life while their homes are drying out and being repaired by providing advice, support and alternative accommodation where needed.”

The survey of 2,000 motorists, conducted for the ABI by YouGov, highlights that:

·         Nearly three-quarters (72%) of people think that drivers using mobile phones are most likely to cause an accident, followed by young male drivers (45%), and uninsured drivers (34%).

·         Motorists back insurers taking tougher action to expose cheats who lie about or conceal information when taking out insurance. 72% would like insurers to be able to check driving licences for relevant motoring convictions or endorsements.

Commenting on the findings at the ABI’s annual motor conference today, Nick Starling, the ABI’s Director of General Insurance and Health, said:

“Honest motorists are fed up with drivers who lie and cheat to try to obtain cheaper insurance. We rely on people being honest, but those who conceal motoring offences not only push up the cost of insurance for everyone, but also run the risk of having any claim rejected. To protect honest customers, insurers are currently discussing with Government whether they would be able to check for relevant motoring convictions and endorsements.”

Other findings from the survey show that:

• The main worry for women while driving is the risk of being involved in a staged accident, with a third citing it as their main concern. Male motorists worry most about having their car vandalised (30%).

• 30% of motorists think that they are most at risk of suffering a serious injury while on the road. 15% of women are worried about being injured as a passenger, compared to 7% of men.

• The cost of driving is the one thing that annoys motorists the most, with six out of ten motorists citing it, followed by traffic congestion (44%), and the condition of the roads (41%).  

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• Household and business insurance policies cover flood damage. If you have been affected, contact your insurer as soon as possible.  Most offer 24-hour emergency helpline services to arrange for repairs to be carried out and damage to be inspected.
• If necessary, arrange for temporary repairs to be carried out to stop any damage getting worse. Keep receipts, as these will be needed for your insurance claim.
• Most policies will cover the cost of alternative accommodation (up to a specified limit) if you need to move out of your home while it is being repaired.
• Comprehensive motor insurance will cover flood damage caused to vehicles.
• Do not use electricity or water supplies until the all clear is given.
• Once flood water has receded, disinfect floors and furnishings. Where practical, leave doors, windows and cupboards open. If possible, keep rooms heated.

• Do not rush to redecorate, as it may take some weeks for the property to fully dry out.
• Don’t do anything that puts you or your family at risk.

 Nick Starling, the ABI’s Director of General Insurance and Health, said:

“Events like flooding highlight why insurance is so important. The first priority for insurers will be to ensure that every claim is dealt with as quickly as possible and they will do everything they can to help customers recover.”

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