Insurance news

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.

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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.

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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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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.

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Read more: Castlemead Insurance Brokers joins Brokerbility

“Traditionally, we’ve not really needed a network,” he said, “and we never wanted to be part of the networks that the [biggest] brokers run, or to ally ourselves with any of those major brokers. And we knew of another business in the southwest, which was a competitor before they sold to Gallagher, which was a local Brokerbility member. And it seemed like a sensible thing for us to do – there’s no pressure on placement strategy and Brokerbility are sensible in terms of their approach to the market. And with insurers focusing on their distribution strategy, we needed a bit more market clout and knew Brokerbility would get us that answer.”

Read more: Ashwin Mistry reflects on the power of broker networking

The Brokerbility deal is an example of a win-win scenario, he said, as it offers the network a well-respected broking outpost in the southwest while it provides Castlemead with a range of advantages. First and foremost, Ingleby said, it offers clients a more significant audience with those insurers with which previously the brokerage has had less contact. He noted that given the recent market moves in recent years, when insurers shut regional branches and relocated to ‘insurance hubs’, brokers tended to have to be very significant in order not to be sidelined.

“And Brokerbility, with its £400 million of GWP, in conjunction with the Clear Group, is in that ‘worth talking to’ camp,” he said. “And, from our clients’ point of view, unless we can get a reasonable response from the market, then again that’s a competitive disadvantage for us. So, we need to be able to get sensible terms, and we need to be able to be taken seriously by insurers.”

Ingleby noted that there’s also the feeling that insurers take the view that if they don’t get the right information or the right partnership with a network member that they can leverage the network itself to remedy that. Networks offer insurers more distribution control, as well as cost savings, as they’re no longer sending insurance sales reps into dozens of different independent brokerages when they can hold agent conversations at a higher level.

The fact that each of these advantages can be taken without losing the independent nature of Castlemead was central to the broker’s decision to join Brokerbility. For Ingleby, what that independence means is being client-focused, and being able to find the best terms and the best policy wordings in the market with no strings attached.

“We haven’t been siloed into different products, or made to become heavily product-driven,” he said. “And actually what clients want is insurance that works for them. And that might mean that things need changing or moving around. And it’s about finding the answers – our phrase is ‘we either find a way or we make one’. That’s ingrained in what we do and it comes down to providing a proper set of insurance [services] that actually protect clients.”

Read more: Ashwin Mistry on the opportunities available to brokers in 2021

Castlemead’s website lays out its value proposition clearly – that “small print matters”. That means taking the time to read and evaluate every policy instead of just selling commoditised insurance products, he said, which makes a substantial difference to client outcomes when it comes to the point of a claim being paid and their business continuity being restored. The opinion of the Castlemead team, Ingleby stated, is that too much productisation of insurance has occurred over time, and the buck stops with them.

“Because there’s normally a solution somewhere along the line,” he said, “and it’s just that having the perseverance to find the right underwriter, or the other way round, which is to actually get the client to improve their risk to make themselves more insurable. But there’s usually a medium in the middle where you can get something that works for both parties.”

COVID seems to have accentuated the air of uncertainty that many consumers feel when it comes to insurance coverage, Ingleby said, and many simply aren’t aware of the specifics of the policy they’ve bought until the point of a claim. Customers want to be well-informed, especially as insurance is such a significant spend, and they want to ensure that they have the right cover, that they’re getting good value and, crucially, they don’t want too many surprises.

And, given those requirements, Ingleby is confident that there is a strong opportunity ahead for independent brokers to plough a different kind of furrow.

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A report by Allianz Global Corporate & Specialty (AGCS) highlighted the unique challenges faced by airlines and airports in restarting operations. It also identifies ways how COVID-19 reshaped the sector, resulting in long-term changes in fleet composition, flight routes and passenger demand.

The challenges discussed in the report included “rusty” pilots, with many pilots citing the long downtime as a factor in recent aviation mistakes and accidents. Airlines are now developing training programmes for pilots re-entering service, depending on the length of absence.

