Insurance buyers urged to bring forward contract process and involve lawyers pre-inception
Everyone who takes part in buying or selling commercial insurance needs to think differently because times have changed, Airmic CEO John Hurrell told the conference. The Insurance Efficacy guide, unveiled at the event, recommends buyers to bring forward the renewal and to obtain legal advice pre-inception.
“We recommend that the whole process starts up to 60 days earlier than the average placement at the moment, in order that the buyer can have the policy they want on day one rather than the policy they would otherwise end up with on day 30. With insurance these days, the contract is everything,” he told delegates.
“When talking to our friends in the market, including lawyers, brokers and loss adjusters, we have developed a pretty good idea of what can go wrong. In almost every case, these problems can be avoided by undertaking a rigorous process to underpin coverage attachment prior to inception.
“We are recommending that policyholders should seek independent legal advice on wordings against specific scenarios relevant to their businesses.”
Airmic used the conference to launch a comprehensive Insurance Efficacy guide to help members purchase the best possible cover for their organisations. The document, written by technical director Paul Hopkin, aims to help buyers work successfully within the UK legal system, which the association believes to be weighted against commercial policyholders.
The guide says it is essential to ensure that terms and conditions are agreed fully and in writing before policies come into force, and that the wordings are understood and well tested in advance.
Over the past five years Airmic has produced a series of guides, protocols and model clauses that highlight pitfalls in the insurance-buying process and recommend ways to avoid them. The new guide brings these topics and other aspects of the commercial insurance process into a single document, together with more general advice on how to ensure that claims are paid as expected. It includes advice on process and timing, and checklists on what needs to be done.
“Airmic’s insurance efficacy guide distils decades of experience accumulated by senior risk managers,” said Airmic immediate past-chair Chris McGloin, who also heads the association’s Insurance Steering Group. “A key message for any risk manager is to get things right at the start, and to leave nothing to chance.”
The publication emphasises the importance of getting things right pre-inception, the three pillars of a robust policy being coverage, contract and claims certainty. It gives advice on matters such as disclosure, global compliance, basis clauses, warranties, reservation of rights, conditions precedent and how to test wordings before policies are signed.
“Purchasing a large insurance programme in the most capital-efficient manner is challenging and time-consuming and requires an awareness of what can go wrong,” said Hopkin. “This guide, taken together with professional advice from a broker, will give the buyer much-needed support.”
The Insurance Efficacy guide is to be read in conjunction with the other documents produced by Airmic in recent years to assist insurance buying. In the coming year these will be incorporated into the guide to create a single seamless e-source of information.
“the contract is everything”
John Hurrell
Airmic CEO
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“much-needed support for buyers”
Paul Hopkin
Airmic Technical Director
