- March 1, 2018
- By Sophie Moore
- 0 comments
Do actions (actual reported profit figures) speak louder than words (conjecture from profit-hungry insurance companies)?
I wrote a blog in May last year concerning the justifications for injury claim reform, in which I concluded that such reform was rationalised, as well argued for by lobbying insurance companies, on the basis of combating a crisis of a compensation culture, a “whip-cash” industry, a gross increase of fraudulent claims made by dishonest people and to prevent the increase in insurance premiums paid by honest and law abiding citizens. However, as I wrote in my previous blog, the statistics showed a different story, with a recorded drop in the number of claims but an increase in insurance premiums.
In a similar vein, there was uproar from the insurers last year when the new discount rate was announced, reduced from 2.5% (which was set in 2001) to -0.75%. Disproportionate and outrageous, they declared, with billions of pounds at stake in this decision. Who would be the losers in such a ludicrous drop, they asked, well the law-abiding policy holders of course, where premiums would need to rise to counteract the inevitable and crushing impact on profit margins.
Well, and as the Gazette has reported over the past week, some of the figures are now in. Direct Line Group, who estimated that profits would fall in 2017 by between £215 million and £230 million, reported to the London Stock Exchange that it expects overall operating profits for 2017 to be £610.9 million, a leap of 51.4% on 2016. Similarly, Allianz announced their figures of an increase of 26% of operating profits to £121 million on last year. However, Allianz did note that profits should have been £22 million higher but for the discount rate.
It has been suggested that the increase in profits can be accounted for by the reserves accumulated from increasing premiums to mitigate against the true impact of the discount rate, which is yet to be felt. However, Direct Line Group reported increased dividends this year to its shareholders, surely indicative of excess profit.
In view of the figures, one questions how the insurers can simultaneously claim that further reform is needed – to restrict access to justice for those with legitimate injury claims and that the discount rate needs to be readjusted – whilst at the same time reporting huge profit increases?
It will be interesting to see what the insurers say about insurance premiums this year and whether increases will be justified on the same arguably spurious basis.
* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*
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