Business Irish

Saturday 17 February 2018

The Punt: Beware drive to hike cost of cover

Noel Brett
Noel Brett
Ben Bernanke

THE debacle at RSA Insurance may provide a dubious excuse for others to hike motor premiums.

This is despite a large number of insurers in the market telling their shareholders, in the likes of interim management statements, that there is no evidence of higher claims. The latest to issue a warning to its customers is FBD.

It told its shareholders this week that "there is early evidence of rates hardening in the market" particularly for motor and business insurance.

This is a signal that it is preparing to hike motor and business premiums.

RSA had recently suggested that an increase in bodily injuries claims frequency was a market trend, and that ended up with three senior executives suspended at RSA and the British parent pumping €100m into the Irish division.

FBD said the level of attritional (day-to-day) losses were in line with the 2012 level.

The most recent statistics from the Central Statistics Office show motor premiums fell by 9.8pc in the year to October.

Aviva said recently it saw no evidence of higher claims here.

Could it be that the now questionable RSA statement that bodily injury claims were rising here is set to be used as an excuse for higher premiums?

Head of the state claims agency, Patricia Byron of the Injuries Board, is on record as saying there is no justification for higher motor premiums on the basis of the claims being made. Motorists need an advocate when it comes to insurance.

Ms Byron is the nearest we have, but then that is not her job.

One wishes the Central Bank was more assertive when companies threaten unjustifiable premium rises.

Troubled road ahead for new CEO

The joke is they needed someone who knew their way around a car crash. The new chief executive of the Irish Banking Federation (IBF) Noel Brett got his baptism of fire at the group's annual conference, the first big gig since he joined from the Road Safety Authority (RSA) in July.

In recent years the IBF event has provoked controversy – especially when the Central Bank's Fiona Muldoon compared the assembled pin stripe suited grandees to mopey teenagers – for their lacklustre approach.

Yesterday DCU's Tony Foley threw the curve ball. He told bankers they could be storing up a major social crisis, even after they finally started getting it together in terms of tackling the arrears issue.

Tony Foley's brutally frank insight was that leaving banks to each deal with their own borrowers is a crisis waiting to happen.

Think about the implications in future as one set of struggling borrowers lose their home, while others get debt deals, not because they have behaved any differently but simply because lender A takes a different approach than lender B.

The Punt noted bankers shifting uncomfortably in their seats while that idea sank in. Mr Brett will have his work cut out keeping a lid on this one.

Bitcoin is here, better get used to it

The Punt likes to think of itself as being vigilant against fads. Nevertheless, continuing to dismiss Bitcoin – the online crypto-currency that has fluctuated wildly over the past six weeks – is starting to feel a little old. The free market may not always be right. But it is currently telling us that investors are interested.

The 'currency', which was created in 2009 and is based on a defined number of encrypted computer code 'units', has been on a fiscal roller coaster ride for some time. In October, one Bitcoin unit traded for €80. Earlier this week, this rose to €650 before falling back to €400, probably after significant profit-taking by geeks who purchased €5 worth two years ago and cashed in for over €10,000.

As we know, governments and central banks typically take a violent dislike to mechanisms with potential to replace established, controlled currencies. But some may be softening their line. The chairman of the US Federal Reserve, Ben Bernanke this week said that virtual currencies "may hold long-term promise, particularly if the innovations promote a faster, more secure, and more efficient payment system". Almost immediately, the price of Bitcoin soared, reportedly on interest from Chinese investors.

The Punt understands people won't invest in Bitcoin because they don't know what it is. However, we have observed that economists who dismiss Bitcoin also don't know what it is. Bitcoin is entering its fifth year. At some point, armchair economists may have to swallow their pride and admit it is there.

Irish Independent

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