As well as being one of, if not the loveliest place to live, the Channel Islands have an undoubted uniqueness about them. That uniqueness manifests itself in the slight subtleties between islands, in the way we islanders go about our business and more generally the way we are in turn treated. Take for instance insurance, not everyone’s favourite topic admittedly, but one that is an essential component of island life.
The islands mercifully spared some of the worst environmental risks that befall our neighbours in the UK and mainland Europe. We are not prone to flooding, other than the occasional high tide which would affect any coastal city. But we have the benefit of strong granite foundations which make for few if any subsidence claims. We do not have the risk of rivers bursting their banks, nor large hail clouds destroying vast acres of property such as they have in Europe. The unique blend of our meteorological situation means that for the most part, we enjoy a relatively benign environment.
And that is one of the key drivers of insurance premiums in the rest of the world. The environmental impact is the key cornerstone of how insurance companies rate their products, but it also represents a potential problem for our islands as well. For, given their relative size, they tend to be lumped together with UK considerations and consequently mainland insurers do not have a bespoke underwriting footprint to cater for us.
One of the core aims of Five Islands is to leverage underwriting expertise and historical performance locally to better inform a more appropriate rating model. What that means in plain language is that we will reflect the lower risks faced by the islands in your premium.
This is where the MGA is a crucial go-between, liaising closely with insurers on the one hand who provide the capacity and sign off on the rating assumptions, and then the brokers who provide the business and represent your risk. In the traditional set-up, brokers have little power to influence underwriting decisions since insurance companies view classes of business on a portfolio basis and invariably lump together assumptions with limited parameters for say discounting beyond those assumptions.
Given our book is exclusively centred on the Channel Islands, it is, therefore, more reflective of the risks faced by islanders. Furthermore, the capacity providers and insurers that we speak to are selected specifically because they have the capacity to be able to listen and tweak their rating assumptions accordingly.
This is much harder with a large composite publicly listed insurance company that looks upon small accounts with the typical view of a Behemoth eyeing up a small dinner plate. It’s not substantial enough for them to invest significant time or effort: it will inevitably leave them hungry. This is not always the case of course but has been a typical approach to underwriting niche market segments for many decades.
When it comes to motor insurance for instance, considering the risks of a Channel Islands-based motor versus those in the UK, it is the case that lower theft instances, malicious damage and fire are all prevalent risks in some parts of the UK mainland, are almost non-existent in the Channel Islands. This reduces the need to collect premiums for those areas, save for the few cases where islanders’ vehicles are stolen either in the UK or mainland Europe. Sadly it does happen we have paid the claims to prove it!
But equally on the personal injury front, the absence of the whiplash rewards, which has served to push premiums up substantially as the claims farmers continually trawl for any compensation opportunities, simply doesn’t exist in the islands. This creates a better and arguably more sensible approach whereby significant injury claimants are still well cared for and indeed well provided for with all of the protections in place, but there’s not the attrition volume that comes through and then gets ultimately fed back into people’s premiums. This does admittedly make claims handling in the islands simpler.
It also means there’s no link between the expensive provision of credit hire vehicles as replacements for those who have had non-fault accidents and the corresponding credit repair bills which can be eye-watering in the extreme. These all serve to add as a toxic soup which together with inflationary pressures means that UK motor premiums continue to soar whilst the Channel Islands premiums have mercifully, to date, been spared the worst ravages of the litigious claims environment.
These are just some of the nuances that then feed into the way we approach insurance partners and how we put together our programs. We take continual soundings from broker partners, as well as a whole variety of information feeds from the local markets to feedback to insurance partners to create a unique rating environment that best reflects the Channel Islands.
We are very proud to be Channel Islands-based and our team are all islanders themselves so these issues are very much close to their hearts.
