Dye points to pricing changes following claims inflation

Property claims are increasing as Allianz warns that theft is on the up and calls on brokers to carefully communicate with customers and make use of risk management services.

Allianz UK CEO John Dye has said that recent prices from the insurer have reflected the current climate of claims inflation.

“We have seen a deterioration in the performance of theft. It is almost as if the economy has been in recession as theft and arson tick up when the economy is under pressure.”

“While Mark Carney might tell us we are not in recession we can see an increase in theft claims both in terms of the number of them and their cost.”

Dye noted that the insurer believed that “organised activity” and fewer police on the streets were exacerbating the problem. The cost of repairs on cars and property have also increased.

“While the world remains uncertain in the pre-Brexit, and in the post-Brexit world, we are unlikely to see this calm down.”

Risk management
Dye counselled the broker market that it was a good time to have a conversation with the insurer about risk management and their customer needs.

Turning to recent pricing Dye admitted things had gone up: “We have been reflecting the claims inflation trend in our pricing.

In terms of brokers communicating these price increases to customers he said: “It is about the quality of the conversation. Being a broker is tough job and you are talking to your customers about a really important part of their protection.

“The end customers are also under pressure. Conversations need to reflect the fact there is inflation coming through claims and therefore there has been inflation coming through pricing. People always want to see the numbers go down, that’s human nature.”

Dual pricing
Dye also discussed the Financial Conduct Authority’s (FCA) recently announced market review examining dual pricing in home and motor insurance.

“The FCA study throws the issue into stark relief but we have always been conscious that our existing customers are getting a fair price vis a vis the new business price.

“Although the review is focused on car and home we will be looking at the way that develops and ensure it is reflected across the whole product suite.”

He continued: “The study puts the dual pricing out there but it isn’t a new topic. There isn’t anything specific we will be doing differently right now but what we will be doing is proceed and look at taking whatever appropriate learning might be available across our business.

“We need to wait and see where the FCA gets to. It is tricky because the notion that you get a discount as a new customer isn’t just an insurance idea, any commercial enterprise will look at the notion. It is a question of proportionality and degree and I think it is clearly not unreasonable for customers to imagine they won’t be penalised for their loyalty.”

“Who knows where this will go, if you got to a place where it was impossible to offer new business discount, is that a good thing for consumers?” he asked.

“Whatever you prescribe here you may get some unintended consequences, the important thing is that it is fair.”

Results
The UK CEO was speaking at a briefing in which he detailed the Q3 2018 results for Allianz UK which saw revenue fall, due to transfer of business between the German provider and its joint venture partner LV,  and COR improve to 96.0% from 98.5%.

Dye said he was “pretty happy” with how the transfer of business was going between Allianz and LV. Commercial lines transfer from LV to Allianz began in August.

He commented: “We have a team in Maidstone focused on transfers in from LV. I can see from what is happening there that our preparation is paying off.

“We always said we’d make it as easy and smooth for brokers as we could. It’s going very much as brokers expect.”

He added: “We’re several weeks in and so far it is going as well as you could expect.

“Car and home has been going out since the end of the second quarter and we can see that landing well, but that is more of a question for LV.”

There have also not been any surprises with regards to customer retention.

“The retention that we are seeing is in line with expectation. Any book will turnover, that’s the way of the market, and some of the LV portfolio doesn’t fit with Allianz. But its early days and we are only six weeks in,” Dye explained.

“We are very much reliant on our broker partnerships to make these things happen.”

Commercial
Looking at commercial lines he remarked that the COR had held steady, something that could only be achieved with good relationships with brokers and if “you’re having good conversations about what you need to provide consistent pricing and service to customers”.

He added: “It’s pretty solid across the piece although earlier in the year there will have been an impact on property due to the weather.

“We’re in reasonable shape in most of them.”

In terms of personal lines profitability Dye said the position had improved compared to this time last year. He explained that Petplan was particularly strong but also the motor business is still earning through. “Car performance is much improved due to the action we took to straighten the account out ahead of transferring it to LV,” he added.

“It’s a solid performance alongside the work for the JV.”

When asked he declined to comment on whether more deals were on the horizon in the face of industry rumours that the group business was looking to target another UK insurer acquisition.

The group posted operating profit of €3bn and revenue of €30.5bn.

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