Car insurers ‘absorbing rising costs as premiums stabilise’

Published

2 weeks ago

April 29, 2024

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The average price paid for comprehensive motor insurance rose 1% in the first quarter of the year, according to industry data indicating an easing in the steep rises seen last year.

The latest tracker issued by the Association of British Insurers (ABI) showed a 1% increase on the previous three months to £635.

That was despite the average claim paid rising 8% to reach a record of £4,800 pounds, the body said.

The ABI said the disparity showed that its members were “absorbing” additional costs and not passing them on.

Premiums hit record levels last year to reflect a surge in additional costs and claims.

The ABI reported a 23% hike in 2023, compared with the year-ago period, with £9.9bn paid out in claims.

That was the highest annual claims figure since the ABI started collecting the data back in 2013, the organisation said.

Insurers had flagged a 16% spike in the cost of paint, with spare parts also rising on average by a double-digit figure.

Other bills, largely driven by the price of energy, were up by 46%, the ABI’s report had said.

They included delays in repair and supply chains and the fact that increasingly sophisticated car technology made repairs more expensive.

The rise in premiums also reflected, it warned, a surge in uninsured drivers who did not take out policies likely because of pressure on their personal finances from the wider cost of living crisis.

The 1% rise in premiums could reflect growing regulatory pressure on the industry.

Insurers faced a further warning from the Financial Conduct Authority (FCA) in March over values placed on written-off and stolen cars.

The watchdog said it was concerned that insurance customers were only getting a better deal in settlement of their claim when they complained.

The industry has also faced accusations that drivers who can’t afford to pay for cover annually were being stung with high levels of interest.

The consumer group Which? recently found APRs being applied to monthly payments of almost 40%.

The average rate across 27 providers that charge interest and disclosed their rate was 23.37%, its report had suggested.

Which? demanded action from the FCA.

The ABI responded last week to insist that its members were taking action to address the concerns.

Its director of general Insurance policy Mervyn Skeet said of its latest tracker data: “We understand that car insurance costs are putting pressure on household finances.

These figures show how competitive the motor market is, with insurers absorbing significant cost rises but keeping prices relatively stable.

Which? director of policy and advocacy Rocio Concha said in response: “While it’s encouraging to see the price of premiums steadying, they still remain eye-wateringly high and prohibitively expensive for many drivers.

“It won’t be lost on motorists that premiums increased by a quarter in 2023 compared to 2022.

“To make matters worse, some who can’t afford to pay for their annual cover all in one go are being stung with interest on monthly repayments of up to nearly 40 per cent, which can add hundreds of pounds onto the final bill.

“The regulator needs to get a grip of the issue quickly by making clear that insurers squeezing customers paying monthly with excessive interest rates to make higher profit margins than those paying annually does not meet fair value requirements, and setting deadlines for firms to fix this.”

Business

Thames Water investors to quit boards amid spectre of bailout

Published

11 hours ago

May 15, 2024

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Thames Water investors to quit boards amid spectre of bailout

Representatives of Thames Water’s multinational syndicate of shareholders are poised to quit as directors of its corporate entities after refusing to inject the billions of pounds of funding required to bail it out.

Sky News has learnt that a number of board members at companies connected to Kemble Water Finance, Thames’s parent, are expected to resign in the coming days.

City sources described the move as “the logical next step” after the owners of Britain’s biggest water utility said they would not commit more than £3bn to help upgrade its ageing infrastructure and shore up its debt-laden balance sheet.

A default on part of Thames Water‘s holding company debts last month has raised the prospect that the company is heading towards special administration, a form of insolvency that would effectively leave the government liable for managing a utility firm which serves nearly a quarter of Britain’s population.

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Thames Water is owned by a group of sovereign wealth funds and pension funds from countries including Abu Dhabi, Australia, Britain, Canada and China.

A number of the investors are represented on boards which sit at various points in the group’s labyrinthine capital structure.

It was unclear on Wednesday whether Michael McNicholas, a representative of the giant Canadian pension fund Omers and who sits on the board of Thames Water Utilities Limited, was among those in the process of stepping down.

Along with the rest of the privately owned water industry, Thames Water faces a crucial moment next month when Ofwat, the industry regulator, publishes its draft determination on companies’ five-year business plans.

The draft rulings will be subject to negotiation before final versions are published in December.

Thames Water and a spokesman for Kemble declined to comment.

Business

Royal Mail ‘minded’ to accept £3.5bn takeover proposal by Czech billionaire Daniel Kretinsky

Published

13 hours ago

May 15, 2024

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Royal Mail 'minded' to accept £3.5bn takeover proposal by Czech billionaire Daniel Kretinsky

The owner of Royal Mail has said it is “minded” to accept a revised takeover bid by Czech billionaire Daniel Kretinsky.