The report also noted an increase in “air rage” incidents, or passengers causing disruptions on aircraft. In the US, there are around 150 such incidents each year. However, by June 2021, there have already been 3,000 such incidents, according to the US Federal Aviation Administration, majority of which involved passengers refusing to wear a mask.

Another risk aviation companies and insurers must look out for revolves around parked fleets. The large number of aircraft that were grounded (with many still unable to fly) remain exposed to weather events. There is also major risk involved in moving groups of aircraft without causing damage, whether into storage or prior to reuse.

“The grounding of worldwide fleets during the pandemic has represented an unprecedented event for the aviation industry,” said Dave Warfel, regional head of aviation at AGCS. “Airlines have worked tirelessly to maintain their fleets and train their crews during this long period of inactivity and, as insurers, we take a keen interest in working with them to understand their plans to return to service. Challenges will no doubt emerge as the industry readies for takeoff again. Although it is hard to predict in exactly what shape the aviation industry will return, one thing is for certain – it will have changed.”

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Over the last two decades or so, the broking community has latched on to the services made available from QuestGates, he said, which, in turn, led to the firm becoming more involved with BIBA. QuestGates has now looked after the BIBA valuation facility since 2013, which has provided the association’s 2,000+ members with an outlet through which to guide their clients through the process of setting their sums insured.

Read more: Chair of BIBA’s Access to Insurance Committee calls brokers to action

The fact is that underinsurance isn’t a slight inconvenience, he said, but rather a major risk facing businesses and consistent annual findings show that around 70% of firms are underinsured to the tune of 40% or so. Then came the dual blow of Brexit and COVID. Brexit brought along considerations about migrant labour and access to materials, he said, and then COVID came along bringing rising claims costs and dramatic shifts in business models.

The financial strain the crisis is putting on businesses and business owners is threatening the fragile gains that have been made in combatting underinsurance. There are business owners who know they’re underinsured, he said, who know they need a valuation, but either don’t want to or can’t afford to – and now the financial ramifications of COVID have accentuated that.

“Businesses just don’t have lots of money to throw around,” he said, “and that includes insurance companies, who have had to quite considerably increase premiums in many areas. Insurers are having to be very careful about their own costs. So, they’re increasing the premiums but they’re also being very strict and directly interpreting the terms of their policies, as opposed to maybe showing a bit more flexibility, as they would have in a soft market.”

Businesses that have had their insurance premiums rise dramatically likely don’t feel like spending more money on a valuation, he said, but this is where brokers need to get involved. Spending £1,000 or so now can save a business literally hundreds of thousands of pounds in the event of a claim.

“And then there are some very real examples of that,” he said. “There was one we had not long ago for a petrol station with a motor workshop at the back of it. And fortunately, we were able to value their premises for them before there was ever a loss. But, from memory, they were 38% underinsured, which in monetary terms was over £700,000. Now, you turn that into real life, and if I turn up with my loss adjusting hat on rather than my valuer hat on, I’m having to tell somebody, they’re getting £700,000 less for their claim than they thought they were going to get, which could well end the business.”

Read more: Gallagher poll points to cyber underinsurance

BIBA revealed recently that two-thirds of businesses have changed their model in the last 12 months, but 90% haven’t changed their insurance cover, and that is quite telling, Steward said. It shows that not only has the tide turned in the wrong direction, with claims costs starting to increase, but also the market is heading towards a real problem with underinsurance again, if companies don’t react quickly enough.

But brokers have successfully helped battle underinsurance before, Stewart said, and he is confident that they will do so again. Ultimately, brokers are the only people that actually know the insured, and so it is natural that if the insured is going to trust anybody, it will be their broker. That’s why it’s so important that brokers are armed with as much information as possible to explain the pitfalls of underinsurance and the benefits of insuring a property for the correct amount.

“From our point of view, it is really important that we take brokers along this journey with us so that they can have these conversations,” he said. “And there’s no doubt that these conversations will be harder to have post-COVID. It’s a really hard environment that brokers are working in, especially those that are having to break the news to clients that their premium is going to double at next renewal… It’s no surprise that [the focus] is just on retaining existing clients and winning new business, but that doesn’t mean these conversations don’t need to be had.”

