'Technology can significantly improve risk assessment'

What RSA and Aviva do, the rest of the market usually follows. It is these two players that will be the game-changers in finally lifting rates on commercial lines.

RSA UK head Adrian Brown believes that rate rises of 10%-15% are needed in order for insurers to get a healthy return on capital. But that doesn’t mean he is going to push those rises through his book.

More likely, the market will see another year of mid single-digit increases. That means insurers will have to find ways of controlling costs, such as job cuts and outsourcing, and investing wisely to improve efficiency.

The interesting part comes with investment. In personal lines, and increasingly in commercial lines, analytics firms and data providers can help insurers assess risks more accurately and weed out fraudsters. Certainly in liability and commercial motor, technology can have a significant impact in improving risk assessment.

Next week, Aviva’s results are due. What ideas does UK chief executive Robin Spencer have to help the insurer navigate through these challenging times?

Market reacts to RSA dividend cut of one-third

If something seems too good to last, it probably is. RSA distributed a juicy final dividend of 5.82p per share in 2011. But chief executive Simon Lee has decided to reduce the dividend for 2012 by one-third and, as a result, he’s taken a lot of criticism from the City and the financial press.

It was a tough decision but almost certainly the right one. The RSA strategy of focusing on emerging markets is sound and, to be successful, the insurer will need to invest in its growth plans. It couldn’t do that if it was distributing such a large chunk of its earnings to shareholders.

The drawback is that once the City and the financial press has you in their sights, it can be difficult to escape. Lee has been in the job 18 months now. This could well be a defining moment in whether he makes it a success.