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Do customers now expect more from insurance companies?

Beazley found that homogenised policies and reliable claims service are no longer enough to satisfy customers; businesses expect insurers to demonstrate a solid understanding of their operations and the risks they face, and to add value through risk management tools, insights, services and flexible coverage.

Forty-eight per cent (48%) of those surveyed said their trust in insurance has increased since the start of the COVID-19 pandemic. However, only 54% believed that insurance was meeting their businesses’ challenges very well.

Among the reports key findings:

  • A quarter of business leaders struggle to understand what coverage they need
  • 19% find it hard to get insurance tailored to their sector or specialist business
  • 44% don’t think their insurers understand their business

The top three demands businesses have of their insurance partners are:

  • A deep understanding of risk by sector and size
  • Specialist risk advisory services as part of the policy
  • Comprehensive, straightforward cover

The top five buying factors for insurance are:

  • A policy designed for the customer’s specific type of business
  • A long-term insurer partnership
  • The cost of insurance
  • Fast, responsive claims service
  • Ease of understanding cover

“While it is encouraging that trust in insurance has increased since the start of the pandemic, it is a concern that only about half of our survey’s respondents feel that the insurance industry is meeting their needs very well,” said Lou Ann Layton, Beazley’s head of broker relations and marketing. “Our report highlights that it is time for a service rethink. No longer can the industry take a one-size-fits-all approach; instead, clients want a more nuanced, tailored and responsive service.

“To deliver what they want till require us to strengthen our relationships and improve communication with clients. Only by listening to them and demonstrating our expertise and insight into how they can better manage their specific, sector-based risks can we build our reputation as trusted risk partners delivering a valued service.”

“This report provides detailed insights into how our industry can work with and better support clients at a time of significant change,” said Bethany Greenwood, head of cyber and executive risk and interim co-chief underwriting officer at Beazley. “Digital technology is more and more entrenched in insurance operations and distribution, unleashing huge potential for service improvement and efficiency. As insurance providers, how we harness claims and risk insight data will be critical in improving the services and solutions we develop for clients.

“There will always be a place for cost-effective standard coverage,” Greenwood said. “However, where our industry will add value in the future will be through a service based on a combination of technological and human factors.”

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Culture surveys examine London Market practitioners’ views on governance and conduct

Culture surveys examine London Market practitioners’ views on governance and conduct

Browne Jacobson is urging insurance companies to take a comprehensive approach to assessing the concerns outlined in the UK law firm’s Reflections Caught: Culture, Conduct, and COVID 2020-2021 report.

The 24-page document, which is available on Browne Jacobson’s website, is based on two surveys commissioned by the firm between the first quarter of 2020 and the first quarter of 2021.

The polls were designed to assess London Market practitioners’ overall perceptions of the market’s performance when it comes to governance, conduct, and culture. Respondents included both past and present market practitioners.

It was found that 94% think that the likelihood that individual practitioners at their firm might commit non-financial misconduct had increased, while 96% believe that the efforts made by their firm to prevent or deter non-financial misconduct had also increased in the last 12 months.

“Amid the uncertainty and challenges of the past year, it is positive to see wide recognition of the commendable increase in efforts by the insurance market to maintain healthy cultures and effective conduct risk management,” said Browne Jacobson partner and financial services head Jeremy Irving.

“However, our findings highlight that senior managers need to be ever more vigilant, especially in relation to remote working as it continues post-pandemic.”

In response, the firm is introducing an audit tool called RECCE (reflect, evaluate, cohere, communicate, evolve), which, according to Irving, is aimed at helping the industry bolster its resilience and success in addressing issues exacerbated by COVID-19.

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Insurance Business named Publication of the Year

In addition, it was a double celebration for the publication as Mia Wallace, Senior UK News Editor – Insurance, received a highly commended award in the category of Reinsurance, Insurance & Risk Profile Interview of the Year.

“While special praise should be reserved for Mia Wallace, as our lead UK journalist securing so many brilliant interviews and building relationships in the market, as well as Terry Gangcuangco, who has been breaking news and doing such a wonderful job of finding stories no-one else can for several years in the region, the entire IB team plays its part,” said Paul Lucas, managing editor of Insurance Business.

