Aviva Share Discussion Threads

[chambersiain] 02/5/2020 20:15

Alphorn have a read here, contract wording is pretty clear and FCA in my mind are just putting a stop to the 3rd party legal vultures trying to flees everyone. If your had a business with limited insurance and bills to pay you'd probably list to some legal eagle telling you he could get 50% of nothing.

hxxps://www.pinsentmasons.com/out-law/analysis/coronavirus-will-uk-insurers-cover-business-losses

[cjac39] 02/5/2020 20:15

roughly speaking the fca is a total shower of inadequate unqualified people. and double down on that for the pra. there are some clever people lurking in the background but mostly its total nonsense

[alphorn] 02/5/2020 20:06

I have not read the contract of course but it may not be straightforward - is the business interruption caused by the disease or by the government's decision to close the insured's premises etc? May be treated differently?

[sam9092] 02/5/2020 19:59

That in my view is good news for Uk insurers except Hiscox and the like with open ended wordings.

[sam9092] 02/5/2020 19:58

Going back to FCA STATEMENT. "Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers," Christopher Woolard, interim chief executive of the FCA, said in a statement."It is clear that decisive action is appropriate given the severity of the potential consequences for customers."However, Woolard warned: "We believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency."

[cjac39] 02/5/2020 19:35

Haha if it was billions I wouldn’t be posting here and running for the hills! Yes mlns so all manageable. On mga policies I don’t know how that plays out and prob best to ask wba. Ie if Gallagher sign them up to rubbish policy which is reinsured how does that flow through the system from underlying claim to reinsurance claim. WBA?

[chambersiain] 02/5/2020 19:23

CJAC sorry should have asked in my previous post, are you saying broker is taking action against insurer as the policies they resell aren't as worded as they want? Surely if you resell anything you should know what you are selling. To retrospectively say I don't like the contracts I've been selling and blame the author is a fools errand

[chambersiain] 02/5/2020 18:56

CJAC many thanks I assume those numbers are millions not billions? So what would you estimate AVs BI exposure at, just an estimate

[cjac39] 02/5/2020 18:46

Well first qn is what’s their net retention. In Canada it’s definitely cad$50. But that’s per event and is this one or more? In uk they think they are rock solid on their own bi policies as definitively they say known diseases only. But marsh and Gallagher have put them on the hook with sloppier wording. However net retention is £150 on commercial. So as I understand nothing existential for av and given what the reinsurers have announced so far I think that uk number looks high. Hiscox in bad place though I hear and even Marsh is thinking of suing them

[chambersiain] 02/5/2020 18:24

CJAC would appreciate your review of the WTW report, suggests worse case similar to 1918 Spanish Flu would cost UK insurers $19B, best case would be $2.1B assuming lockdown ends in June. The report is at the bottom of the link and is very extensive. Ive given it a quick read and my conclusion is they've thrown kitchen sink at this and worst case would be $5B for all UK insurers. My question to you is what proportion does Aviva make up of the business insurance market in the UK? Looks small to me, where as they are the second largest in Canada. Second question what's the Canadian exposure?

hxxps://www.law360.com/articles/1269427

[whatsup32] 02/5/2020 18:22

It’s not like we get much guidance from our company. This may lift the fog on Aviva’s exposure or lack of it.

[cjac39] 02/5/2020 17:58

I think that’s all correct - they can’t rewrite law as where does that end. The fca as wba highlights is a bloated useless organisation that has through organic creep grown to be so large that they look for extra layers of regulatory annoyance and burden to apply to firms under the guise of improving customer outcomes. The cost of this is now ridiculous - my own fca regulated firm pays something like 2% of turnover for the privilege of a load of nonsense new regulation. It used to be the case that ensuring fair competition in regulated markets was one of their principles but nowadays they don’t care. Case in point their interpretation (PRA) and implementation of the solvency 2 rules has driven the largest annuity writer out of the market namely the Pru. Rant over!

[chambersiain] 02/5/2020 17:49

Not so sure EI, the various contracts under review will need to stand up to English Law and no political intervention can alter centuries of legal case history. If that were the case any contract, ever, would not be worth the paper it's written on. Wishing I had purchased full comp insurance isn't the same as having third party when I've wrapped my car around a lamppost. I feel for these businesses but if they didn't purchase the extended cover because it was too expensive you can't blame the insurer. If on the other hand their policy gives them full cover for any pandemic regardless of physical damage happening on their premises then they should be covered, but I think these policies are like hens teeth. Wimbledon is the only one I'm aware of. They paid top dollar for that and I'm sure they would also point that out, so why should some penny pincher get full coverage for a 2 bit policy?

[essentialinvestor] 02/5/2020 17:38

FCA action in this area will be largely a result of political pressure imv.

This could potentially be more costly for UK insurers than consensus expects?.

[chambersiain] 02/5/2020 17:33

Bluenose here, should have picked the Villa but it's a family tradition. I think insurers will come up with a limited offers a bit like the car insurers have, which pacifies the FCA and gives the customer a token gift. The car insurers have been praised for giving £25 back on a £800 policy! Given most folks haven't used their cars for 3 months insurers are up £175 per car! But you can't really ditch car insurance as a storm or thief doesn't care if it's a pandemic or not. The only time you don't need insurance is when you pass on V5 form in the respect of a car or you remove yourself as a director at companies house. Insurers, food stores and funeral directors will always be needed, plus the two other evils banks and hookers.

