Insurance Business Clarification
Quote:
Originally Posted by
Snoopy
hardt wrote: "In the last year or two their financial services and insurance division continues to become a bigger part of their business, capital intensive on both ends with little room for error."
Not sure that I agree with your above comment in the Turners situation hardt. Here is what Turners said after acquiring Autosure Insurance (p16 AR2017).
"The Autosure Insurance acquisition, including the Autosure brand, mechanical breakdown and payment protection insurance portfolios, was finalised as at 31st March 2017. This provides much needed scale for our insurance group , and focuses our underwriting effort on core products - MBI and Loan Repayment Insurance. We have a 10-year partnership with Vero for underwriting our comprehensive motor vehicle insurance policies."
Autosure was bought from Suncorp. But Vero, the underwriter of Turners Autosure is a subsidiary of Suncorp. So it looks to me as though most of the insurance risk has been outsourced to Suncorp, even though Turners has taken over the 'retail face' of the Autosure insurance business.
Following my attendance at the Christchurch roadshow presentation, I need to back-track on my post above. "Comprehensive motor insurance' has traditionally meant 'fire, theft and accident' cover, both for your vehicle and whatever vehicle(s) you might contact in a collision. However, given the breadth of motor vehicle insurance available today, there are plenty of things that 'comprehensive insurance' does not cover. An extended warranty/repair contract when buying a second hand vehicle is perhaps the most significant. It is into this policy gap that 'Autosure' was launched. The genesis was the Japanese car import business that started in the early 1980s without manufacturer blessing!
There was some discussion at the presentation about the cost of vehicle repairs. Since acquiring 'Autosure', Turners has found that the 'mechanical breakdown' policies on Japanese sourced vehicles were subsidizing the 'mechanical breakdown' policies on European sourced vehicles. Upon realizing this, Turners has directed Autosure to raise the premiums on European vehicles and reduce those on Japanese vehicles to better reflect the risk. A particular example given was of a Mercedes Benz wing mirror. One audience member guessed what he thought a fair price would be and doubled that figure for his 'price guess'. The true answer was three times his price guess IIRC! Anyway, it came out that Turners fully underwrites the Autosure costs themselves, which is contrary to what I suggested above. Nothing was mentioned about having a 'reinsurance' policy with a larger insurance industry player. So I assume that Turners do not do this, for Autosure. Todd told us that Turners spend $2m on mechanical repairs per month.
By contrast Turners do offer the traditional 'comprehensive insurance' for cars via Vero. On this type of policy, Turners earn a one off commission and do not have ongoing responsibility for costs of policy settlements. Turners are a 'retail face' for comprehensive insurance, but fully operate 'Autosure' and assume all risks for that in their own right. I hope that clears things up!
SNOOPY