“As the industry’s truly global publication we’re able to regularly source stories from our other markets from the likes of Ryan Smith, Ksenia Stepanova, Gabriel Olano, Lyle Adriano, Chris Davies, Mallory Hendry, Duffie Osental, Maria Hoyle, Pete Miller and Roxanne Libatique, as well as utilising the brilliant international interviews and editorials from the outstanding Bethan Moorcraft. We have also recently welcomed two new hires too – Surina Nath and Daniel Wood – who I am sure will be fantastic additions.

“There are also a host of people ‘behind the scenes’ who have helped us achieve market-leading status since our inception in the market a mere five years ago – from our SEO and commercial teams, through to events, marketing, research/intelligence and our newsletter co-ordinators. It’s a massive team effort across the board, so many, many thanks to everyone involved, as well as to our clients and sponsors who have helped us grow so rapidly, our brilliant industry columnists and contributors, and to all the media teams and PR representatives across the sector who have supported us with such grace and kindness.”

Remember you can sign up for Insurance Business’s morning briefing and daily newsletter, for free, here.

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Swiss Re projects record high in global insurance premium

The Swiss Re Institute economists expect global insurance premiums to follow that strong economic growth, increasing by approximately 3.3% in 2021 to a total of US$6.9 trillion. In the same year, they predict key market insurance premium to grow by 6.3% in China, 1.7% in the US, 2.8% in Western Europe, and 5.6% for emerging markets. For 2022, the report forecasts 3.9% insurance premium growth.

“We expect the insurance industry to earn a record US$7 trillion in premium by the end of next year,” said Jerome Haegeli, group chief economist at Swiss Re Institute. “The best preparation for the next economic shock is having economic buffers in place. However, fiscal and monetary buffers are being depleted, which means the private insurance sector is increasingly important. Narrowing protection gaps needs to become an economic policy goal.”

Swiss Re’s annual insurance premium report examined how factors such as inflation and digitalisation are influencing insurance industry development.

The report noted that positive development in consumer awareness is a key opportunity for insurers as it has been “cemented by the COVID-19 pandemic.” It also highlighted how global health and protection-type insurance premiums increased by 1.9% and 1.7%, respectively, in 2020, as the pandemic increased awareness of the value of health and protection-type production.

”The economic upswing expected in 2021 and 2022 is on track to materialise, and this is a key factor for insurance premium growth across the globe. The main market to watch is China, where both economic and premium growth continue at a strong pace,” Haegeli said.

“Consumer awareness is clearly an important growth driver, and this has been driven by the pandemic. Whether it is private medical insurance or supply chain interruption for businesses, people have become much more aware of what insurance is and how it can help them to emerge resilient from such a crisis.” 

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Zurich Insurance continues COVID-19 vaccination campaign

The foundation has also launched various local fundraising campaigns in collaboration with the local business units and employees of Zurich Insurance Group (Zurich) globally – inviting contributions from the community, including Zurich’s suppliers, distributors, customers, and the public.

“There is a global movement to ensure everyone has a chance to be protected from COVID-19, and we applaud everyone who has been supporting it through our own initiative or others. Every commitment counts to provide equitable access to vaccination,” said Gregory Renand, the head of the Z Zurich Foundation.

UNICEF and its partners have been working on a vaccination procurement and supply program to vaccinate frontline healthcare and social workers, as well as high-risk and vulnerable people worldwide.

Through the COVAX Facility – along with GAVI, the Vaccine Alliance, WHO, and CEPI – UNICEF is leveraging its unique experience as the largest single vaccine buyer in the world by working with manufacturers and partners on the procurement and supply of COVID-19 vaccines.

“As citizens in wealthy countries begin to return and resume their lives in a post-vaccination world, for low-income countries, the future is still uncertain with the vaccine rollout slow and uneven,” said Carla Haddad Mardini, the director of private sector fundraising and partnerships at UNICEF.

“UNICEF welcomes this expanded commitment from the Z Zurich Foundation to continue raising valuable resources and help us in our mission to deliver COVID-19 vaccines to where they are needed most.”

