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With significant involvement in handling test case litigation in HAVs (hand arm vibration), asbestos-related and sensitive claims, including group actions and policy trigger litigation to his name, Michael Mackenzie (pictured), head of specialist claims at Pro Global has a unique perspective of the trends currently impacting the complex specialty claims space.

Speaking with Insurance Business, Mackenzie, who has been involved in work on a range of public inquiries, including the Hillsborough disaster and IICSA, and who currently chairs IRLA’s Legacy Committee, highlighted how changes to the legal environment continue to dominate experience in this area. Jurisdictional relativity is also becoming increasingly pronounced, he said, while key trends include the following:

• A pronounced increase in noise induced hearing loss claims, which is likely driven by the upcoming changes to the Fixed Recoverable Costs “FRC” regime.
• The consolidation of the noise induced hearing loss market, with a small number of claimant law firms intimating the majority of new notifications.
• The increased frequency and severity of abuse claims, with differences in the Scottish jurisdiction around the law of limitation and quantum driving increases in the frequency and severity of losses.
• The emergence of sports head injury claims related to the onset of neurological conditions, such as dementia, caused by head injuries have been on the rise.

“A number of interconnected factors and stakeholders contribute to the complexity, and understanding of some of the issues that affect or influence such a claim can help (re)insurers be more proactive and responsive,” he said. “Whatever the type, severity or amount of a claim, the key is to have a firm grasp on data analytics to diagnose and plan interventions and good and timely communication to remove friction, delay and unnecessary distress – and ultimately improve outcomes for those impacted.”

Reinsurance challenges

Mackenzie noted that (re)insurers operating in the complex specialty claims space are facing several pressing challenges. Rising inflation and the subsequent increase in legal costs and claims payouts are impacting the overall costs of claims, he said. Meanwhile, the continued emergence of new, pioneering life-extending treatments creates challenges in assessing mesothelioma claims.

Accurately reserving against historic books of business that are affected by an evolving legal environment and shifting claims trends can be particularly challenging, he said. (Re)insurers must also navigate the complexities of historical long-tail claims, which require dedicated resources and expertise for effective management.

“Different laws in different UK jurisdictions is another factor (re)insurers must contend with, as is keeping up-to-date with changes in the legal environment,” he added. “Increasingly, data is king, both in terms of monitoring trends and understanding the likely impact of a changing legal environment. The ability to diagnose issues and plan interventions is essential to ensure outcomes are appropriate.”

Mackenzie cited the impact inflation is having on (re)insurers’ current books of business as “significant”. Rising prices, particularly in legal costs and specific heads of loss are driving increased claims settlements, he said. This inflationary pressure necessitates insurers gain control over their claims exposure and seek operational efficiencies to mitigate the impact.

“Inflation is also affecting (re)insurers’ historic books of business,” he said. “The rising costs of servicing long-tail claims from an administrative, legal, and payout perspective are a concern. It is crucial for insurers to reassess their reserving policies to ensure accuracy and potentially increase reserves to address the impact of inflation.”

Mitigating the issues

Identifying some of the key steps (re)insurers are taking to mitigate these issues, he highlighted that they are focusing on operational resilience, embedding operational efficiency measures, and triaging complex claims effectively.

“By proactively managing claims and adopting optimised claims management systems, (re)insurers can enhance cost efficiency and accurately reserve for liabilities,” he said. “They are also leveraging technology and data to drive improved supplier engagement, streamline claims handling processes, and identify trends for effective defence strategies.

“It is critical that (re)insurers stay up-to-date with the latest legal, political, medical and media developments in the complex claims environment and work closely (and early) with trusted subject-matter-expert partners to help analyse their exposure, and handle all complex claims fairly, sensitively and efficiently.”

Pro Global is actively working to support (re)insurers in navigating the complexities of historic and current claims, he said, and it is well-positioned to do so due to its expertise in reserving accuracy, optimised claims management systems, and access to specialised resources.

“We are focused on being a proactive and supportive partner that can be relied upon to accurately assess exposure, define claims handling strategies, engage with leading lawyers and physicians early in the process, and streamline claims administration and triaging,” he said.

