If 2016 is to be remembered for anything – and for many in the insurance industry it’s a year they’d sooner forget – it will perhaps be as the year that unrated insurers were revealed as potential Achilles’ heels. With the demise of companies such as Gable and Enterprise, and the significant disruption and distress their failures entailed, it reminded all at CUL, were such a reminder required, as to why we insist on only dealing with insurers with excellent ratings. The fallout of these failures was significant, both for brokers and for customers, and we are relieved to be able watch events unfurl as concerned, but unaffected, spectators.
Why Use Unrated Insurers?
Of course, CUL completely understand why brokers choose to use unrated insurers; there is no law against it and, some would argue, just because the ratings agencies haven’t given them their seal of approval that doesn’t mean they aren’t sound businesses. That said the spate of unrated failures – Setanta, Gable, Enterprise, Balvan and Lemma to name but a few – does suggest a lack of stability.
Unrated insurers have attractions though. Unrated insurers are, as we all know, often highly competitive and are able to take on risks that other, rated insurers simply don’t want to touch. And should the worst come to the worst and they do fail then there is always the backup of the Financial Services Compensation Scheme, the FSCS.
In the event of an insurer insolvency, the FSCS may pay out compensation for claims that the failed unrated insurer cannot meet. That said, they cannot offer 100% compensation in all cases and if the insured risk lies outside of the UK, is being claimed by a larger enterprise or is for a common small business policy such as goods in transit insurance or credit insurance, then the policy holder will be left holding the proverbial baby.
Unrated Insurers: Too Risky For CUL
To our minds, and this is simply CUL’s policy rather than any sort of judgement on the unrated sector, using unrated insurers simply isn’t worth the risk. Yes, they can offer competitive pricing, but what value is a cheap insurance policy if you are unable to claim on it as the insurer has gone out of business? With unrated insurers – especially those based in continental Europe – not being held to solvency tests and being subject to less vigorous scrutiny than U.K.’ insurers, the risk to you(the broker) of problems down the line is much higher. Not only do such failures cost you money – one insurance broker we know had to spend over £10,000 on mailings alone in the wake of the Enterprise failure – they also cause you a heap of work. Worse still, the reputational damage accruing from failed insurers can be substantial; as customers will likely hold you to account for selling them the policy in the first place.
CUL’s Rated Insurers: The Quality Insurance Solution
Despite the use of unrated insurers increasingly looking set to become a fixture rather than a fad in the UK insurance market, here at CUL we will continue to insist on only using highly rated insurers. It’s what we have always done and it is completely in-line with our commitment to offering our customers the very best insurance service. Our portfolio of products – from caterers’ insurance to unoccupied insurance – is wide enough for us to not have to rely on unrated providers and the competitiveness of our premiums also means they hold little attraction for us. So, unrated insurance providers? No thanks!
Find Out More About City Underwriters Limited
If you would like to know more about City Underwriters Limited, our insurers or our range of insurance policy offerings, then please call us on 0800 3081 044 or you can send us an email by clicking here.