October 12, 2012

“When you squeeze a balloon,” AXA CEO Paul Evans confided to oddly coloured daily the Financial Times this week, “the air goes somewhere else.”

Curiously, this apparently banal observation concerning the physics of party inflatables could yet prove the single most important insight to date into the hopeless futility of politicians and lawmakers’ attempts to drive naughtiness out of the motor insurance market.

Given the impossibility of making money by underwriting motor insurance policies, anyone who insists on ploughing this godforsaken furrow will inevitably need a bit of something on the side to make it all worthwhile.

With self-righteous do-gooders squeezing for all they’re worth on the sections of balloon marked with labels such as Referral Fees, insurers are sensing potential relief in a previously unstrectched area of virgin latex designated Legal Services.

In the run up to yesterday’s flotation, Direct Lie Group titivated potential investors with the putative prospect of potentially pouncing on a piece of this Legal Services action – now that the Tesco’s Legal Services Act 2007 (TLSA) is opening the floodgates to a supremely ironic reinvention of the crash for cash game. RSA too has publicly mooted a similar intention.

Those high-minded souls at AXA – righteous trailblazers in their stridently bruited self-denying abduration of referral fees – put it rather differently – lamenting that if this shameful law wasn’t changed – AXA too would reluctantly have to buy up or set up a law firm or two to put itself on a level playing field with other less scrupulous firms.

What exactly is wrong with insurance firms carving up the UK legal services market between them, you may well wonder. AXA’s Evans is in no doubt. Unequivocally branding the TLSA as “morally wrong” (that’s the worst kind of wrongness, incidentally – we checked), he assured the FT that TLSA creates a “perverse incentive” (again, the most disreputable kind) for insurers to make claims through law firms they own or control. Quaintly, he worries that this could cause people to think less of the insurance industry.

When, oh when, will all these interfering busybodies abandon this absurd obsession with treating the consumers fairly and stop recklessly pushing air round the balloon in ways that could have all manner of unforeseen consequences? Is nobody prepared to stand up for the interests of hard pressed insurance providers?

As it turns out, somebody is. Rating’s Agency Moody’s this week worried aloud that the recent decision by the Office of Fair Trading to refer the UK private motor market to the Competitor’s Companion would be likely to “create uncertainty” for the industry and result in lower premiums.

Puzzling as the idea that greater uncertainty would lead to more relaxed pricing may seem to the uninitiated, let us be absolutely clear: lower motor insurance premiums would be bad news indeed for literally everyone!


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