Looking back on the evolution of QuestGates over the last two decades, managing director Chris Hall (pictured left) noted that “it doesn’t feel like 20 years at all.” One of the original three founders of the specialist loss adjusting and claims handling company, Hall remembers the ‘have a go’ approach taken to building the business.

“Never in our wildest dreams, did we think we’d get to where we are,” he said. “And the pace of change in the last three years alone has been incredible. In three years, we have more than doubled the size of the business. It took us 17 years to get to £20 million and only another three years to get to £40 million. So obviously we were slacking in those early years!”

M&A – a focus at the heart of QuestGates’ growth strategy

Several factors have underpinned this rapid growth, key among them the acquisition trail QuestGates has been blazing . Similar to the broking market, Hall said, the loss-adjusting sector has seen quite a bit of upheaval in recent years with owners approaching retirement age and looking for the right exit strategy. And COVID had quite a big impact on encouraging people to more actively think about and plan those exit strategies.

“I think COVID had a big impact on people’s attitudes,” he said. “A number of the businesses we’ve acquired or are acquiring, we’ve been talking to for quite a long time. One of the businesses we recently bought, I’d been talking to them for about 10 years. And the owner rang me and asked to go for a coffee, and told me that things had changed, that COVID had made him rethink things.”

Regulation and compliance are also critical factors behind this M&A activity. Hall noted that a number of the acquisitions made by QuestGates have actually been driven by insurers’ messaging around compliance standards. However, as part of the wider QuestGates group, these companies meet insurers’ IT, security and business continuity requirements.

“The final thing is that from day one we had two USPs,” he said. “We wanted to do specialist work – we didn’t want to do high-volume, low-margin type business. And we wanted to stay an owner-managing business, and we’re now the only owner-managed business of our size in the market, all the others have gone. I think that owner-managed piece is very attractive to business owners who want to sell their business but still want to carry on working.

“One of the things I’m most proud of is that we’ve done 14 acquisitions to date, with two or three more close to completion and we’ve brought those senior people with us. That goes back to when we started the business by buying QuestGates Partnership and we still have some of the original people from that team. So, our model is pretty unusual in that we keep the management teams of the businesses we buy and allow them to do the bits they love about running the business, without having to worry about compliance and all that other stuff.”

What’s next for the QuestGates team?

Hall noted that while it has taken 20 years to get to where QuestGates is today, he firmly believes that the firm is now “at the most exciting stage we’ve ever been.” There are so many opportunities present in the market, he said, and QuestGates is now of a size, scale and reputation that it is being actively approached by potential vendors and by insurers which previously considered the independently owned business too small to work with.

“In addition, we’ve developed so many new services and the people that go around them,” he said. “We’ve brought in engineers and surveyors and we’ve recruited accountants. The area where I think we’ve really surprised people is around major loss. Speaking with insurers and other adjusters, you hear that everyone’s worried about the ageing market and younger people not coming in. But we’ve taken a totally different attitude to major loss.

“Rather than focus on recruiting the guys that are 55-plus with great experience and expertise, but aren’t necessarily here for the long term, we’ve deliberately gone for people that are younger and mentored them and brought them through the sector. And now we’ve got a young, highly competent major loss team that work with the likes of Allianz and AXA and AIG – and it’s a team that’s potentially going to be with us for the next 20 years.”

Technology plus people – the right blend for meaningful development

For Alistair Steward (pictured right), director of business development at QuestGates, who has been with the business since its early years, one of the most instrumental changes he has seen is the evolution of how technology is used in loss adjusting and claims handling.

“In the loss adjusting sector, you often find that you’ve either got the technical expertise but not the tech support that you need, or you’re very driven by technology but you don’t have that technical expertise,” he said. “We’ve always taken the view, given the fact that we deal with large and complex claims on the whole, that you’ve got to have people dealing with the claim. And those people need to know what they’re talking about and be able to show empathy, but also be supported by some really good technology.”

That blend of people and tech is what it takes to deliver a client-centric proposition at a cost-effective price and Steward has been gratified to see how advancements in technology are enabling claims to be settled more quickly and in a way that supports the customer journey. QuestGates has done a good job of using technology as an enabler for the human at the front of the claim, he said, which has been ratified by the firm retaining its flagship Investor in Customers Gold award.

