Buyers set to benefit as capacity pours into the market – Insurance Forum

Trillions of dollars of capacity are pouring into the Property and Casualty market and buyers are certain to benefit, the Insurance Forum heard. The well attended plenary session turned out to be one of the highlights of the conference, with the audience appreciating the panellists’ open and waffle-free responses. This frankness was perhaps only made possible by the seniority of those taking part.

The conversation was spiced up by a steady stream of texts sent in by the audience and displayed on the big screens, some of which formed the basis of questions put by the chairman.

Other key points to emerge:

• The insurance industry must do better on claims and innovation
• Buyers can do more to help underwriters and brokers improve their service
• The old insurance cycle looks like being a thing of the past
• More has to be done to increase the relevance of insurance to risk management

Vincent Vandendael of Lloyd’s said that, with all the new capital in the market, firms that demonstrate good risk management should see favourable renewals. However, he warned that bad risks would be hit.

“I question whether there will ever be a hard market again as we used to know them,” said Stephen McGill of Aon.

Steve Hearn of Willis pointed out that the capital was coming from new sources not normally associated with insurance, and he questioned whether it was here to stay. Despite this reservation, though, both he and the rest of the panel agreed that customers should benefit.

Innovation – we must all do better, including buyers

The chairman Anthony Hilton turned the discussion to innovation, bringing a frank admission from Steve Hearn that brokers “are not doing a good job” in this respect. “We do not do enough as an industry,” agreed Thomas Hürlimann of Zurich. Stephen McGill observed that only two of the top ten risk management risks are addressed adequately by insurance. “The industry is not keeping up,” he said.

John Doyle of AIG used the example of cyber-risk. Their first cyber product came out in 1998. “Fifteen years later we’re talking about it as the new hot thing,” he said.

There was a consensus, however, that the world’s economic problems and increasingly complex regulatory environment made innovation more difficult and encouraged people to be risk-averse. All panelists agreed, furthermore, that buyers have a part to play. “Customers can help us on data,” said  Vincent Vandendael. He added that insurers need to know more about specific customer needs.

“Clients could do more,” said Steve Hearn, who reminded the audience that new products represent a considerable risk and investment. He said buyers needed to become involved in the evolution of new products. The customer should be able to say how much capital he is prepared to put aside for a risk, added Thomas Hürlimann.

John Doyle, who said his company had a culture of innovation, identified supply chains as an area where insurance had yet to deliver and where customer support was pivotal. “We need different information to deliver the products,” he said.

Were the audience convinced? Not entirely, to judge by the texts coming onto the screen, which led Anthony Hilton to observe that there appeared to be some skepticism.

Claims – focus on what happens when the policy is purchased

When the discussion moved onto claims, with an alarming statistic suggesting that 50% of big claims end up in dispute, everyone acknowledged that there was a problem. 

From a broker’s perspective, Steve McGill assured Airmic members that insurers “are working to improve claims processes so that claims are paid as they should be.” Steve Hearn described it as “an incredibly complicated issue” exacerbated by the fact that we have moved into “an increasingly litigious environment.”

Anthony Hilton asked the panel whether they supported Airmic’s proposal to negate Basis clauses. The answers were non-committal.

“The best innovation comes from carriers not paying claims” – text sent in by member of audience during the debate

There were several comments, however, to the effect that more should done at and before inception.

“Quite often there are elements in an insurance contract that build in differences of opinion between clients, insurers and brokers,” said Steve McGill. Clients need to do more to understand and insurers and brokers more to explain, said Steve Hearn. “We don’t spend enough time discussing what would happen in the event of a claim,” said John Doyle.

The point was also made that risk management departments have been cut back, making it difficult to find time for quality dialogue. Economic pressures, meanwhile, increase the temptation for companies to purchases the cheapest policies regardless of quality.

In other words, on this and other insurance issues, insurance buyers are part of the solution.  To what extent the people receiving this advice agreed is another matter, but it made for a stimulating debate.

To watch the Insurance Forum video, click here

To read the audience’s live texts, click here

From left to right: Anthony Hilton, Stephen McGill, John Doyle, Steve Hearn, Vincent Vandendael

The panel:

Anthony Hilton (chairman), Financial Editor, the Evening Standard

John Doyle, CEO, Global Commercial Insurances, AIG Property Casualty

Steve Hearn, Deputy CEO, Willis Global

Thomas Hürlimann, CEO, Global Corporate, Zurich

Stephen P McGill, Group President, Aon plc

Vincent Vandendael, Director, International Markets, Lloyd’s