'More Than' Home Insurance sold to Admiral. Admiral renewal quote double the price.

dosh37

My home buildings and contents insurance has been with More Than for about three years.

They recently pulled out of home insurance and sold the business to Admiral.

I received a renewal quote from Admiral that was roughly double last year's premium with More Than.

Instead of offering a like-for like policy they were attempting to push a more expensive product that included additional cover that I did not want or need.

I went to the Admiral website and searched for a policy similar to what I had before.

It was still more expensive and came with higher excess.

I used a couple of price comparison sites and found something better than I had with More Than  at about the same price as last year. The premium includes home legal expense cover and home emergency cover. It also has a lower excess.

It pays to shop around.

DullGreyGuy

RSA just sold the right to offer a renewal quote, they didnt sell their book of business as that requires a High Court process outlined in Part VII of FSMA. If you were to need to make a tail liability claim (eg if a solicitors letter came saying the posty tripped on your uneven path last year you'd sill claim from your former RSA policy. 

It always is sensible to shop around even if you are happy with your current insurers. You may end up staying in the same place but better to check than assume

Annemos

DullGreyGuy, can you please explain what this actually means: "A Block Transfer of Business". I saw this in an FOS case. Is this what you mean when you say "Sell a book of Business" using a High Court Process? 

Why do Insurers have different ways of operating, when they pull out of the market? Can you please describe what their thinking might be?  Many thanks. 

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FOS case: The guidance doesn’t comment on what should happen if an insurer chooses not to operate in the home insurance market any longer. But it does say that where ‘block transfers of business’ occur, the transfer agreement should specify how to handle cases where continuous subsidence cover is being provided.

DullGreyGuy

Annemos said:

DullGreyGuy, can you please explain what this actually means: "A Block Transfer of Business". I saw this in an FOS case. Is this what you mean when you say "Sell a book of Business" using a High Court Process? 

Why do Insurers have different ways of operating, when they pull out of the market? Can you please describe what their thinking might be?  Many thanks. 

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FOS case: The guidance doesn’t comment on what should happen if an insurer chooses not to operate in the home insurance market any longer. But it does say that where ‘block transfers of business’ occur, the transfer agreement should specify how to handle cases where continuous subsidence cover is being provided.

Whilst many people dont have a clue who they are buying from in principle they are making a decision that they trust Axa, Aviva, UK Insurance, the Society of Lloyds etc are financially strong enough to pay out their claim in the future should the worst happen. These companies are the insurer or underwriters of the policy whose capital is on the line should you have a major crash or your house burns down. 

If they decide they want to totally exit the Motor market, for example, their only real option is to sell the block of business. The problem in that is you may have bought your policy underwritten by Aviva because of their AA3 (Stable) Moody's rating but they could sell your policy to C (poor)  rated Conifer Insurance who are hoping to enter the UK market and you may suddenly feel very exposed to the fact your insurer may not have the financial ability to pay out on that massive claim you had last year. 

To protect consumers from this sort of risks the transfer of existing liabilities from one insurer to another but still not require the consent of each and every policyholder the law requires the approval from the high court as outlined in Part VII of the Financial Services and Markets Act. It also covers other financial services transfers hence lots on here reporting receiving communications from Tesco Bank and its sale to Barclays as again your savings etc could disappear if Barclays went bust. 

The process outlines the requirement for a court approved communication plan to inform impacted parties, the right of customers to object, the requirement of an independent expert to opine on the impact to customers, the FCA and PRA to give their views etc. 

It is a very expensive process and if it's a closed book of business (ie no new money coming in) then the seller is the one that pays the buyer to take on the liability. The Prudential did their annuity back book sale a few years ago and paid circa £12.5bn for Rothesay Life to take on the liabilities plus over £50m in costs (in part because the High Court rejected it, it had to go to appeal and then back to the High Court when the Court of Appeal stated the High Court had made mistakes). 

If the high court approves it then basically for all contracts in the scope of the transfer "Aviva" should be read as "Conifer" going forward, even your half way through claim suddenly transfers to the new company on the effective date. 

Given its big, expensive and painful process not all companies will decide to sell. Some instead will do what RSA has done, simply stop selling new policies, sell the right to market to your customers to Admiral and manage the claims down at some point this gets painful as this will go on getting ever smaller for the next 20 years. Because your inforce policy remains with RSA and you are under no obligation to buy your new policy from Admiral this doesn't require court approval. 

Often at some point in the future they'll do a deal with someone else that'll be a reinsurance and outsourcing deal so on paper RSA remain 100% liable to their customers but in practice they'll be handled by a TPA outsourcer and a reinsurer will be reimbursing all the costs. Large scale outsourcing needs engagement with the regulators but not court approval as ultimately it's still RSA that has to pay should the reinsurer go bust. 

Why different companies take different approaches depends on a combination of the prudency of their own views on their liabilites/asset returns, ultimately who's in the market looking to buy and how prudent they are, differing views on the two companies ability to manage costs (claims and operations) and what the driver is for the seller. 

The Pru went for the sale option because despite paying out £12.5bn their capital on the business was more like £13.5bn meaning the deal released £1bn. Had they not sold the business then in the long term they'd have likely released more than £1bn but for them they needed to transfer a Hong Kong subsidiary of "Pru UK" to "Pru Asia" which then enabled the Pru Group to split up carving out Pru UK & Europe from the rest of the world. Because Pru UK was the owner of the HK company it sat on their balance sheet and either Pru Group would have to find more capital to make up the shortfall or reduce Pru UK's liabilities with the sale. 

RSA either couldn't find a buyer at a price they were willing to pay or dont need the immediate release of capital for another strategic reason. It seems they just dont like their future projections of where the Motor market is going so kept the existing business and sold the renewal rights. 

Annemos

DullGreyGuy you are WONDERFUL. Thank you so very much for taking the time to explain this to us. 

It is very useful for homeowners. (I am going to save your reply.) 

What bothers me somewhat, is that if a company stops doing the home insurance, then there must be an exodus of the people who used to handle the claims, as they look for other jobs. 

If a homeowner has an ongoing Subsidence claim which can drag on, one wonders if they will retain the competency to do the right thing for the homeowners. (Or even the level of staff numbers.)

I am just testing RSA out on this myself at the FOS. 

DullGreyGuy

Annemos said:

DullGreyGuy you are WONDERFUL. Thank you so very much for taking the time to explain this to us. 

It is very useful for homeowners. (I am going to save your reply.) 

What bothers me somewhat, is that if a company stops doing the home insurance, then there must be an exodus of the people who used to handle the claims, as they look for other jobs. 

If a homeowner has an ongoing Subsidence claim which can drag on, one wonders if they will retain the competency to do the right thing for the homeowners. (Or even the level of staff numbers.)

I am just testing RSA out on this myself at the FOS. 

All classes of insurance have a different run off rate based on a combination of how long contracts are and how long the tail on claims are (a combination of how quickly you get to hear about claims and how long a claim takes to settle). Most consumer insurance tends to be fairly short (12 months or less) and relatively short tail (you dont get many asbestosis claims 30 years later etc) so run off quicker than say Marine insurance. 

Inevitably if you are an X specialist and you hear your employer is pulling out of X you will know the job losses are coming but how quickly depends on the tail. Some will want to run to find their next job, some will stay on hoping for redundancy. As mentioned above you also get deals like the one done by Aviva where it reinsured its long tail liabilities via a 100% quota share deal to a reinsurer and TUPEd the claims handlers across to the reinsurer's choice of outsourcer so no initial job losses and now those people are backed up by the wider outsourcer teams. 

Whilst it's still on their books they will have to show they are appropriately staffed (internally or outsourced)  to meet FCA requirements, depending on how much the customers are valued it may impact if its bare minimum or above that. Take Hiscox's Syndicate 33, they too have done reinsurance deals to get long tail liabilities off their books but because its still in classes of business they write or still target customers on other classes they didnt outsource the claims to ensure customers still have good experiences and continue to buy from them, inevitably they had to pay the reinsurer more for this.

Some people are highly specialist or particularly love a certain class of business so will want to move on. Some are more generalist and will be happy to transfer to another class of business. Just as RSA are entering this book into run off they are also buying other business, so https://www.directlinegroup.co.uk/en/news/company-news/2023/direct-line-insurance-group-plc----sale-of-brokered-commercial-i.html is the Part VII that will see them take on a load of new business from DL and before it the 800 or so employees as it too is structured as 100% QS RI followed by Part VII.