The latest offer from Mr Kretinsky’s investment firm EP Group values the Royal Mail parent company International Distribution Services (IDS) at £3.5bn.

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Mr Kretinsky’s firm already owns most of IDS as a 27.6% shareholder but wishes to buy the remaining shares.

An earlier offer of £3.20 a share had been rejected last month for being too low.

But now he has offered to pay £3.60 for each share. The day before the original offer was made a share in IDS cost £2.14.

An extra shareholder pay out of 8 pence a share has been offered by EP Group, if the deal closes, as has a 2 pence per share payment to every stakeholder, expected to be paid in September.

It would bring the total value of an IDS share to 73% more than it cost before the prospect of a buyout was raised.

‘Good value’

“Having considered the proposal, the board has indicated to EP Group that it would be minded to recommend an offer to IDS shareholders”, the IDS board said.

The price is “fair” and reflects the value of current growth plans, the IDS chairman said.

Consideration was given by the board to the national significance of Royal Mail as the operator of the postal network.

“The board is particularly mindful of Royal Mail’s unique heritage and responsibilities as the designated universal service provider in the United Kingdom and a key part of national infrastructure”, it said.

In assessing the proposal, the board has also been very mindful of the impact on Royal Mail and GLS and their respective stakeholders and employees, as well as broader public interest factors”.

EP Group has until 29 May to advance or withdraw its takeover bid.

Who is Daniel Kretinsky?

There has already been scrutiny of Mr Kretinsky’s part ownership in the postal company but a government national security concerns review into his investment led to no intervention.

He also owns parts of West Ham Football Club and Sainsbury’s.

EP Group, which he controls, has financial interests in energy, logistics, and food retail.

Business

West has ‘good hand in China economic battlefield but it doesn’t have to be war’

Published

14 hours ago

May 15, 2024

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West has 'good hand in China economic battlefield but it doesn't have to be war'

The boss of the world’s biggest bank has told Sky News that Western economies have a “good hand” in the “economic battlefield” with China but declared it does not have to be war.

In a wide-ranging interview with Sky’s Wilfred Frost, chief executive and chairman of JPMorgan Chase Jamie Dimon said the West was going to have a “hard time” as long as China had close ties with Russia.

But he said it was well placed due to the resilience of their collective economies and long-standing partnerships, such as NATO.

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However, he warned of the dangers of fragmentation since Donald Trump, when US president, pulled out of the Trans-Pacific Partnership in 2017.

He also said that Joe Biden’s administration should have worked with allies over the effects of his Inflation Reduction Act.

The massive programme of incentives to bolster the green economy had the effect of taking investment out of Europe at a time when Russia’s war in Ukraine was dominating the agenda.

The bank boss warned too of a backlash from China over US tariffs against its electric cars and solar panels announced just this week, arguing that a joint approach from western powers over China more generally would carry more weight.

Mr Dimon, who has run JPMorgan since 2005 and is widely seen as the most influential boss of a financial services company in the United States, said: “We have competition with China.

“I think the American government is doing the right thing to fully engage. That doesn’t mean the Chinese are going to like everything we do just like we don’t like everything they do but it doesn’t have to be war, it can be tough competition and we should be prepared for that.”

“The most important thing”, he added, “is that we do it together”.

“They’re not an enemy, you know, but they’re competing. They want a different world than we want. And I think they want a different world than we want in the Western world… it’s worth fighting for.”

“We all made a little bit of mistake in how we kind of expected them after WTO (World Trade Organisation) to become more Western and things like that. It’s okay. Don’t cry over spilled milk,” he concluded.

Mr Dimon was speaking 24 hours after the US-based bank, which has 22,000 staff and a 200-year history in the UK market, announced £40m in new investments to help connect young people and underserved communities to economic opportunities.

They followed the opening of a new tech centre in Glasgow.

JPMorgan Chase – perhaps best-known in this country for its Chase retail division – is the biggest bank in the world by market value with a capitalisation of almost $600bn (£475bn).

Mr Dimon, who was initially critical of Brexit following the UK’s split from the EU, spoke of the bank’s continuing commitment to the country having called the future of its UK operations into question in 2021.

Asked about the looming election, he said that talks with Rishi Sunak and Sir Keir Starmer had left him in no doubt that both the Conservatives and Labour were “pro business”.

He described how growing economies benefits everybody as it allows for investment.

“Everybody I heard… Conservative and Labour, (is) talking about growing the economy, technology, research and developments, simplifying regulations, making it easier for people to start businesses and grow businesses, making sure schools educate… those policies work,” he said.