A tricky week for the industry
In the same week we were told that the Premier League season would restart on 17th June, we witnessed a spectacular own-goal from Boris Johnson’s right-hand man after an ill-advised jaunt to Barnard Castle – check out Matt’s blog for more on that particular subject.
Away from embattled politicians and their spin-doctors, the insurance press pondered over whether COVID-19 could signal the greatest insurance loss ever, whether the leap in InsurTech facilitated by the pandemic could spell ‘goodbye’ for the traditional broker, and reported on calls for a resilience framework to be implemented for catastrophic risks – this was the week in insurance news.
Could brokers be next in line for legal challenges
Until recently, legal challenges over pandemic related claims have fallen squarely at the feet of insurers, with the likes of Hiscox and a number of other insurers facing group class actions over their refusal to pay out on many pandemic-related business interruption claims.
But whilst the outcome of an upcoming FCA test-case which will explore common areas of uncertainty around business interruption coverage is yet to be determined, The Daily Telegraph reports that claimants unsuccessful in recovering their costs could mount a legal challenge on brokers for failing to give them correct advice on the suitability of their policy.
Though some industry commentators cited various angles that could lead to brokers being ‘on the hook’ for claims, the FCA countered that around 90% of business interruption policies “clearly don’t cover pandemic risk.” In addition, a 2019 survey by AON indicated that risk managers simply didn’t view pandemic as a pressing risk to their business, ranking 60th on a list of risks they were most concerned about.
It remains to be seen just how far the dial will be turned up on brokers.
“The greatest insurance loss ever”?
Although active cases of COVID-19 in the UK appear to be falling daily, the projected costs of the pandemic show no signs of a similar decline. Willis Towers Watson, Munich Re and Lloyd’s are among those industry giants that have shared their market predictions on the costs of the pandemic, and it doesn’t make for happy reading.
According to a piece in Reactions, a report by Willis Towers Watson suggests that we could be looking at losses of somewhere near $80bn in a worst-case scenario; AIG CEO Brian Duperreault agrees, speculating that COVID-19 could cause the largest industry loss of all time. However, Munich Re remains cautious about some of the figures being shared, citing the high level of uncertainty around the continued spread of the virus globally and the length of lockdown measures as currently unknown variables that could ultimately impact the final cost.
What is certain however is that the industry will be counting the costs of this pandemic for many years to come.
A chance for brokers to add digital value?
Digital insurance is no longer the domain of the millennial according to a Capgemini and Efma report featured in Insurance Business this week.
The report asserts that insurance customers are turning to tech providers more frequently than ever, citing that the number of Gen-X and older customers making daily online transactions has more than doubled in the past two years.
Consumers are now more confident in researching and purchasing their insurance directly online, rather than going through a traditional broker and tech-savvy insurers are reaping the benefits of these “millennially minded” customers. According to Capgemini, this shift has been accelerated by the COVID-19 pandemic as customers are forced to live more aspects of their lives digitally to counter lockdown and social distancing measures.
We talked last week about a slowdown in investment in InsurTech, so could this week’s news of a shift in consumer behaviour give brokers an opportunity to gain some ground by providing excellent digital customer service in addition to the technical expertise that customer’s value?
And finally, Levelling the NDBI playing field
Captive Review reported this week that the Federation of European Risk Management Association (FERMA) had reached out to the EU outlining its proposal for a resilience framework for catastrophic risks, its aim is to address the lack of coverage available for losses resulting from non-physical damage business interruption (NDBI).
As COVID-19 spread across the globe, it became apparent that there is a fundamental gap in cover for NDBI resulting from catastrophic incidents such as the pandemic, leaving many businesses struggling to cope with their subsequent losses.
FERMA explained that the proposed resilience framework “would have the flexibility to respond to a range of catastrophic events, such as pandemic and massive cyber-attacks, that can create severe business losses without physical damage.”
The approach would call for the insurance sector, national governments, and EU institutions to come together to develop solutions for both short-term crisis management solutions and long-term business resilience.
As Captive Review reported, FERMA is committed to the development of this framework which will hopefully lead to better support to all businesses in future, particularly those small to medium-sized enterprises that are often hit hardest during times of catastrophe.
With thanks to:
http://www.captiveinsurancetimes.com/captiveinsurancenews/industryarticle.php?article_id=6886