The insurance arm of Royal Bank of Scotland (RBS), the struggling parent company of top UK insurance brands Direct Line and Churchill, is subject to an advanced bid valued in excess of £3 billion. If successful private-equity group CVC and Swiss Re, the world’s largest reinsurance group would take a 51% stake in the business, according to The Times.
This could affect as much as half the population as, with 26 million policies, RBS Insurance is the second-largest general insurer in Britain, the largest motor insurer and the second-largest home, travel and pet insurer.
Like most other banks RBS has been hit hard by the credit crunch, and recently lost chief executive Fred Goodwin who resigned after the bank was forced to sign up to a rescue deal likely to make the British government its controlling shareholder in the short term.
Sunday, October 19, 2008
Monday, October 6, 2008
Watchdog set to demand loan insurance crackdown
Last year the Office of Fair Trading alleged that banks were harming customer interests by loading cheap loans with expensive insurance policies and now Britain's beleaguered banks are set to receive another blow when the Competition Commission announces a crackdown on the huge profits lenders make on insurance products, according to the Financial Times.
The commission, which has been probing the sector for over a year and a half, plans to impose strict limits on the £5.5bn market for lending-linked sickness and unemployment insurance, which could slash the reported £1.4bn of excess profits the banks are claimed to earn through the sales, and possibly lead to a rise in the already soaring price of credit as lenders pass the costs on to consumers.
The commission wants to ban lenders from selling insurance at the same time as loans, giving customers a few days to shop around for better deals. It will also demand an end to the banks' practice of charging customers an up-front lump sum, on which interest is then levied, rather than staggering payments as with most other types of insurance.
The banks, already feeling the strain of the current economic climate, are expected to fight the plan.
The commission, which has been probing the sector for over a year and a half, plans to impose strict limits on the £5.5bn market for lending-linked sickness and unemployment insurance, which could slash the reported £1.4bn of excess profits the banks are claimed to earn through the sales, and possibly lead to a rise in the already soaring price of credit as lenders pass the costs on to consumers.
The commission wants to ban lenders from selling insurance at the same time as loans, giving customers a few days to shop around for better deals. It will also demand an end to the banks' practice of charging customers an up-front lump sum, on which interest is then levied, rather than staggering payments as with most other types of insurance.
The banks, already feeling the strain of the current economic climate, are expected to fight the plan.
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