Cyber, reputation and lack of innovation are top risks, Airmic

Cyber, reputation and lack of innovation are the top priority risks and among the most difficult to insure, according to the annual Airmic member survey.

The survey had shown a continuing shift away from concerns about physical risks towards intangible perils, combined with the observation that the insurance market remains unable to cover many of the most business-critical exposures.

Other key findings include a strong trend towards insurers using late notification to challenge claims, a dramatically improved member access to the board and a rapidly growing concern about late claims payment and insurance documentation.

According to Airmic, the three areas of risk that give members the most worry are cyber causing business interruption (cited by 45.5 percent of members as a top-three concern), cyber causing loss or theft of personal data (44 percent) and reputation (31.5 percent). It is the first time that cyber has occupied the top two slots.

The survey finds that all three types of cover are among the more difficult to acquire, with over half of respondents lacking cyber-insurance. Yet under 20 percent have a high level of confidence in their organisations' ability to manage these risks. The main reasons for not buying cyber-cover are inadequate coverage, relevant insurance being unavailable and high cost (especially for theft/loss of data). Take-up of reputation-related insurance is even lower, at 4 percent, with lack of availability of relevant cover the main factor.

By contrast, the top physical risk (catastrophic events) was mentioned by less than 20 percent, significantly fewer than those who chose another intangible, contract risks and exposures.
When participants of the survey were asked to assess the insurance market, three factors dominate the list of concerns: lack of innovation (59 percent), broker conflicts of interest (41 percent) and errors and delays in documentation (41 percent). On a positive note, many respondents had noticed advances in the insurance market, with greater capacity (63 percent) better prices (58.5 percent), wordings (47 percent), improved limits (45.5 percent) and greater relevance (34 percent) all frequently mentioned.

Airmic has said there has been a big change of sentiment on a number of key topics. Concern about lack of innovation has more than doubled in two years. The number of members saying that claims had been queried on grounds of late notification in the previous three years has risen from 28 percent in 2014 to 44 percent. Since insurance buyers' practices are unlikely to have changed much, claims departments appear to be adopting a new, more challenging approach.

More members are worried about broker conflicts of interest, increasing from 8 percent two years ago to 41 percent, and about broker-controlled capacity - up from 3 percent in 2014 to 25 percent. Insurance documentation issues have also become a priority, with 41 percent mentioning it compared to just 9 percent in 2014.

Airmic has said risk managers now find it dramatically easier to gain attention from the top. Last year, 43 percent lack of access to the board as a number one or two concern. In 2016, this had reduced to 18 percent. They also report greater support and leadership from the board on risk issues.

The survey shows how the Insurance Act is already influencing behaviour. 71.5 percent are reviewing internal processes for collecting information to meet the fair presentation requirements, 43.5 percent have reviewed policy documentation and 21 percent say they already contract to the requirements of the Act. Just 9 percent had still to prepare for it.

One likely benefit of the legislation was highlighted by the fact that Basis Clauses (soon to be made unlawful by the Act) were cited as a reason by 26 percent of those who had had a claim challenged, reduced, delayed or declined in the past three years. An even higher proportion - one in three - said it was because they had been unable to provide information required by the insurer. One in five reported having had difficulties with a claim in the past three years.

With regard to board engagement, the survey shows the extent to which top management are now engaged with risk. Only 2.5 percent of respondents see lack of access to the board as a big challenge, with 10.5 percent highlighting lack of leadership/support. Despite this high-level interest, most members reported that risk management is not yet integrated with corporate strategy and that risk education has not been integrated into other business units.

John Hurrell, chief executive officer of Airmic, said: "These results confirm the trend towards the intangible risks that insurers find more difficult to cover.

"Addressing these perils requires an enterprise risk management approach much wider than pure risk transfer. Nonetheless, the findings underline the importance of our work with our partners in the insurance world to develop the products that would increase their relevance to corporate UK in the future.

"The survey also shows that boards are taking a genuine interest in risk as never before, representing a great opportunity for our members to extend their influence within their own organisations. Helping them to respond through relevant guidance and training, frequently developed in co-operation with other professional bodies, will continue to be one of our priorities."