As 2012 is the 100th anniversary of the Titanic sinking it was probably inevitable that ‘echoes of Titanic’ and the like were used in the reporting of the sinking of the Italian cruise ship Costa Concordia. But other than a large gash being ripped in the side of the hull, there seems little to connect the sinkings, particularly as (fortunately) the loss of life was light compared with the 1517 lost on Titanic and the actions of the captains could hardly be more different with Titanics Captain Smith honourably going down with his ship and the Italian captain acting like a proverbial drowning rat.
In terms of the insurance market there is also little comparison as the Costa Concordia loss, whilst significant to the insurers concerned, is not on the enormous scale of the Titanic claim in its day. It will also be miniscule when compared with the big losses of 2011 which included the New Zealand earthquake, the Japanese tsunami/earthquake and the spring tornado and thunderstorm season in the US which received less publicity, but if taken as one event was the 7th costliest insurance claim in history at $16.3 billion.
These losses followed on from the Australian floods, BP Mexican Gulf oil spill and Chile earthquake in 2010 and the global catastrophe insurers/reinsurers will be hoping for a quieter 2012.
In the past, rises in UK insurance premiums were frequently blamed on increasing reinsurance rates resulting from natural disasters around the world which is always a little difficult to explain to clients. Whilst still a factor, reinsurance underwriting is now more sophisticated and targeted to the areas affected by the disasters, meaning that most premiums for UK business insurance have seen little, if any change over the last few years, despite the big global catastrophe losses.
So what is likely to happen in the insurance world in 2012?
Premium wise, insurers have been trying to increase rates for the last few years, generally unsuccessfully in view of the competitive nature of the UK insurance industry, however some have kept premiums artificially low by releasing reserves from previously profitable years and this coupled with increasing claims inflation and lack of investment income means for some, reserves are running low.
These problems have already caught up with the private motor market which saw premiums rise towards the end of last year and increases are now being seen in business insurance, particularly commercial motor rates. However don’t panic, if you have a good claims record you will generally see no more than an inflationary increase.
The media spotlight will no doubt remain on motor insurance, particularly premiums for young drivers and Jack Straws attempt to restrict whiplash claims and ban referral fees and it will remain centre stage as we approach the December deadline for insurers to stop charging different rates for male and female drivers following the ban imposed by the EU Court of Justice.
The transfer of power from the Financial Services Authority to the new Consumer Protection and Markets Authority is scheduled for the end of 2012, although a delay would not be too surprising and hopefully we will see progress in the renewal of the governments agreement with insurers to guarantee the availability of flood cover in most parts of the UK (due to expire in June 2013).
And with the EU set to publish its reform of the Insurance Mediation Directive in the Spring, I can promise another year of scintillating insurance news!!
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