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JOURNALS
Insurance Research and Practice
Insurance Research and Practice is a peer-reviewed series of research papers published as a regular supplement to the bimonthly Journal. As such it continues in the footsteps of the earlier Journal of Insurance Research and Practice, last published in July 2006.
The aim of Insurance Research and Practice is to publish high-quality research papers relevant to the practice of general insurance. If you are interested in submitting a paper for publication in this series please see the notes for contributors. All enquiries relating to Insurance Research and Practice should be addressed to CII Knowledge Services.
Online edition: ISSN 1758-8812.
No 1 (December 2007) | Special issue (January 2008) | No 2 (February 2008) | No 3 (April 2008) | No 4 (June 2008) | No 5 (August 2008) | Notes for contributors | Copyright release form | Journals home page
NO 1 (DECEMBER 2007)
The future of flood management in the UK
By David Crichton, MA, FCII, Chartered Insurance Practitioner
Visiting professor, Benfield UCL Hazard Research Centre at University College London
Visiting professor, Middlesex University Flood Hazard Research Centre
Honorary research fellow, University of Dundee
Abstract
The floods in summer 2007 have once again raised the issue of how society should deal with flooding risks. The insurance industry in the UK no longer offers cheap insurance cover on new houses in flood hazard areas. For many years this had enabled people to get mortgages and encouraged speculative building in such areas. As insurance in flood hazard areas becomes more expensive and harder to find, this change in strategy is intended to reduce building in such areas.
But a disturbing barrier to adaptation is emerging: planners have not stopped new building on the flood plains of England. Instead, new developments are proceeding that are not dependent on the availability of mortgages: social housing for the poor, sheltered housing for the old, hospitals for the sick and schools for the young. How ironic that these are the very people who are the most vulnerable to flood! Housing association homes for essential workers like teachers, nurses, police and bus drivers are also being built on the flood plain, and while these workers are less vulnerable, if their homes were destroyed society as a whole would suffer.
There are opportunities for the insurance industry to:
- use its risk management skills to help planners, architects, utilities and other sectors of society to manage flood risks;
- go to court to recover claims payments from the authorities, thus
providing an incentive for the authorities to manage flood risks better;
- help local planners to avoid building in flood hazard areas.
There are also social issues to be considered, in particular the damage to social cohesion due to the rise in the number of people who cannot afford insurance. Insurers are very conscious of this in the growing incidence of looting and fraud after a flood or storm. Without insurance, people cannot easily recover from a disaster. There are signs of a radically new approach to flood management being developed. It has already started in Japan and elements of this approach are taking place within the UK. Insurance companies have to do more than pay claims; they have to work in partnership with the rest of society and spread best practice from elsewhere in the world. This paper considers the current challenges and offers an overview of new developments.
SPECIAL ISSUE (JANUARY 2008)
The reform of insurance contract law – why have consumers waited so long?
By Peter J Tyldesley, LLB, AKC, LLM, AFSALS, MCIArb, Solicitor
Lawyer, consultant to the Law Commission
Abstract
Why do insurers still deal with consumers on the basis of law established largely in commercial cases in the 18th and 19th centuries? Judges, ombudsmen, academics and, increasingly, practitioners agree that reform is long overdue. However, past initiatives have come to nothing. Most notably, the recommendations for change made by the Law Commission in 1980 have never been implemented.
The stagnation of the law is partly the result of successive governments agreeing with industry representatives that voluntary measures will be accepted as a substitute for reform. This paper considers two such agreements, but suggests that other factors have also been significant. In 1980, for example, the Law Commission rejected the reforms proposed in a draft European directive, leaving the Department of Trade in a weakened position to press for change. Combined with the outspoken hostility of the British Insurance Association towards the Law Commission's own recommendations, this proved sufficient to scupper any prospects of reform.
In 2005 the Law Commission and the Scottish Law Commission announced a joint review of insurance contract law. A final report is not anticipated before 2010. It appears that many insurers now support reform and the paper closes by advocating an interim step which could bring immediate benefits for consumers and insurers alike.
NO 2 (FEBRUARY 2008)
The review of insurance contract law
By Hugh Price
Partner, Hugh James
NO 3 (APRIL 2008)
Broking in 2012 : consolidation or bust?
By Mark Grice, Sarah Ouarbya, Margarita Rodriguez-Piza and Stephen Temple
Mazars LLP
Abstract
The insurance market has been through seismic change in the last few years and there are few signs that the process
is over. Changes in socioeconomic conditions, increasing regulatory and capital requirements and technological
developments have forced those in the industry to adapt. This paper considers recent trends in the market and paints
a picture of what the broking market could look like in 2012.
Perhaps one of the most significant trends to have emerged in recent times is the emergence of the “broker consolidator”. But as the trend for consolidation increases, so have the cost of acquisitions: is the bubble about to burst? Many industry specialists believe that there is a 12–18-month window of opportunity in which to sell at such high prices. Changes to the capital gains tax rules announced in the pre-Budget report will only bring this forward. By 2012 the trend for consolidation is expected to have drawn to a close, leaving the industry with a smaller number of more powerful players.
Aside from changes in ownership, brokers themselves are also evolving to meet the needs of the 21st century consumer. The line between the broker and the underwriter is becoming increasingly blurred as brokers set up underwriting agents and take on more delegated authorities. This trend is expected to continue as brokers branch out into traditional underwriter territory and seek to add real value for their clients.
NO 4 (JUNE 2008)
Can accident rates be reduced? A study of the plastics and rubber industry
By Dean Mander, FCII
Multi-risks portfolio manager, Royal & SunAlliance
Appendix
Abstract
Can accident rates be reduced? To consider this I have reviewed employers’ liability claims for one trade sector, comparing them to external statistics to highlight trends and find areas that could bring further improvements. If a company only experiences one claim, is it natural to think it is a “one off”?
The study produces a profile for an accident: mainly occurring in the first 2.5 years of employment, regardless of age, with inadequate risk assessment and only brief, undocumented training or instruction for a task. A further rise in accidents is seen where employment period exceeds 10 years. Both findings highlight training needs – for more in-depth induction training, with refresher training for long-term employees. This should be adequately documented for successful defence of a claim.
In light of this, I recommend that length of service is recorded within accident book entries and be a formal part of reporting under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR). Trends could be highlighted before claims are received and this would enable individual companies to review work practices and training methods as an aid to prevention. Discussing and sharing the results could help prevent future accidents occurring.
Although the study relates to the plastics and rubber sector, the issues could equally relate to other industries.
NO 5 (AUGUST 2008)
Has captive insurance truly earned its place in risk financing?
By Callum Beaton, FCII, Chartered Insurer
Callum Beaton (Insurance Consulting) Ltd
Abstract
The captive insurance company has, over a 50-year period, become a “must-have” item in the toolbox of major corporates’ risk managers. Although the path to achieve that accolade has been uphill, from a playboy image of exotic travel and a place in insurance vocabulary based on tax reduction rather than risk transfer, a multibillion dollar insurance sector has emerged.
From the initial concept, it is simpler to consider what has not changed. Regulation in captive domiciles was absent until the 1980s. Since then, captives have been spurred on, and attacked, by legislation. Companies having had at their disposal for over 20 years a simple and tax-effective solution to insurance capacity and premiums have had to respond to new challenges that, many perceived, sought to destroy the entire concept.
Regulation brought requirements in relation to underwriting, solvency, reporting and corporate governance. International accounting standards have complemented this, demanding changes to transparency and disclosure. There can be no doubt that the challenge to tax and regulate fairly and effectively has been met by continuous creation and innovation that does indeed mean that captive insurance has truly earned its place in risk financing.
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