The choice of whether to have a valuation ultimately rests with the client, he said, but the responsibility to offer the right advice is at the very core of the broking offering. He quoted Benjamin Franklin’s warning that, “it takes many good deeds to build a good reputation and only one bad one to lose it.” Insureds need to trust that their brokers are evaluating every risk and potential pitfall that could damage their business continuity, and brokers need to move the conversation away from price and towards value.

“We have an opportunity in 2021 to move ourselves back from the cliff face,” he said. “We’re walking towards it currently and things could go very badly wrong over the next year or two, with a combination of the hard market and the economy and companies just not having the money to spend that they had in the past. Companies will still have claims, that’s the one thing that can be guaranteed… So, from my perspective, my message to brokers is to please keep under insurance, and eradicating under insurance, on the agenda when they have conversations with their clients.”

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McGill and Partners has hired Peter Chesman (pictured) as partner for its UK structured solutions team.

According to a statement from the specialist re/insurance broker, Chesman’s role will focus on alternative risk financing and in particular captives and multi-year structures, and he will work with large complex clients and captives across multiple lines of insurance.

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Prior to the transaction, Gallagher held 30% of the brokerage. It is headquartered in Mumbai, with branches in Delhi, Bangalore, and Kolkata.

The joint venture was formed in 2019, when Gallagher acquired a minority stake in Edelweiss’ broking business, expanding its access to international markets. This marked Gallagher’s first foray into India, which is among the fastest growing insurance markets globally.

According to Gallagher and Edelweiss, the acquisition will integrate EGIBL more deeply with Gallagher’s global operations, and help scale up the business significantly. It will also give clients access to a larger suite of insurance products and services.

“We are delighted that Edelweiss’s insurance broking business will become fully owned by Gallagher once we have the necessary regulatory approval,” said Vyvienne Wade, Gallagher’s chairperson of global broking in Europe, Middle East, & Asia. “Since we started our partnership with Edelweiss in 2019 we have enjoyed an excellent relationship with the team under the leadership of Vinay Sohani. We view India as a key and strategic market for the insurance industry and for Gallagher, given its scale and growth potential, and we see many interesting opportunities for further development of the business.”

Varun Bajpai, president of Edelweiss Group, added: “We are excited to commence the next phase of our business journey along with Gallagher. Insurance broking is increasingly becoming a global play and we look forward to drawing on Gallagher’s strategic insights and leveraging its expertise across products and technology to capitalize on the growing opportunity in the space.”

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Read more: BAE Systems global director on the five trends shaping the evolution of insurance fraud

So, in keeping with that old adage about honey and vinegar, Harris first addressed what insurance businesses tend to do well in this area.

“Data sharing is a key aspect,” he said, “and insurance has got so much to teach the rest of financial services. They’re lightyears ahead of banking – if you look at banking, for example, we talk to banks, and they can’t even share information between their own branches in different countries. So, insurance has really blazed the trail when it comes to data sharing.”

This is particularly relevant considering the rising attention being paid to a public-private partnership solution to fight financial crime, he said. The reality is that an individual insurer is never going to be able to solve this issue in a silo, but rather just put a sticking-plaster on the problem. The only way to truly offset widescale financial crime is by establishing an accessible and sizeable pool of data and centralising it to the benefit of the wider profession.

“When it comes to pricing, I think insurers offer very good value,” he said. “And they’ve got fantastic processes in place for understanding what their risks are, and for balancing premiums against their expected payouts. It’s a very stable industry and you don’t see too many insurers going under, so I think it’s really well-managed from that perspective.”

An area that is more of a mixed bag for the sector is the challenge of compliance, which is an area in which BAE Systems handles a variety of clients. Whether it’s to do with money-laundering, KYC or watchlists for terrorist funding, insurers tend to do an OK job, he said, but this is going to be an area where they will soon be feeling a lot more pressure. That pressure, in turn, will inevitably fall on the brokers as well, as due diligence around the customer onboarding process will be emphasised – not just from a fraud perspective, which implies loss, but also from a compliance perspective.