UNICEF is also working with WHO, PAHO, GAVI, and other partners regionally and globally to support countries in preparing for their COVID-19 vaccine rollout – including assessing capacity and helping countries to strengthen their cold storage capabilities and supply chains to ensure the countries have adequate infrastructure to transport and store the vaccines.

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A ‘great conversation starter’ around business resilience

In 2021, the country with the highest overall resilience score of 100 was Denmark. Broken down into the three core resilience factors, Denmark scored 85.2 for economic risk, 94.5 for risk quality, and 91.4 for supply chain. The remaining countries ranking from 2 to 10 for business resilience were: Norway, Luxembourg, Germany, Switzerland, Finland, Sweden, Austria, United States Zone 3 (Central US), and the United Kingdom. 

Read next: FM Global releases interactive earthquake risk map

What does business resilience really mean? To Eric Jones, vice president and global manager of business risk consulting at FM Global, it can be broken down into: 1) What is the risk that something bad could happen to disrupt a business? 2) If something bad does happen, would the surrounding environment enable a business to recover quickly and effectively? FM Global’s Resilience Index does “a great job,” according to Jones, of looking at resiliency in a holistic fashion.

“The Resilience Index is a great conversation starter; it’s a way to get organisations thinking about risk differently,” said Jones. “The fact is, when it comes to making major business decisions, very often resilience and property-related risks can be a blind spot – they’re not always considered. The Index is a great way to help shine a light on that, to get people thinking about risks that are associated with where you’re doing business in the world, or where you plan to do business. And it’s not just your own internal facilities and people and where they’re located, but it’s also wherever you might have business dependencies in the world, especially within supply chain, logistical concerns, and even your customers.”

Read more: FM Global welcomes senior broker relations manager for EMEA

Jones gave the example of a business looking to expand into Asia and considering key suppliers in Taiwan and Singapore. In FM Global’s 2021 Resilience Index, Taiwan ranks 70th overall, while Singapore ranks 12th for business resilience. He commented: “That doesn’t mean that you’re not going to do business in Taiwan, but the fact that there’s a higher level of risk there – that needs to be factored into the overall decision process. You need to go in with your eyes wide open […] and dig a little bit deeper to really understand that risk better.” 

Quantifying risk is fundamental to all facets of risk management. Having an understanding of the potential financial implications of risk resiliency helps businesses strategize and decide where to focus their resources and how to allocate capital for risk improvement. The Index enables organisations to kickstart those discussions and points insureds towards areas where they need to drill in further. 

“Whether you’re a broker, a consultant, an insurer, a risk manager, or an executive, I would just encourage everyone to look at the data in the Resilience Index, and as you do, think about: What does it mean to you and your organisation or your clients?” said Jones. “The application of all this can be different, depending on what your role is, but ultimately, it tries to get to the question of: How is your business or your client’s business impacted based on operating in different parts of the world? Where do you need to dig deeper? Who do you need to show this to?

“Start having those conversations, because the reality is, risks are different all around the world. And time and resources are always limited, no matter what function you’re talking about, so the Index is a great way to help you prioritise and think about: Where do we really need to focus from a risk standpoint? And it helps you understand where businesses need to drill in deeper and kickstart that risk evaluation process, and ultimately, hopefully help organisations become more resilient in the process.”

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Aon-WTW mega-merger receives green light from EU regulators

Aon-WTW mega-merger receives green light from EU regulators

The EU’s antitrust regulators have today approved Aon’s US$30 billion bid for Willis Towers Watson (WTW), subject to certain conditions. The seal of approval hinges upon full compliance with a “substantial” set of commitments offered by Aon, which include the divestment of central parts of WTW’s business to the international brokerage company Arthur J. Gallagher (Gallagher).

The European Commission noted that these commitments will “strengthen Gallagher in its capabilities in reinsurance and commercial risk brokerage” as well as improving its footprint in the European Economic Area (EEA). This, the regulator said, will make Gallagher a credible rival to the combined Aon-WTW entity post-transaction.

Commenting on the approval, executive vice-president Margrethe Vestager, who is in charge of competition policy, said: “European companies rely on brokers to obtain best possible solutions to manage their commercial risk. Aon and Willis Towers Watson are leading players in the insurance and reinsurance brokerage markets.”

