Thursday, 19 July 2012
HDI-Gerling to get tough on bad risks
HDI-Gerling, one of Germany's large industrial insurers, has begun to individually reassess all of its clients on the basis of their track record on claims and quality of risks. Industrial clients with whom the insurer is unhappy will face higher prices or changed terms and conditions.
Christian Hinsch, Head of HDI-Gerling Industrie
“During the course of the year, we intend to look at all our conspicuous clients and groups of clients, in order to achieve a more acceptable ratio between premium levels and risks involved,” Christian Hinsch, Head of HDI-Gerling Industrie, told Commercial Risk Europe. Mr Hinsch is also Vice-Chief Executive of HDI-Gerling’s parent company, Talanx.
HDI-Gerling is venturing onto ground that no industrial insurer in Germany has so far managed to tread successfully. Tough competition among insurers has meant that it has not been possible for them to implement any significant price rises with the exception of cover for motor fleets.
In all other lines, industrial clients, whose insurers want to raise prices, are usually able to find alternative providers that can offer them cover at the original price. Competition is tough amongst HDI-Gerling and its rivals such as Allianz, Zurich and Chartis.
But Mr Hinsch thinks that the time for change has come. “This is the eighth year in which we are operating under soft market conditions,” he said.
Many insurance companies have a combined ratio of over 100%. Such underwriting losses can be partly compensated by investment earnings. But, this option is becoming increasingly limited given current low interest rate levels.
However, so far, industrial insurers have managed to produce good financial results. HDI-Gerling Industrie managed to achieve an operating profit of €321m in 2011. It easily outperformed the €110m earned by its private customer business. These figures of course make corporate clients more determined to resist price rises.
Nevertheless, HDI-Gerling Industrie is intent on scrutinising the figures. “I doubt very much if companies that have a high exposure level in relation to natural catastrophes are paying an adequate premium,” Mr Hinsch said.
He is also convinced that changes must be made to liability policies for pharmaceutical companies because many are continuously threatened by litigation in the US. He also sees the need for further adjustments in motor lines. “Each individual fleet must be examined on a case-by-case basis as to whether it is working positively or negatively,” he said
HDI-Gerling wants to expand outside of Germany where the potential for growth is much higher, Mr Hinsch said. In Germany it is much harder to secure market share, he explained.
The insurer has been concentrating on expanding its range of overseas business for some years now, along with its rivals Allianz and Zurich.
Talanx, HDI-Gerlings parent company, has primary units in 38 countries and is able to provide cover in a further 100 countries via network partners.
HDI-Gerling achieved total worldwide premium income in 2011 of some €3bn, of which around half accounts for international business and half from transactions within Germany.
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