20 years – a comma, not a full stop

As for what’s next, Hall emphasised that QuestGates’ 20-year anniversary represents an opportunity to look back, not an excuse to stand still. The team is always reviewing everything it does, he said, and prides itself on being adaptable to new opportunities as and when they arise.

“We want to stay an owner-managed business and we will,” he said. “Whether we will look to take external investment in at some point in the future, that’s possible. We’ve always done acquisitions by retained money – but if the right option meant we had to borrow the money, then we would do so. In the same way, we may look to take on external investment, though there’s nothing on the cards from that perspective.”

Keeping the momentum of the business high is also critical to Hall’s growth agenda, and he highlighted QuestGates’ continued commitment to further diversification of its reach and proposition.

“The key for me is to carry on but not to lose our ambition or our enthusiasm,” he said. “Whenever I get asked when will I give this up, I say two things – “one, when I’m not enjoying it anymore and two, when it no longer annoys other people that I do it’. And as long as both those two reasons are still there, I’m carrying on.”

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Insurance and legal services provider Carpenters Group has announced its sponsorship of the world premiere of Bolan’s Shoes on September 14 in Liverpool.

Produced by local independent production company Buffalo Dragon, the film promises to take audiences on a nostalgic journey through the glittering era of 1970s glam rock while touching upon the enduring legacy of childhood experiences and the deep bonds of sibling love.

Bolan’s Shoes features a narrative weaved around the music of Marc Bolan’s T. Rex, a band that pioneered the glam rock movement. The film, however, does not merely celebrate the iconic decade’s culture but delves into the poignant aftermath of a tragic road accident, reminiscent of Bolan’s own fate in 1977.

Donna Scully, director of Carpenters Group, expressed her enthusiasm for the sponsorship in a news release.

“When we were approached by Liverpool-based Buffalo Dragon about being headline sponsor for the premier of the wonderful movie Bolan’s Shoes and found out they would be supporting Sean’s Place, it was a no-brainer for John and me,” she said. “It ticks so many boxes for us with its huge connection to Liverpool, its support of the brilliant work Debbie and the team at Sean’s Place do to support mental health in Liverpool and supporting the arts which has taken a huge hit with the pandemic.”

Sean’s Place is a local charity that focuses on men’s mental health and offers access to social and therapeutic support in an environment that is non-clinical and free of judgment.

“We’ve worked with Sean’s Place since Debbie set it up during the pandemic so it’s wonderful to see them get the platform and support from this project,” Scully added. “We at Carpenters Group are very much looking forward to being involved.”

Terri Dwyer, co-owner of Buffalo Dragon and producer of Bolan’s Shoes also commented on the Carpenters’ sponsorship and said the company was a great match for the project.

“Sometimes you meet people, and you just know straight away that you’re all on the same page in trying to achieve the same thing and do something really special,” said Dwyer. “This was the feeling I got when I meet Donna Scully and her team at Carpenters Group. We are all delighted to be working with them.”

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“This has been a disappointing half for me in many regards, but I do think we’re making progress on our key initiatives and have good momentum in the business.”

Those were the words of Andrew Horton (pictured), group chief executive at QBE Insurance Group, during the company’s earnings call on Thursday prior to which it was announced that the insurer saw a massive lift in its net profit after income tax – from US$48 million in the first half of 2022 to US$400 million this time around.

Trouble in North America

“Underwriting performance was impacted by catastrophe costs, both in the current and prior year, resulting in a combined operating ratio (COR) of 98.8%, or 97.6% excluding the upfront cost of the reserve transaction we announced in February,” the CEO noted during the results webcast.

“Though we’ve been able to better absorb some of the setbacks and still maintain a double-digit return on equity, I’m disappointed with the extent of the catastrophe volatility this half on our result in North America. Improving returns in North America remains our highest priority.”

In terms of underwriting profitability, only North America posted a COR above 100% during the first half. Australia Pacific, barely making it, took a hit from the weather events in New Zealand earlier this year.  

