Mr Davies, Distribution and Strategic Initiatives Manager at HDI Global in the UK and Ireland, joined the fortnightly podcast for a 20-minute conversation all about the hardening market.
“A number of markets have tried to keep their market share by pushing down rates to a point where it is fundamentally unsustainable,” he said in addressing the rising rates of the past two years. “Those mounting losses are now hitting across all classes.”
Mr Davies added that the whole communication chain between client, broker and insured needed to be improved as capacity is reduced and there are fewer markets available for taking on risk.
“You really need to be getting across to your broker your efforts on good account management around clear capital expenditure focus and how your board’s commitment to that expenditure means you will be fit for the future,” Mr Davies added.
“The broker’s job on that is ultimately to get across to the insurer that that client is better than the average client for that sector. A client knows their business better than anyone else and trying to get that across to insurers is the biggest issue at the current time for insurance buyers and their brokers are very key in ensuring that happens.”
A common complaint from Airmic members and insurance buyers of the past 18 months is the feeling that good risk management accounts are not being recognised or rewarded in the current environment. Mr Davies said he believed that was not the case, but it can be hard to recognise when rates are going up across the board.
“Clients who really do manage their business are being rewarded, but the problem is in a hard market that is very hard to quantify. In a soft market you are getting decreases 0f 10-20%, but in a hard market you are getting increases instead of decreases.
“The reality is your broker should be highlighting the fact that poor performing cases have not been able to get the full capacity that they need to support the client’s risk approach or that their prices have gone up manyfold.
“Yes there will be price increases and yes there will be less capacity, but if you are a good risk you will be on the right side of that. Whereas if you cannot demonstrate clear focus on risk improvements, an engrained risk management culture through the organisation from top to bottom… that whole risk management and understanding will put you in a better position than those who fail to get that message across clearly.”
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