Earlier today the group revealed its full year financial results that saw claims inflation impact its loss ratio but customer retention was positive
Hastings has been increasing prices in line with claims inflation as far as possible, John Worth its chief financial officer told Insurance Times.
Hastings previously put a number of initiatives in place that it hopes to reap the benefits from this year.
These include pricing within its defined loss ratio, protecting its margins, and investing in its strategic initiatives which include claims, anti-fraud and digital.
In terms of digitalising, this is due to a shift in the way customers want to interact with Hastings, it has seen a reduction in the number of calls to its centres by around 18% over the course of the year as customers prefer to interact via the app which has seen 550,000 downloads.
This figure was 317,000 at the half-way mark last year – Worth said that 40% of policy changes are now being made via digital channels.
It follows Hastings full year results being released earlier today that saw its loss ratio fall.
Challenging year
Despite 2019 being a challenging year due to elevated claims inflation that impacted the loss ratio, he said that the firm was pleased with its growth in customer numbers.
“In particular that this was driven by retention rates, so keeping our existing customers,” Worth added.
He attributes this to pricing ahead of the market which has resulted in a reduction in competitiveness in the market.
Although Hastings’ prices may be higher than its competitors, it has offset this with customer retention, therefore its existing policy holders are remaining – this is due to treatment of customer at the renewals stage, which is a result of some intensive training in its customer services operations.
There was further growth in home to 209,000 policies, a 27% increase year on year, as we continued to enhance the capabilities of the group’s in-house underwriting team and work with third party panel members.
Hastings has been seeking to diversify its books, it has also brought its underwriting team in house – this has also part of its targeted strategy.
Ahead of the market
Worth said Hastings does this by looking at claims data costs as soon as possible, relaying this to its pricing and underwriting teams and making sure it understands the dynamics of the market well and therefore price accordingly.
“One of the features of 2019 is that claims inflation has been increasing throughout the year,” he said.
When asked whether this strategy has worked, Worth said “certainly” in the sense it has protected Hastings’ loss ratio and operating results.
“The difficulty of course is [trying] to chase a market where claims inflation is increasing. It’s something that is well recognised around the industry at the moment,” he said.
Claims inflation
Hastings’ loss ratio was impacted by claims inflation. This is because most of its book is motor policies, and it comes back to the cost of every repair increasing.
It’s less about the amount of accidents that we are seeing and more about the cost of each accident” Worth said.
Underlying this is the greater complexity of motor vehicles and the rise of interconnected cars.
“This has not been the case over the last few years.” It has made repairs more expensive and added to the severity of claims.
“Some hybrid and electric technology can be more expensive to repair and requires new and specialist help in order to do so,” he said.
Hastings has seen an increase in theft for car parts for these vehicles.
Hastings made a post-Ogden adjusted operating profit of £109.7m last year, compared with £190m in 2018.
Worth continued: “Previously we said that we were using between 0-1% charge so approximately it had a 0.75% negative impact on us.
”That reduction on the discount rate led to an 8.4 million charge through our income statement and increase in our best estimate.”
But he said that it has treated Ogden as a “one-off” as has the rest of the industry, although he added that Hastings wanted to be transparent about it.
Strategic initiatives
Last year Hastings shared its vision with the market and declared its focus on claims from two perspectives.
“[Firstly] we have re-engaged with new claims partners such as Vision, Auto-glass and Enterprise Rent-a-Car,” Worth said.
These partnerships were put in place at the end of last year.
“The second is the investment we keep making with respect to fraud prevention. This is another one of the pillars of our strategic initiative. We have increased the fraud cases that we can identify thanks to the investment we have made in that area and that has a direct positive impact on claims,” he added.
It aims to return to its target loss ratio of 75-79%.
Worth hopes that the benefits of these initiatives will be reaped in 2020 which will in-turn reduce its loss ratio.
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