Echoing Horton’s sentiment, QBE group chief financial officer Inder Singh declared: “This has been a very challenging half for underwriting performance. The impact from catastrophes has been too large, and the returns in North America are not acceptable.”

In his one-on-one with Insurance Business following the results webcast, Horton cited the above as among the “elements of disappointment” marring an otherwise outstanding set of financial results.

“We’ve been focussing on North America for a number of years now, and it needs to be a lot better than that,” the CEO said while at the same time highlighting the “many, many positive things” such as the group’s capital strength and stability of management.   

The plan for North America, in terms of core lines, is to have a good balance between crop, specialty, and commercial.

Horton told Insurance Business: “Then how do we ensure they’re all delivering in this low- to mid-90s combined ratio? So, there’s more work to do on the US. But the US – it’s a much more straightforward business than it ever has been. It’s not that many lines of business, so we haven’t got too many areas to focus on to improve it.”

Profit source

During the first half, QBE’s total investment income amounted to US$662 million – a huge jump from last year’s US$20 million loss. This positive result was the main driver behind the insurer’s largely improved net profit after income tax, instead of what QBE earned from underwriting.

As highlighted during the company’s presentation, QBE generated more investment income in the first half than it did over the course of 2022. Horton, however, would like underwriting to contribute more to the bottom line.

“It’s purely driven by our investment income being so much higher, and that’s likely to continue for the rest of the year,” Horton said when he sat down with Insurance Business. “So, we’re probably going to earn a similar number in the second half of the year.

“Overall, profits of the company look good and return on capital looks good. But we are an underwriting company and, therefore, we need to deliver a good underwriting profit.”

With a new group chief underwriting officer slated to take on the post in September, the group CEO is keen to further advance QBE’s portfolio optimisation, which is among the insurer’s strategic priorities.

Referring to Peter Burton, who is moving on from his international markets role, Horton said: “So, let’s look at our underwriting. Are we consistent in what we’re doing? And then second is this aggregation issue – have we got aggregations we haven’t thought of yet? Then he’s also going to be responsible for the reinsurance buy. So, these are all linked things.

“Let’s get our consistency of underwriting and underwriting appetite. Let’s ensure we understand the aggregations. That will link into our reinsurance, and ultimately links into an improved combined ratio. So, these are the conversations Peter and I have had and will continue to have.”

According to Horton, efforts to better manage volatility continue at QBE, with property catastrophe risk remaining a major focus.

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Global insurance group Howden has unveiled its latest blended insurance product that brings together professional indemnity, crime, and cyber liability into one policy and under one limit.

This latest proposition brings potential cost savings and improved efficiencies for financial institutions and was developed with a panel of other specialist insurers, including the Lloyd’s market. It was developed as an answer to the rise of sophisticated cyber claims such as ransomware and phishing.

With this blended offering, claims responsiveness and communications with the insurer are simplified, given that a single cyber event can trigger multiple insurance products including professional indemnity, crime, and cyber liability. Howden Financial Lines FIDO managing director Ed Brennan said that the new proposition should help the insurance group’s clients in addressing complex requirements as cyber events continue to scale.

“This product was developed to provide seamless and efficient solutions to address financial services clients’ increasingly complex cyber requirements in the midst of rising cyber events. This product will help clients navigate this difficult environment, and I look forward to working with them to maximise efficiencies and improve their insurance protection,” Brennan said.

Howden Specialty CEO Sarah Hughes also commented on this new blended product, saying: “The launch of this blended product reflects Howden’s broader strategy to harness its collective specialty expertise across the group for the benefit of clients, developing advanced products that provide joined up protection, ensuring that our solutions remain relevant to clients now and in the future.”

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More than half (51%) of the construction sector’s SMEs are relying on some form of credit to fund their insurance coverage, making the sector the biggest borrower, according to a new study.

The results from Premium Credit’s insurance index found that the average construction firm borrows an average of £1,130 for insurance. That said, around 13% of construction SMEs who use credit for insurance said that they have borrowed over £3,000 to fund their coverage.

