Earlier this year Post magazine carried out in-depth interviews with a range of Airmic members to assess their views of the insurance market. In the second of two reports, their researcher, Michèle Bacchus considers the service that risk managers receive from their insurers.
Insurance is predominantly a service industry and risk managers are generally satisfied with their insurer’s offerings, although sometimes these services fall short of expectations: the claims process has to speed up, intangible assets should be more protected and insurers must offer more of a tailored service.
Insurance is expanding its remit and is no longer just about claims: the growing trend to integrate insurance with employee benefits is one relatively new service dividing the risk management industry, with 36% of the risk managers having already taken this step, and the same percentage firmly believing that employee benefits must remain “a standalone kind of proposition”.
Other value-add services such as risk management advice could also have an impact for both insurer and risk manager: “Insurers have been talking about data for some years now but they’ve started sharing it with customers and I see this as very valuable. Which could make the difference,” admitted one risk manager. “And it’s great. They really add value.”
Yet the risk managers are divided on data management: several praised their insurer’s manipulation and sharing of data while others complained that “it hasn’t overly improved from insurers over time because they either haven’t kept up with technology, or they haven’t understood what their clients require.”
The three principal intangible risks concerning risk managers are cyber, reputation and non-damage business interruption. “We should have a business interruption cover that would respond whatever the type of incident,” stated one participant. “If I have an employee injured on a site with no machine being broken, and I have to shut the site for two weeks because of investigations, this is not covered,” bemoaned another.
Over half of the respondents have digital cover incorporated into other insurance policies but some participants found the whole concept of digital risk rather baffling: “There is an element of corporate ignorance or ‘board level’ ignorance, because most of them are probably my age; they can barely turn their phone on, so the ideas that somebody could destroy the business from something on a data stick, is probably a bit beyond most. It’s certainly a bit beyond me anyway,” confessed one respondent.
Learning to innovate
Keeping up with the accelerating pace of change in technology is vital for effective risk management and nearly 30% of the risk managers believe their insurers are innovative, with another 33% stating their insurance companies were “trying” or struggling to be innovative despite the hurdles.
The single most common reason preventing an insurer from being innovative was lack of knowledge about their company and the risks it faces: “They don’t get how businesses tick a lot of the time, in terms of what things are important to us and the bigger picture of how losses impact our bottom line. So therefore they don’t come up with something that would be the panacea for all ills, so to speak.”
For the 40% who felt their insurers lacked innovation, insurance companies were failing due to their propensity to compartmentalise companies and standardise products. “Sometimes insurers just need to know what your end product is. Because insurers don’t know that - and they would have to know that for everybody - it probably makes it more difficult for them to innovate in the detail.”
Insurers are being paid predominantly to protect assets and prevent huge losses, and just under one-quarter of the risk managers admitted their experiences of large claims had been “mixed”.
Several risk managers disapproved of one particular term which warns of a lengthy claims process: the reservation of rights, as one risk manager expressed: “If your very first move is a reservation of rights, that doesn’t really set the right tone. Almost what you are saying is, ‘'we aren’t going to pay what you are claiming Mr Insured; we don’t want to pay the claim.”
Nearly all participants bemoaned the general timeframe involved and “procrastination” from the insurers, with one risk manager stating: “What happens is insurers club together and appoint a solicitor who will pour through everything and will try and reject the claim, and that’s always the same if you have a large claim.”
Overall, innovation and value-added services are a welcome oasis in the ever-increasing cost-cutting environment that surrounds risk managers, and they are genuinely curious about their insurers’ plans for the future and wait to be wowed. Not necessarily with brand new products, but with more efficient processes and value-added services. They want insurers to transform a standard off-the-shelf product into a bespoke tailored solution for their company, yet sometimes these risk managers simply want their insurers to take the time to sit down and reassure them that they are on the same team.
Michèle Bacchus is Special Projects and Research Editor at Post magazine. This article summarises the last two of four in-depth reports published earlier this year looking at Airmic members’ perception of the insurance market.