Insurance and financial services speakers spoke about the effects of inflation on their business at a recent roundtable hosted by Airmic.
The effect of inflation on legal compensation values is having broad implications for casualty insurers, revealed one speaker. “We’re seeing quite a few small contractors not taking out adequate insurance,” said the speaker.
“From a recovery point of view, when we’re looking at a target defendant who has no insurance, that impacts our clients who are looking to try and minimise or reduce their indemnity spend by bringing in some recovery. We’re seeing quite a lot of uninsured defendants out there,” they said.
Inflation is affecting claims valuations, sums insured and the removal of average clauses, the speaker suggested.
“Again, we’re certainly seeing a lot more interest from underwriters around possible misrepresentation from a consumer point, breach of duty and fair representation of risk for the commercial companies around sums insured,” they said.
“That’s a big issue for a lot of people in regard to inflation. What might have been a correct sum insured a year or 18 months ago is significantly less than the reinstatement cost of a building now,” the speaker added.
Claims values are up on previous years’ values, another speaker emphasised, but the biggest rises hit between 2021 and 2022.
“It won’t be a big surprise, but the biggest jump was between 2020 and 2021. That’s where we saw the real kind of change,” they said.
“From an inflation perspective, some parts of the business were running somewhere between 10-15%. The inflation between 2021 and 2022 is still obviously an increased cost, but slightly less than it had been before.”