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General Insurance Market Assessment 2008
Key Note Publications Ltd, Jan 2008, Pages: 198
Is general insurance profitable? It is more profitable in the late 2000s than it was at the beginning of the decade. General liability and pecuniary loss insurance have become profitable, while health insurance is showing signs of recovery.
In the areas of motor and household insurance, there are strong signs that premiums are rising as insurers realise that competition has led to losses.
General insurers are increasingly looking at reducing their costs by cutting distribution staff and rationalising their UK operations. In many cases, they are looking to expand into overseas markets that have much lower densities of general insurance incidence. Emerging markets have growing numbers of more affluent citizens with more valuable possessions and more sophisticated lifestyles that they need to protect by insurance. They lack the presence of insurance companies offering competitive, attractive insurance proposals, and these markets are increasingly attractive to the large UK insurers.
European and US insurers are increasing their efforts to take a large share in the UK general insurance market and, despite the heavy concentration of many insurance sectors among only a few companies, they are often seeing success within a few years of entry.
Consumers are increasingly confident that they will be protected, as policy documents are more easy to read and contain clearer clauses and exceptions lists written in simpler English. The role of the Financial Services Authority (FSA) in promoting fair treatment of customers is having a significant effect. With the FSA's remit widening to include mortgages, veterinary surgeons, estate agents and, from 2009, travel agents, the whole industry will soon be regulated under the same market conditions. This should create fairer conditions in which efficient competition can take place.
The distribution of general insurance continues to be dominated by independent intermediaries, in particular national brokers, and the advance of direct sales has been halted as customers use aggregation sites to choose their preferred policies more frequently. As such sites increasingly expose the gaps in firms' offerings relative to their rivals, rather than the price of the premium, customers are coming to realise that general insurance is complex and the advice of a fully trained broker is preferable to a website. Price is not the only guide to a value-for-money policy.
Several problems remain within general insurance, some of which (e.g. protection from flooding) appear to be beyond the influence of insurers. However, the pressure of competition remains strong and insurers are under constant pressure to offer better packages than their rivals.
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