“So we’ve got a number of customers on the compliance side, and I think that’s going to escalate and potentially move into the broker market as well,” he said. “That’s mainly on the life side, for now, because that’s where you have the biggest premiums, and the biggest potential payouts. It’s less on the P&C side, but we do have a number of our life insurers asking us more about putting some checks in place to make sure that they are meeting the regulations around financial crime compliance as a whole.”

Read more: What are the new insurance fraud trends to be aware of?

Where insurers tend to be quite poor is when it comes to offering additional services to their customers, Harris said, as all too often it’s the case that they sign up a customer and then don’t contact them again until renewal time. Insurers are making inroads with this, but there’s still a lot more they can do – especially when their customer interaction is compared to other industries, such as the banking sector.

“Their knowledge of their customer on the back of that tends to be really poor,” he said. “They have so little information about their customer where various other financial institutions are always trying to engage and interact with their customers in order to learn more about that customer behaviour. That’s so important for fraud because you can only identify the bad guys, if you know what a good guy looks like. When you know what a good profile is, you can spot the outliers. And that’s not just from a fraud perspective, but also from a risk-analysis, and cost-analysis, and an underwriting perspective as well.”

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Moody, who is based in London, will report to Dean Klisura, president, Guy Carpenter and assume responsibility for Guy Carpenter’s UK property and casualty business. Moody has held his current position of CEO, Marsh Specialty, UK & Ireland since 2018 and, during his 22-year tenure with Marsh, has developed and led several successful strategic growth initiatives in the UK financial lines and specialty divisions.

Meanwhile, Dominic Samengo-Turner (pictured below) has been appointed CEO, Marsh Specialty, UK & Ireland, effective September 01, subject to regulatory approval.

Samengo-Turner will be based in London and report to Chris Lay, CEO, Marsh, UK & Ireland, and Lucy Clarke, president of Marsh Specialty and Global Placement. He is currently the global head of facultative reinsurance at Guy Carpenter, having previously served as head of Marsh Specialty, Asia, following Marsh’s acquisition of JLT. With over 35 years’ experience in global and specialty markets, Samengo-Turner is an industry veteran who also spent 23 years at Willis Towers Watson in several leadership roles before joining JLT in 2015.

Toby Wemyss has been appointed global head of facultative reinsurance, Guy Carpenter.

Reporting to Moody, Wemyss is expected to join in the fourth quarter of 2021 and will be based in London. He joins Guy Carpenter from Willis Towers Watson, where he had served as global head of facultative for the previous four years. Wemyss also previously held the role of regional CEO of Central & Eastern Europe, Middle East and Africa and CEO of global markets, international for Willis Towers Watson.

Commenting on the senior leadership shakeup, Klisura said the company was delighted that Moody and Wemyss are joining. He noted that both have extensive track records in leading successful teams, focused on delivering client-focused solutions.

“In these key leadership positions, their experience and market insight will be invaluable to Guy Carpenter’s continued growth,” he said. “I would also like to thank Dominic for his service and wish him every success at Marsh.”

Clarke added that Samengo-Turner is an “exceptional leader” who will bring his extensive experience in the global specialty markets to Marsh Specialty. Under his guidance, she said, the business will continue to pursue transformational solutions for its clients in a challenging market.

“These changes reflect the deep bench of talent we have available across Marsh McLennan and our ability to place strong leaders from within as well as attract industry-leading talent to the firm,” she said. “On behalf of all of us, I would like to thank Paul for his outstanding contribution to Marsh Specialty, and wish him every success in his new role at Guy Carpenter.”

Meanwhile, Lay added: “I am looking forward to working with Dominic to bring the deep specialty capabilities that make us well-positioned to address the future risks our clients face. Dominic’s experience will be invaluable as we develop the solutions that enable us to meet our clients’ ever-changing needs and unlock their growth possibilities. I would like to thank Paul for his leadership at Marsh, and welcome our continued collaboration in his new role.”

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