After our last post, following the latest wave of shareholder spring activity resulting in the Aviva pay deal being voted down, we weren’t sure on what the next steps where going to be. Whilst we cannot deny that the last five years have seen a huge effect on financial services firms (including insurance) throughout the world, Aviva have lacked any sense of direction. They seem to have lurched from one strategy to another without any increase in company value.

We were sure, as were the financial journalists, that Andrew Moss would be given at least until the end of the year to try and win over the city and investors alike. Whilst we will never know (whether Andrew Moss asked, or was asked, to step down) the truth, whatever the press releases say, what we can look forward to is some real direction from what effectively is a massive UK insurer. Whilst personal lines make up a share, they are the combination of three of the largest business insurance companies in the UK. The three companies, are Norwich Union, General Accident and Commercial Union. Here at Businessinsure, we can see where insurers are going, Aviva have not really gone anywhere in the past 18 months. Complacency has set in, they have a large book of business which tends to just stay with them, what you cannot say is that they are market leaders in anything.

We know the UK is back in technical recession, but for business insurance we can at least see the corner up ahead, when we turn that corner, no-one knows, but the bigger insurers, that are forward thinking, are already planning where their growth and income is goin to be in 2015 and beyond. I would hate to call Aviva a sleeping giant, there are some wonderful individuals working at the business who could really drive forwards. The problem appears to be at the top, it will be interesting to see where Andrew Moss and Lord Sharman end up, but I will bet that they are no in any strategic roles, this is where they have failed.

Lets hope that someone with an inkling of what insurance an investments is all about, get’s the top job, and we hope that Scott Wheway and the remuneration committee actually set some real targets for the new job holder.

It has been widely reported in the press that yesterday, over 50% of shareholders rejected the pay and remuneration deal against Aviva directors. Whilst there was the small matter of thousands of local council seats up for grabs and the great, as yet unresolved Boris v Ken vote in London, there was an Annual General Meeting yesterday at the Barbican, for Aviva.

The vote against the directors pay is being labelled in some areas as a revolt against fat cat bosses taking whatever pay they want. But, it does go much deeper than that, with shareholders, both small and large, looking for companies to deliver more value. If they do not deliver value, then they shoudl not be rewarded. We do not have an agency with Aviva for business insurance. They may be one of the bigger companies, but their strategy is too haphazard for many to follow. They do not appear to know what they want to do, nor do they really understand the insurance market as being cyclical. For years, even when I worked at one of the constituent companies (General Accident) that makes up the current day Aviva, we accepted that over the years you would make money in some years, stay flat in a few  and then have a couple of bad years. Over the piece though, you made money and slowly, but surely increased shareholder value.

The reason that the pay was voted down yesterday was that the revenues had reduced, the profits had reduced, the share price had halved but the directors were looking to pay themselves more money. To me, as a layman, someone at the top should accept responsibility. The board do not appear to have done so, in a way there was an arrogance yesterday in that they thought they would have a rough ride for a few hours, they could then blame their current performance on the recession and it’s after effects and then go home. But, it was good to see the shareholders, and there must have been some big pension funds voting against as well, actually say, what are you going to do to earn your money?

I do not believe Aviva will sort themselves out without some real, true, insurance people at the top, fingers crossed though!

Employers Liability is cover required by UK law. Since 1969, when the original act was introduced, there has been a requirement for any business employing people to have adequate insurance cover in place.

Employer liability, or EL, insurance provides a indemnity in respect of your legal liability for injury or disease sustained by your employees caused by or arising out of their employment. The definition of employee in most policies is very, very wide. It picks up temporary staff, people on placement and even labour only sub-contractors.

Cover is on a worldwide basis for employees normally resident in the UK. But, cover will extend to include employees who temporarily work overseas. This cover will also include all legal costs and expenses incurred, where the insurers have agreed and consented, involved in the defence of any prosecution under the health and safety legislation of either Great Britain, Northern Ireland, Channel Islands and the Isle Of Man.

Most EL insurance is part of a combined liability insurance and premiums are calculated on the estimated annual wages. But for package policies, such as your shops, pubs, hotels, offices and the like, it is included in the package price. If it is on a non-package basis then it may well be that the insurers will ask for a declaration at the end of the insurance year. For example, if you take out a policy which is based on estimated annual wages, for the next twelve months, of £250,000 at the end of the insurance year you may be asked to complete an annual declaration for the actual wages paid. Usually, if there is a big difference, for example more than 10%, then insurers will ask you to pay extra premium for the past year.

This can be a difficult pill to swallow for many businesses, they pay their premium and then fond out that at the end of the year, you are faced with an additional bill. This is why you really should estimate as near as possible to the correct wageroll figure, rather than an estimation that is too low.

As far as business insurance policies (which cover more than just liabilities) are concerned, there are two main types available. Firstly, there are packaged policies and secondly commercial combined. Whilst not intended in any way to be an exhaustive list of the differences, we do get asked on a regular basis by customers what the differences are. As an industry, we know the differences as we are brought up on this from day one. But, when talking to customers we can quite easily talk about the policies without really explaining why we are using one and not the other.

Since the mid 1970’s, insurers have been building up a better understanding of the needs and wants of particular trades and industries. In the late 60’s insurers stopped using tariff rates. These were basically monopoly rates where insurers, amongst themselves, decided what the minimum prices where going to be. Unless you went to a non-tariff underwriter, such as Lloyds of London, you were stuck. You would not get a better price wherever you went. As brokers, we did not have a clue about the secretive rating. Insurers controlled the pricing, but this also snuffed out the competition.

As the tarrif rating stopped, insurers started to build products specifically for, say pubs and shops and offices. They were still underwriting on three basic premises, area, sums insured and trade, but the products were slightly different. For example, a package business insurance policy for a pub, would include frozen food, or household contents for the owner. You would not need this for, say an office policy, so this was not included in the office package. All of the insurers that started to build up a stable of these policies had small differences in their wordings, terms, conditions, excesses and covers. This is how they decided to price differently rather than working to a single, uncompetitive and unfair, tariff rate.