Adrian Ladbury (AL): What is your view of the current state of the commercial and corporate insurance market and what is the outlook overall?
Richard Taylor (RT): By its nature the insurance market is a very broad concept, with each sector being in their own commercial cycle. Relative to this article our expertise lies in the corporate risk space, which we would look at here in a couple of key areas: P&C and motor fleet.
Pricing in P&C remains stubbornly static with little or no sign of hardening. If anything, those attempting to attract the prime risks are still driving premiums down. Perhaps now to an unsustainable level.In motor fleet, and particularly our specialty, large fleets, the recent changes and uncertainty around the discount rating calculations caused a spike in premiums.But if one factors that out, we are seeing general pricing stability across the market. That said there are pricing variances, mainly driven by risk appetite. For example, bus and coach programmes have lesser appetite, and as such we are seeing genuine increases.The key factor driving this soft market has to be the seemingly endless capacity that continues to come into the sector. Much of it being from existing carriers, rather than new entrants. With a clamour to write the ‘prime’ risks this is materially driving premiums down.If there is a capacity shortage it thereby naturally falls to those programmes with negative loss ratios or in the higher exposure areas such as (petro)chemical, power generation, pharmaceuticals, wood working and recycling, to name a few.Effectively it is this end of the market that is bearing the pressure of any rate increases to subsidise the under-rated business at the other end of the risk appetite spectrum.
AL: What is your view of the insurability of supply chains? This is clearly a potentially huge area of risk and opportunity for the insurance market, but also an area in which a lot of money can be lost. What is your view?
RT: Rounding off our capacity points made above, we see a few areas where risk appetite varies materially; supply chains have real challenges when it comes to insurance classes such as contingent business interruption (CBI) and cyber.When one considers how supply chains are structured today the reason for these sensitivities becomes apparent. For some time, they have become more complex in structure, with many multiparty arrangements within them. This serves to create a raft of emerging intangible risks that sit alongside the traditional.We have seen increasing uncertainty amongst those in control of the chains to be able to fully comprehend the extent of their chains, or have tools available to allow them to map the extent to which this creates risk exposures for them, tangible and intangible in equal measure.With a three-dimensional depth of the supply chain and the interrelated relationships that all suppliers have within it, there is too often a lack of appreciation of the effect a failure – that can be three, four or even more times removed – will have upon the organisation.A simple failure can bring the whole supply chain to a halt, causing any number of financial and reputational losses. One only has to look at the effects of the Thai floods or Tianjin explosions to witness the consequences within supply chains.We believe that the industry needs to coalesce to create tools that address these issues. Tools that create robust supply maps and transparency across the chain and shared amongst all relevant stakeholders within it. Only then can truly proportionate risk protections be put in place.We are investing in such tools here at HDI and are aware of others doing likewise. In our thinking we also realise that the maps we are creating are only snapshots of a fixed moment. By their complexity, supply chains have become constantly evolving, mapping them is therefore intensive and laborious. It is imperative that any tools recognise this and empower clients, and by extension us, to respond with agility.
AL: What about cyber? This is also a fast-evolving risk that is difficult to identify, measure and manage let alone transfer. What is your thinking in this important area?
RT: If supply chains are complex to comprehend, then repeating this in something as broad as fast-evolving cyber risks is perhaps even more so. The product offerings in the market are generally good, but making them proportionate to each client’s actual exposures, both risk and quantum, is less developed.An important pre-requisite for us to write cyber cover and perhaps offer higher limits is that we really understand the underlying risk. Therefore, we require comprehensive risk information, and an in-depth risk dialogue with the client. This is even more important if the potential customer has a very decentralised and heterogeneous IT and information security landscape.We also need to deeply understand the clients’ needs. Simply put, it is not our ambition to just sell a product. Our target is to create a tailor-made solution fitting the clients’ true needs. Without this risk dialogue, we do not think it is the right approach to sell cyber products.
AL: How could and should the insurance market improve service, particularly in claims, and reduce the overall cost of the system for the benefit of all parties?
RT: Your question has a focus upon claims. At the outset, I would like to say that for our corporate markets, we believe the industry does a fantastic job servicing claims. With the complexity of clients’ risks and the related insurance products created to protect them, there are many grey areas of interpretation that confront our claims specialists daily. The fact that the vast majority of these are resolved amicably every day stands testament to the quality of service.When we look at how this is achieved, it gets to the heart of your question. Corporate insurance programmes are highly specialised and not transactional. We therefore work tirelessly to build long-term professional relationships with clients and their brokers. Like any relationship, the longer they exist, the better the understanding between us grows. This builds trust and a common desire to do the best for each other.Bringing our claims specialists into these relationships from the outset adds real value. Working collaboratively, it means we minimise any grey areas ahead of a claim and can deliver a more certain outcome.Of course, not all of this is delivered internally and like any insurer we work with a range of external claims experts, including third party claims administrators. This does not mean that we abrogate any of our responsibilities to our clients. Rather we work hard to ensure those we work with meet our claims culture with the same rigour as internally at HDI.This text was first published by Commercial Risk Europe. Publication on this website by courtesy of Commercial Risk Europe: