Thu | Sep 21, 2017

General Accident targets homebuyers to replenish bottom line

Published:Wednesday | May 18, 2016 | 5:00 AMNeville Graham
Managing Director of General Accident Insurance Sharon Donaldson

General Accident Insurance Company is going after 20-25 per cent of additional business from the homeowners insurance market, by targeting mortgagees who pay insurance on their home loans.

Through a new marketing campaign called Look. Call. Save, General Accident is urging homeowners to unbundle the insurance component of their monthly mortgage payment, and to hire them as insurer instead at a cheaper price.

"We are saying that the cost of home insurance can be cheaper than you are paying right now. General accident sees this as an opportunity to provide the home insurer with better premiums and to encourage others who are not currently insuring their biggest investment to purchase home insurance," said Managing Director Sharon Donaldson.

General Accident is trying to lock on to new business in a segment of the market that is among the least risky to cover in order to roll back underwriting losses recorded in intermittent quarters in its core operations and declines in bottom line profit.

Last year, General Accident made $114 million of underwriting profit, however in the quarter ending March 2016, the company made underwriting losses of $26 million, or double the $13 million of losses in the March 2015 quarter. Gross premiums also dipped to $1.6 billion from $1.69 billion in the same periods.

Significantly the loss ratios for homeowners and property insurance were the only ones in single digit in 2015, while motor insurance was showing a 55 per cent loss ratio.

Mortgagors are usually required to subscribe to peril insurance, a service typically bundled with the mortgage loan.

probability for growth

"We did the market research and we know that there is a strong probability for growth," said Donaldson. "Many don't know but the mortgagor has the right to choose where they get the insurance. So if you decide to go with an insurer of your choice to cover your asset then the mortgagee will have to take your insurance," she said.

The Look. Call. Save campaign kicked off at the end of April and will run for about a year. General Accident is offering up to 20 per cent savings in the cost of premiums, along with a $5,000 switching bonus. The insurance executive insists the savings on premiums is not a one-off benefit.

"As an insurance company we operate by the principle of utmost good faith and I can't see us breaching that fundamental principle by having you come in at a lower rate and then a year later push the insurance rates back up. It that happens there is nothing stopping you from walking away from General Accident and switching," Donaldson said.

The marketing campaign is a fairly big step for the insurer, which does not usually spent big on promotions. Its annual advertising budget is running below $10 million per year, which represents 2 per cent of expenses and equates to around 0.2 per cent of gross premium revenue.

"General Accident was never a company that was in the PR space," the managing director said.

budget

Donaldson declined to comment on how much the marketing budget would be ramped up this year, saying only that it would be considerably more than the annual advertising expenditure and that much of it would be targeting a younger demographic.

"We've now decided that there is a Generation C. They are always 'connected' through their phone and Facebook, in addition to other electronic media. This generation will own homes and they will want to purchase insurance in a different way. They will not want to purchase insurance in the traditional methods, said Donaldson.

"We expect over a one-year period to make significant inroads into the market share of the homeowners business," she said.

General Accident has been a public company for less than four years, since 2012. Within that time its annual profit peaked in 2013 at $328 million, but has been declining since despite consistent growth in top line income. Last year, profit fell to $304 million but remains above the $291 million made by the general insurer at listing in 2012.

neville.graham@gleanerjm.com