Imagine you ran a private hire company and discovered just before the Friday rush that your fleet was no longer insured? Is this a risk your company would be financially prepared for?
Are you certain that your Private Hire Insurance provider will be able to securely and financially provide the right motor insurance cover? How do you know? Do they have a rating?
The way that insurers can prove financial stability is by gaining a rating which gives the public a good indication of the company’s financial status.
There are times when the policy holder is not aware that the insurer they are using is unrated. To protect this from happening to you, it is strongly suggested that you use an experienced broker that only uses rated insurers.
Insurers invite rating companies to rate them showing the public how financially credible they are. With this is mind, does this mean that unrated insurers have something to hide?
Standard & Poors is a rating company that assesses the financial strength of insurance companies. As one of the world’s largest insurance rating organisations, they maintain reports and ratings on more than 3,000 insurance companies.
An insurer’s credit profile would be rated by looking at Industry and country risk assessment, competitive position, capital and earnings, risk position, liquidity, financial flexibility and management and governance.
An example of a rated insurer would be the insurance company RSA who have been awarded a rating of A by Standard & Poors.
When looking for motor insurance, ultimately people are more interested in price than anything else. Unrated insurers will often have the ability to offer cheap premiums to brokers. But great price does not always mean great value. A cheap price may seem great at the time, but you may not be getting what you paid for.
Not knowing the financial status of an insurer when taking out a policy is a huge risk to any business. The policy holder could be left having to pay another premium or obtain another policy to keep the business insured if the original insurer was to fail.
Has it happened before? Yes, on several occasions an unrated insurer has gone into liquidation leaving many policy holders without cover. Insurers such as Quinn, Lemma, ERIC and now Balva have either withdrawn from the market, had their licences to transact business withdrawn or have gone into administration and/or liquidation. Another example is the Gibraltar based motor insurer ‘Service Insurance Company’, which has recently announced that they have ceased to enter into new contracts of insurance.
The Financial Services Compensation Scheme (FSCS) is the UK’s compensation fund for customers of financial service companies authorised by the Financial Conduct Authority (FCA). If the company cannot pay claims for reasons such as liquidation or ceasing to trade, the FSCS will compensate on its behalf.
This doesn’t necessarily mean you will receive your compensation quickly! It could be a lengthy process. The insurer ‘Independent Insurance Company’ entered provisional liquidation in June 2001, and still to this day many claims have not yet been paid out. Would you want to wait over 10 years for your claim to be paid?
SEIB Insurance Brokers work with a large number of highly rated insurance companies including A rated RSA for many of their motor policies to ensure their clients have the right cover specifically designed to their needs, and they have peace of mind that their insurer is financially stable.
SEIB are happy to do the due diligence for you.
For more information or for a free no obligation quotation, please contact SEIB on 01708 850 000.
SEIB Insurance Brokers are specialists in equestrian insurance, funeral directors insurance and private hire insurance. We are able to provide flexible policies to suit individual client needs and provide advice on what cover is needed. For more information call the team on 01708 850 000.