In total, construction firms accounted for 12% of all net advances from Premium Credit last year, a figure that remained steady from 2020 and 2021. Close on its heels is the professional and scientific sector, which also accounted for 12% last year, representing a small rise from 10% in 2021 and 9% in 2020. Rounding out the top five were manufacturing, land transport, and wholesale and retail trade.

The report also found that one in four have reduced their level of cover across a range of insurance lines; vehicle, property, and public and product liability are the lines most likely to be hit. Around a third (32%) of SMEs that reduced their cover also cancelled at least one policy. Meanwhile, up to 10% said that they plan to increase their level of cover in the year ahead.

“Insurance is vital for business operations as demonstrated by the near 20% growth in net advances we have seen year on year. It is particularly important in the construction sector which accounts for how much lending we do in the sector,” Premium Credit chief sales officer Owen Thomas said.

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According to the latest Global InsurTech Report from Gallagher Re, new funding for the insurtech sector decreased to US$916.71 million in the second quarter of 2023.

This represents a decline of 34% from the previous quarter’s total of US$1.39 billion. Notably, this is the first time in three years that the quarterly total has fallen below the US$1 billion mark.

Although there was a significant decrease in the overall funding, the average deal size only declined by 16.1% to US$12.39 million in Q2, the report stated. This decrease in average deal size can be attributed to the smaller number of investments, with only 97 reported for the quarter.

Early-stage funding in the sector reached its lowest point since Q3 2017, according to the report. Investments in early-stage life and health insurtech companies only amounted to US$58.34 million, while property and casualty early-stage funding slumped to US$157.71 million. The average deal size for the early-stage sub-category fell to US$5.27 million across 51 investments.

On the other hand, there were 17 “acceleration” category deals that attracted US$134.49 million, accounting for 14.7% of the total insurtech funding for the quarter. This share is lower than what is typically observed, Gallagher Re said. Only one mega-round deal qualified in Q2, which was Baring’s US$150 million Series B investment in Accelerant. This marks the third consecutive quarter with just one mega-round deal.

During Q2, (re)insurers made a total of 43 insurtech investments. Most of these investments were in early-stage deals, with 12 seed investments and 14 Series A investments. Munich Re Ventures led the activity with six investments, followed by MassMutual Ventures with five. Aviva Ventures, MS&AD Ventures, and Nationwide Ventures each made three investments.

“During insurtech’s primary phase, from 2012 to 2021, about US$42 billion was invested,” said Dr. Andrew Johnston, global head of insurtech at Gallagher Re. “The focus was on technology, the ‘how’ rather than the ‘what,’ but up to a third of those insurtechs no longer trade.

“Insurtech is now in a secondary phase focused on beneficial deliverables, rather than digital usurpation and quick cash,” he said. “The whole insurtech phenomenon instilled a new understanding of the importance of technology in our sector. Rapid and accelerating adoption by incumbent insurers has created a huge opportunity for insurtechs to support incumbents through technological innovation. Those presenting clear commercial outcomes for themselves and their clients will benefit from investors’ more realistic sense of what can be achieved.”

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Broadway Insurance Brokers has announced the strengthening of its executive team with the appointment of Gary Ward (pictured left) as its new director of operations, internal audit, risk and compliance.

In a Press release, Broadway noted that Ward comes to the team after four years compliance officer with IC Insurance Brokers in Bolton ad brings four decades of insurance experience to his new role. He is also currently deputy chairman of the Manchester Committee of the British Insurance Brokers’ Association (BIBA).

Commenting on the appointment, CEO Daniel Lloyd-John (pictured right) said that it sends a “strong, clear signal” to clients and industry peers alike about Broadway’s ambitions.

“Gary’s arrival is something of a coup for us, given his vast experience and his standing within the profession,” he said. “The fact that he is already so well known to our existing staff will certainly help with his integration.

“More than that, however, he underlines the emphasis which we established when we launched three years ago not only about providing a different, innovative service to high net worth clients but also adhering to the most rigorous processes in order to do things right on their behalf.”

Lloyd-John added that Ward’s appointment has become “very necessary” due to the speed of growth Broadway has seen as it extends its operations from the North West across the UK and overseas. The firm recently outlined that the value of the assets for which it arranges cover doubled to more than £2 billion in the space of less than 12 months.