September 2007

Housing market slowdown confirmed by Nationwide
In another sign of a slowing housing market, Nationwide Building Society reports average house prices up just 0.6% in the month of August (2007), the annual rate of house price inflation fell to 9.6% down from 9.9% in July (2007). A typical UK property cost an average of £183,898 in August, £16,177 more than one year ago.

Fionnuala Earley, Nationwide's Chief Economist, said, "The expected slowing results from three main factors, each of which have been around for some time. First, weaker affordability, as house prices continue to grow more quickly than earnings; second the effect of higher interest rates and inflation on consumers' pockets; and third lower house price expectations.

"The US sub-prime crisis has created turmoil in international financial markets, but this is unlikely to have a significant additional effect on the rate of growth of house prices in the UK in the short term. We still expect house price growth in 2007 to come in close to the middle of our forecast range of between 5% and 8%."

Commenting on Bank of England figures which show mortgage approvals steady in July, Capital Economics said, "Mortgage demand has been slow to react to the tighter monetary conditions. However, with new buyer enquiries steadily falling and mortgage lenders tightening lending criteria, we do not expect this resilience to last.

"Although mortgage lending remains steady for now, there are good reasons to expect it to slow in the months ahead. Weaker mortgage demand by the end of the year remains our central forecast."

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Drivers in old age 'may need re-testing'
A number of senior drivers may need re-testing once they reach old age, it has been claimed. The Association of British Insurers (ABI) has stated that those unable to control vehicles to a reasonable standard of safety in later life should be encouraged to take public transport instead.

As a result, it may be that accidents are reduced along with the cost of a car insurance policy. But ABI spokesperson Malcolm Tarling has commented that the tests need to be fair and conducted without discrimination.

"It's important not to tar people with the same brush, there are responsible older drivers and also very good younger drivers," he said. The ABI represents the insurance industry in the UK and has spoken out on a number of related issues this year.

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Northern Rock shares plunge 32%
Shares in one of the UK's largest mortgage lenders, Northern Rock, have fallen 32% after it had to ask the Bank of England for emergency funding. But experts and officials insist that Northern Rock, which has £113bn in assets, is not in danger of going bust. Despite the reassurances lines of customers formed outside many Northern Rock branches around the UK. The bank has struggled to raise money to finance its lending ever since money markets seized up over the summer.

NORTHERN ROCK FACTS

• Founded in 1965 after merger of Northern Counties Permanent Building Society and Rock Building Society
• Headquarters in Newcastle
• Became a public company in 1997
• Has 6,400 staff
• Has 18.9% share of new UK lending
• Loans and assets of £113bn
• Deposits from customers of £24bn

Northern Rock said that its profits for 2007 would be hit, but that it remained solvent. Unlike most banks, which get their money from customers making deposits into savings accounts, Northern Rock is built around its mortgage business.

It raises most of the money which it provides for mortgages by borrowing from banks and other financial institutions. Angela Knight, chief executive of the British Bankers' Association, said that anybody who was "either a saver with Northern Rock or has got a mortgage, can be absolutely confident that they have got their money with or they have borrowed from a very sound financial institution."

The decision for the Bank of England to become the "lender of last resort" is extremely rare - and also comes after consultation with the Financial Services Authority (FSA). It is an unlimited facility, with interest rated at a "penal rate" of more than 1% above Bank base rate.

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Car Insurance Renewals
Previous generations of UK drivers showed a huge amount of customer loyalty towards their car insurance provider or broker. With high street brokers dominating the motor market during the 1970's, 80's and early 1990's car insurance renewals were the indication and benchmark of customer satisfaction and a very important element of business income.

With the recent developments of varying marketing approaches (price comparison web sites and other online media) the element of customer loyalty has diminished. Motor insurance renewals are an extremely important source of revenue and more importantly bottom line profit to all motor insurance companies. However, still many providers neglect the opportunity of contact prior to the renewal date, some leaving the contact right to the last minute!

The biggest factor in the latest drop in retention of car insurance renewals comes from the transparency offered by the insurance aggregator companies who are now driving premiums down for both first time policyholders and motorists seeking new quotes on renewal of their policy.

Margins are being heavily hit in new business as well as car insurance renewals and the focus of control has definitely drifted in favour of the consumer and aggregator.

Times are a changing in the motor insurance sector and whether the insurance providers and direct insurers can sustain this pressure is yet to be determined, one thing that is plainly clear is that car insurance renewals are completely price driven and the ease of shopping around has enabled motorists to view market rates much clearer than ever.

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Broker launches commercial insurance policy with eco discounts
Independent Insurance Services, the only insurance broker to be registered with the British Standards Environmental Management System (ISO14001) has launched a combined commercial policy under its ‘Ecocover’ branding with discounts for eco-friendly businesses.

Businesses can be rewarded with a discount of up to 10% in addition to other policy benefits, for good environmental practices. These may include recycling, conserving energy and water, green procurement, using wind or solar power, or operating an Environmental Management System.

Standard policy cover will be enhanced to include increased cover for loss of metered oil and water, solar panel and wind turbine cover and cover for waste streams. Reduced excesses have also been negotiated.

Ray Johnson, proprietor of Independent Insurance Services, said: “We consider ourselves to have the relevant expertise and experience when it comes to environmental matters. It is a hot topic at last! Recycling, carbon footprints, transport and a wealth of other aspects have always been a serious issue to us.

Over many years we have negotiated discounts for clients with good environmental practices. We are the first broker in the insurance sector to be truly carbon neutral. We are delighted with this initiative under ‘Ecocover’ that is the first ever environmentally focused commercial insurance offering.”

Independent Insurance Services also offer eco discounts for other classes of business.

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NIG launches online home insurance product
NIG will launch Advantage Plus, a new home insurance product, on 1 October. The product will be offered on EDI will initially be available via Software Solutions Partners, Open GI and CDL, with other software systems including Acturis to follow.

Advantage Plus, has been designed to meet the needs of a broad range of customers, also offers a choice of five levels of contents cover from £30 to £75,000. Key features will include a buildings limit of £500,000, which will be fixed regardless of contents limits selected.

Other features will comprise: inner limit for valuables offers percentages of overall content limit i.e. 30% rather than being fixed; sliding scale for Single Article Limit dependant on Contents Sum from £1,500 - £3,750; Business Contents of 10% Contents Sum Insured; Downloaded information covered up to £1,000; Trace and access cover is included up to £5,000 and Optional Family Legal Protection cover is available up to £50,000.

Advantage Plus will also allow brokers to add on optional covers for customers.

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