Is a storm brewing in Motor Fleet Insurance?
There is a storm brewing in the Motor Fleet insurance market and some companies are beginning to feel the ill wind.
The fundamental situation in the insurance marketplace is that for many years there has been too much capacity. In a very basic sense this means there is too many insurers competing for business resulting in over capacity and therefore downward pressure on pricing. This is known in the industry as a ‘soft market’.
Whilst this downward pressure on pricing isn’t good for insurers, it has meant that motor fleet operators have been enjoying a long period of very competitive premiums.
When capacity shrinks, the remaining insurers can take advantage of a lack of competition and begin to push pricing upwards.
Motor insurers are still making good money though?
Well, in some cases there are but in challenging, more complex fleets they most certainly are not. Several insurers have gone bust (eg Quinn, Enterprise and QDOS Underwriting) and several have dramatically cut back underwriting capacity (eg Amlin, Equity Red Star and QBE).
Clearly this cutting back of available capacity causes a problem. Five years ago these insurers would have been the #1 markets to give complex and large fleet insurance buyers the best options.
Why is this happening?
The recent Ogden rate decision has piled pressure on to the claims reserving side of the insurers. In a nutshell, they are having to put more reserves aside and expect to pay higher claims going forward. If you put that on top of 13 or 14 years of softening premium rates as a result of new entrants and increased capacity it is not hard to see that the insurers are in panic mode.
It’s not only primary insurers that are feeling the pain. Reinsurers are now charging more for the reinsurance cover they provide to the primary insurance market. The primary insurers will therefore hold more of the underwriting risk to avoid the cost of reinsurance. As a consequence, they will want more premium from clients to cover the increased retained risk.
It isn’t just complex fleets that are getting hit though. Fleets that are less complicated are also being pushed for increased premiums.
Clearly, these are challenging and potentially costly times for fleet operators. It is in times like these that they need a broker who really does understand what’s happening and is experienced in planning and executing a delicate renewal process to success.
These capabilities are found in depth at AT&A. We have significant experience of hard market negotiations with insurers, particularly in respect of large motor fleets.
For further information please contact your Account Director or call Andrew Thompson on 01474 727800