[wba1] 02/5/2020 17:15

Indeed a baggy.For a time it seemed to be a common thing in insurance with several insurer directors with season tickets. I used to bump into Martyn Capewell, the old CEO of HSBC Insurance more often at The Hawthorns than on business.

Reading the practice note which accompanied the FCA press announcement I understood that they were expecting insurers to propose some form of action to deal with situations such as where the company temporarily ceased operations, making liability cover unnecessary (except in law!) but where the various property covers are still needed. But I fail to see how an insurer is supposed to identify which customers are still trading as opposed to those locked down. And that is without addressing the issue of contractual rights of the insurer as well as the customer. I am afraid that all my dealings have led me to expect regulators to be no more than political pawns.

[chambersiain] 02/5/2020 15:23

WBA1, a Baggy I assume? When you say the contract is no longer required I assume you mean the custimer's business has gone bust? Because if you mean custkner wants to pause cover then they will lose fire and theft, I can't see any reason why refunds should be made, just because business isn't currently trading doesn't mean the business has stopped or risks of fire flood or burglary have vanished? With UK businesses coming back online this month, I can't see why the FCA even raised this apart from trying to sweeten the bad news that customers aren't covered for pandemic insurance.

[wba1] 02/5/2020 15:11

I agree that the proposed legal cases pose little threat to Aviva, although I have far more doubts about the FCA motivation having seen them and their predecessor (the FSA) in operation in the past.

But the FCA approach to reassessing product contracts and insurer rights to rely on a contract in the light of the pandemic is more worrying. I do not think for one moment that the effect of this development will be limited to cases where the insurance is no longer exposed. A contract is signed for 12 months of cover and if the need for that cover disappears the contract does not. The only remedy should be the usual one of a customer being able to stop the contract mid term subject to a suitable return of premium after an administration fee. Any other approach leaves the insurer exposed to a sudden resumption of the risk which is no longer covered by the premium retained. The responsibility must be on the customer to inform the insurer of the change of circumstance and any action they require under the contract. If insurers are expected to guess which customers are affected there are bound to be errors for which they will be held liable, even if they are acting on regulator instruction.

This entire fiasco only confirms my opinion that the FCA is no more competent than the FSA before it.

[chambersiain] 02/5/2020 14:50

I don't read the FCA's approach in a negative light but a very positive one. They want to eliminate a mass of legal claims which are time consuming and costly. They have said most businesses don't have pandemic cover but in the few cases where there is pandemic cover the likelihood is the contracts won't cover COVID as there is no outbreak on the clients property forcing a closure, and where customers have taken an extension to this there is still little chance of a payout as it was the government asking shops/pubs to close. The FCA are helping the insurers by getting this validated in the courts as a contract is simply a worded document with obligations and can't be retrospectively changed to benefit the customer. Also businesses can't cancel or postpone their insurance now as it covers fire, floods and burglary. There will be a handful of rightful claims where businesses have purchased extensions to BI insurance to cover any pandemics which force them to close there business that hasn't resulted from a physical act and is not on their premises, but these will be few and far between. The good news about this is that it will stop all those legal firms in their tracks trying to make a quick buck. Brokers on the other hand may get stung for mis-selling insurance products whereby the customer thought they were covered for a direct meteor strike.

[wba1] 02/5/2020 12:28

I have had a closer look at the FCA statement which explicitly states that "The FCA is writing to a small number of firms seeking clarification about whether they are declining, or intend to decline BI claims." In other words their action is targeted.

More worrying is the other part of their statement that " The FCA expects insurers to assess the value of their insurance products to customers during this period and to consider appropriate action. This might include changing how benefits are delivered, refunding some premiums or suspending monthly payments for a certain period of time. The FCA proposes to give insurers up to six months to assess this so that it can take into account effects of coronavirus in a more rounded manner."

It seems that the FCA is taking the view that insurers run multiple businesses equivalent to the product lines, and that where circumstance benefits the customer then the customer keeps the benefit but where the benefit is to the company then that benefit should be returned to the customer. So,in essence, an insurer can lose a fortune on a line like business interruption (or due to impact on investment return) but if there is a balancing gain elsewhere (due to the same cause) it is not entitled to its luck (only to the bad luck). This is the sort of thing which happens when you have a regulator run by people who have spent their entire careers as government bureaucrats or political placemen, and staffed by too many who have been thrown out of the companies they regulate because of their incompetence.

If a regulator behaves in a partial way, taking account only of the interests of one party in an industry, then it is essential that those it disadvantages make full use of the courts.

[p0pper] 02/5/2020 10:19

wba1 and cjac39 many, many thanks for your informed input, it really much appreciated.

p0pper

[wba1] 02/5/2020 09:53

I saw the report about FCA action yesterday. I think it is mainly aimed at companies like Hiscox, whose wording really gives them little excuse for declining claims. The Aviva wording (certainly that on their package policies) is about as unambiguous as possible and any suggestion that payment should be made on such policies would result in the entire basis of UK insurance being called into question if you cannot rely on clear terms. I am sure there are some grey areas (such as the extent of cover for supplier disruption as in the Direct Line package) and there will be many cases around the large global risk contracts which have bespoke wordings. I am sure that if the FCA and courts attempt to extend cover beyond a reasonable interpretation of wordings, or in direct conflict with wordings, the cases will go to the Supreme Court and probably to Europe (and whatever the greased piglet says, the UK cannot retrospectively change the jurisdiction of European courts over matters such as compensation for property rights - which would be one basis for appeal).

But Hiscox (and maybe one or two others) are screwed.

[whatsup32] 02/5/2020 09:17

This will be interesting to us at Aviva