Climate Change WILL Increase Insurance Premiums

We could have a big long discussion over climate change, how it is caused, what it is doing, what we can do to stop or reduce it. The bottom line is, it is happening and we will be looking at changes in our climate in future years.

What we are here to discuss is how this could affect insurance premiums. The hardest hit are going to be property insurances, in particular home insurance. Changes in climate will lead to more severe storms and higher sea levels meaning an increase in storm and flood damage claims.

It is said that more and more places will be deemed as being in flood area making it difficult if not impossible to obtain insurance full stop. The main thing we will see is steady increases in such insurance costs as claim levels begin to rise.

There is little we can do to stop this happening. It is not just home and other property insurance that will be effected but motor insurance as well. Poor weather will unfortunately result in more accidents and floods obviously affect whatever is in their path which includes your house and the car parked outside.

Insurance Fraud on the Increase

The accountancy network known as BDO have released their half year report on fraud which has made for some very interesting reading. The report has been running for seven years and for the first time has broken the £1billion mark for a 6 month period. The total amount of recorded fraud for the first 6 months of 2010 is almost the same as the whole of 2008 which shows how worryingly fraud is become more common.

Obviously BDO are recording all types of fraud but their figures show that the insurance sector leads the way with 49% of recorded fraud making it the most targeted by the fraudsters. Whilst the distribution is not surprising, and probably hasn't changed a great deal over the years, the amounts we are talking about are increasing at an alarming rate.

Regulators are taking more and more steps to combat fraudulent activities but these figures show that they may not be working. It is not coincidence that this dramatic change is happening at the same time as the recession. BDO has predicted these figures will continue to rise in the second half of 2010 so we could end up seeing further records being broken that we perhaps don't want to see.

BP Oil Spill Raises Liability Insurance Awareness

The recent oil spill in the Gulf of Mexico has certainly raised the awareness of the need for liability insurance. The cost of the spill is still unknown but is certainly going to stretch into the billions of US dollars.

Obviously in most businesses, the amount of risk is very unlikely to get anywhere nearer the cost of this incident but it is an eye opener as to the unexpected things that can happen. Some people think that £1 million cover is more than enough but you just never know how much injury or damage you could end up causing.

I'm sure BP probably thought that £1 billion cover should be enough to cover any event but we can see this wasn't the case. I don't know anything about BP's insurance protection but an event of this magnitude was certainly unforeseen.

This is the whole purpose of liability insurance, to protect against the unforeseen. You should always obtain more cover than you think you need otherwise we are putting ourselves at risk of footing a rather large bill.

IGI Insurance is now AmTrust Europe

With effect from 1st July 2010, IGI Insurance Company Limited have re-branded to AmTrust Europe Limited. IGI Insurance are one of the main insurers we use for landlords insurance but from now on they will be known as AmTrust Europe.

Our website has been updated to show the new name for all new customers. If you are an existing policyholder of IGI Insurance then your policy will not be affected. From renewal you will notice that documentation will have been updated to reflect the new name.

The change of name comes about due to the acquirement of IGI by AmTrust International Insurance Limited back in 2007. AmTrust are developing their presence in the UK and other European markets. They have now decided to consolidate this under one brand being AmTrust Europe.

Keith Wardell, the managing director of IGI Insurance has said:

"The change of name is about growth and progression. We have an exciting future ahead of us and this development is hugely positive. Our priority is to continue to deliver profitable and cost-effective insurance products backed up by a reliable and quality service."

Insurance Premium Tax up to 6%

As predicted in our blog post a few weeks ago (Emergency Budget - Insurance Premium Tax on the Increase), Insurance Premium Tax (IPT) is being increased.

The increase is not as extreme as we thought but the current rate of 5% is being put up to 6% with effect from 4th January 2011. This means that for every £100 of insurance premium we pay, we will have to pay an extra pound of tax to the government.

A typical car insurance premium of £420 which consists of a £400 premium and £20 IPT will now go up to £424 being the same £400 premium but with £24 tax instead. A £4 increase may not sound a lot but this is only one insurance policy.

When you take into account all the insurance that you hold as an individual, family and/or business then the extra you are paying could be very considerable.

We are also seeing an increase in VAT from 17.5% to 20%. This rate is used as the tax rate on travel insurance policies so if you are taking out this cover then be prepared for a large jump in your premium when the new rates come in to effect.

FSA to be Abolished

George Osbourne, the Chancellor of the Exchequer for the UK, has followed through on a promise that the now Prime Minister, David Cameron, made in July 2009 in that the Financial Services Authority (FSA) will be abolished.

Over the next 2 years, the powers of the FSA will be split among different regulators but with most power going to the Bank of England. The current chief executive of the FSA, Hector Sants, will become the Chief Executive of one of the new agencies called the Prudential Regulatory Authority. There will also be the Financial Policy Committee which will also be headed by Sants but the governor of the Bank of England, Mervyn King, will have the overall control over both these bodies making the ultimate decisions at both. Workers at the FSA will be split among the new agencies over time and by 2012, the FSA will no longer exist.

The decision to make these changes comes along due to the conservatives thought that the FSA have failed in what they had set out to do. The former Prime Minister, Gordon Brown, set up the FSA in 1997 as they believed that Bank of England were not handling the supervision of the financial services in the best possible way. It looks as though that 15 years on, the power will switch back to where it originally was.

Emergency Budget - Insurance Premium Tax on the Increase

Almost every insurance product in the UK is subject to tax known as Insurance Premium Tax (IPT). This tax rate currently stands at 5% and has been the same for over 10 years. The new Government has announced an "emergency budget" in little over a weeks time and there are rumours that there could be a significant increase in this rate.

It is being said that the rate could be doubled to 10% or even brought in line with VAT which is currently 17.5%. To put this in to perspective, if you currently pay £525 per year for car insurance, this would go up to £550 or even £587.50 depending on the rate decided upon. This doesn't even include changes in the premium itself which, at the current moment in time, is on the way up. Your £500 premium could easily be over £600 next year when you haven't even made a claim! What you need to keep in mind is that this is only one type of policy and this sort of increase would be likely to happen against all your individual insurances.

Insurer and broker associations BIBA and the ABI are against this increase on the basis that the increase would actually end up costing the treasury more money than the increase would actually earn them. This theory comes from the fact that massive increase in insurance premiums people are going to have to pay for things like car insurance and the like are going to affect all of us. Insurance is a common thing to be avoided by individuals or businesses who are trying to reduce their outgoings so is likely to increase the number of people who are uninsured when, in the current climate, people should be encouraged to be protecting themselves.

Of course, this increase has not been announced yet but it is certainly something that requires a lot of thought by the Treasury as any quick decision could end up costing them, and ultimately us, more money.