She noted that the remedy package accepted by the Commission ensures that European companies, including both insurance companies and large multinational customers, will still have good choice and good services when choosing a broker suitable for their needs.

Today’s decision follows an in-depth investigation into the impacts of the proposed transaction, given the status of both companies as global leading players in the markets for commercial risk brokerage services, reinsurance brokerage and the provision of retirement, health & welfare and investment services to commercial customers.

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The unforeseen impacts of the pandemic

Virtual meetings enabled businesses to continue throughout the lockdown, and now that we are in sight of a return to more normalised working, there is every chance that Zoom and Teams will remain as much a part of business life as the traditional office commute, maybe more so.

Find out more: Learn all about Close Brothers Premium Finance here.

Broking finance directors have found that they are making big savings on their travel and entertainment budgets because so many client meetings are now taking place on computer screens. 

Supporters of virtuality also point out that account executives can meet many more clients each day without leaving their home office. Added to that, account executives have replaced the daily grind of commuting with a home office or desk, reducing their miles and helping the planet too.

Virtual business has proved itself useful for keeping costs down, and keeping up with clients, but it has also added to the challenges brokers have faced this year, sometimes in an unforeseen manner.

For example, brokers seeking to place more complex risks have sometimes found it harder to get cover, and those writing specialist lines like professional indemnity, leisure and hospitality, or larger commercial risks, have found it especially tough. Risk placement has become a big issue for brokers this year.

It is partly down to the fact that the pandemic has encouraged insurers to continue to tighten their risk appetite, something that was already happening before 2020, and partly because underwriters have become more risk averse because they have had to weigh up their decisions and make judgements largely on their own.

The pandemic has caused all of us to focus more of our attention on minimising risk, and underwriters are no different. Working alone, without the benefit of being able to speak quickly to senior colleagues, makes turning business down the easier option. 

As a result, risk-averse behaviour in underwriting has impacted two broader market issues; a harder market and lack of underwriting capacity. These were both cited as concerns by brokers when Close Brothers surveyed them at the beginning of 2021.

In our survey, 63% of personal and commercial lines brokers said the hardening market and lack of underwriting capacity (59%) were significant challenges to growth.

Some business lines (such as construction, or PI) were already putting rate through prior to COVID-19, while parts of the market experienced a capacity squeeze before 2020 after several non-rated, off shore insurers stopped trading.

At the present time, we don’t have the data to know how these factors have affected growth plans among our broking partners, despite there being a good deal of optimism at the start of 2020 while the UK was in virtual lockdown.    

In January 2021, 45% of brokers said they expected their business to grow between five- and 20% during this year (a further 15% forecast 20%+ growth). Only 21% said their businesses would tread water or contract.

The two areas brokers said would power their growth were adding new clients to their books, and rising premiums.

Commercial premiums have, of course, continued to rise this year as a result of the harder market, while personal lines home and motor premiums have been static or even falling, as the market readies itself for the impact of the new FCA pricing regime from 2022.

Hard markets increase churn, because commercial clients are more likely to shop around if their existing provider quotes a significant increase in premiums. Some construction risks, for example, have seen premiums increase by 100% or more. 

In a previous commentary on dealing with the impact of a hard market, we advised brokers to communicate the issues early and openly to their clients, and to work with them to balance the price and level of cover, including offering finance to spread the cost of their insurance premium.

Brokers with trusted relationships who have managed client expectations will ensure the client knows they’re getting the best deal.

Of course, brokers are natural optimists, and there are plenty of signs that broking continues to hold up well even during these unprecedented circumstances.

It will, however, be interesting to see whether that optimism about growth is justified when new performance data becomes available at the start of 2022.

Learn more about Close Brothers Premium Finance here.

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Carpenters reveals how its MGAA partnership came about

The partnership first came about as the Carpenters team was increasingly being approached by businesses who wanted to work with a credible partner on claims services, from first notification of loss to liability decision making, he said. As that B2B demand grew, the firm thought about the proposition from an MGA perspective, given the size of that market and the demand for its services.

“Our experience through having 10 years of handling TPA services for businesses as large as Aviva meant that we were perfectly placed in terms of our experience and our agility to look after new-to-market insurers,” he said. “Interest really helps, if you get people asking if you do something, then that’s a really good sign.

“And what’s buoyed me and the team is that our success was initially just from word of mouth. I think there’s more we can do in this marketplace. And the MGAA, from our perspective, is a great cohort and we know we can really add value to their customers. There are so many great businesses that are part of that membership community.”

Smith noted that now is the perfect time to be working alongside the MGA community as they possess the agility and flexibility increasingly being demanded from insurance services. There is a demand for change from consumers, he said, and that change has to come fast.

“Some MGAs that are new to the market are new to the market for a reason,” he said, “which is that the services and the scope of services that they are offering the insurance market may have never been offered before. So it’s a very exciting time. And MGAs [have] a lot of creativity, a lot of innovation and a lot of entrepreneurial spirit which gives them a real ‘walk through walls’ mentality. As a partner, that means we walk through those walls at the same time, if that’s what they need us to do.”

Read more: ABI welcomes Carpenters Group as associate member

And, as a supplier partner, Carpenters now has the opportunity to give MGAA members access to its end-to-end claims service offering.

The claims environment is changing rapidly – claims frequency is changing based on people’s driving habits and behaviours. For instance, for dozens of years, the busiest day for claims was always a Monday but now that’s shifting because remote working and homeschooling have changed the usual pressures of a Monday morning commute. Strong, accessible partnerships which share data and expertise are the key to keeping pace with all the innumerate alterations happening across this space.

“So, we can talk to MGAA members about the data that we’ve got within our business and as a TPA,” he said. “Across the bigger expanse of Carpenters Group, we dealt with 415,000 FNoL notifications last year. So, from a player’s perspective, we’ve got a great horizon view, because of the data that we have and because of the broad range of services we offer across the market. And that’s what makes us unique in this space.”

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Banking giant hit by huge penalty for insurance failures

Banking giant hit by huge penalty for insurance failures

The Financial Conduct Authority (FCA) has today hit LBGI (Lloyds Bank General Insurance Limited, St Andrew’s Insurance Plc, Lloyds Bank Insurance Services Limited and Halifax General Insurance Services Limited) with a fine of over £90 million. The fine of £90,688,400 has been issued for LBGI’s failure to ensure that the language of millions of home insurance renewals communications was “clear, fair and not misleading”.

Commenting on the case, Mark Steward, executive director of enforcement and market oversight at the FCA highlighted that firms must ensure any communications with customers are fair. LBGI failed to ensure that this was the case, he said, and, as a result, millions of customers received renewal letters that claimed customers were being quoted a competitive price. This was unsubstantiated and risked serious consumer harm.

The FCA noted that between January 2009 and November 2017 LBGI sent nearly nine million renewal communications to home insurance customers which implied that they were receiving a “competitive price” at renewal. These claims were not substantiated and policies were renewed in approximately 87% of renewal communications containing this language.

The watchdog revealed that LBGI did rewrite its renewal communications and began to remove “competitive price” wording from 2009 onwards, but that the language remained in a significant number of renewals communications (in the relevant period) despite repeated missed opportunities to address it.

“Separately,” the FCA said. “LBGI informed approximately half a million customers that they would receive a discount based on either their ‘loyalty’, on the fact they were a ‘valued customer’, or otherwise on a promotional or discretionary basis, where the described discount was not applied and was never intended to apply. This affected approximately 1.2 million renewals, with approximately 1.5 million communications sent by LGBI. The erroneous discount language was only identified and rectified by LBGI during the course of the FCA’s investigation.”

The FCA found that LBGI breached Principle 3 and Principle 7 of its Principles for Businesses between January 01, 2009 and November 19, 2017.

The FCA has not yet established whether individual consumer behaviour would have been changed if the communications in the case had been up to standard and has not required LBGI to redress customers who received a renewal letter that included the claim the renewal premium was ‘competitive’.

The regulator has taken into account that LBGI voluntarily made payments of approximately £13.5 million to customers who received communications that erroneously referred to the application of a discount when none was applied. The banking giant is now proactively contacting customers proactively, and the FCA continues to engage with LBGI on the voluntary payments process.

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