8 June 2016 Insurance

Insurers and risk managers must review business conduct, Airmic

Insurers and risk managers need to work together and review how they go about business in order to boost the rising but still low levels of cover purchased for non-traditional risks such as cyber, according to a report from Airmic.

The report stated that underwriters are aware that innovation has the potential for competitive advantage. 61 percent of insurers saw innovation as a core part of their growth strategy, according to a KPMG report in 2015. Yet, the report says, 49 percent of Airmic members believe their insurers are ‘hardly innovative’ or ‘not innovative at all’ in developing relevant covers. Only 1 percent view their insurers as ‘highly innovative’.

John Hurrell, chief executive officer of Airmic, said: “All the big gains the market has made in recent years have come about as a result of collaboration between the interested parties and a willingness to change the way they do things. Innovation is no exception. We can meet this challenge head-on as long as underwriters, brokers and corporate buyers work together and are open to new ideas."

The report also said there needs to be cultural change among both underwriters and buyers.

Airmic suggested insurance and risk managers must have early discussions with their boards to assess their appetite for innovative solutions and willingness to finance them. It said boards are now more open to talking about risk, which provides the opportunity to ask them to consider new forms of insurance.

It said insurance managers must adopt a more collaborative, enterprise-wide approach, which may involve bringing finance, marketing and other business functions into the discussion with insurers. This is to help them to open up their businesses to underwriters, who will then be in a better position to respond to their needs.

Airmic also said insurers and insureds should move away from the ‘silo’ approach to risk exposures and insurance classes and create integrated solutions wherever possible. It said insurers need to embrace a ‘culture of innovation’ where staff are given the time and access to the necessary resources to consider opportunities and new ways of working. It suggested they need to ensure that their products are what their customers want to buy.

Airmic concluded by saying insurance managers should be aware that completely new covers are likely to be relatively expensive as well as hard to achieve. It suggested smaller and more tactical product improvements may suit them better, at least until all parties have developed their understanding of the risks involved.

Georgina Oakes, author of the report, said: “Insurers are working harder than ever to innovate and some areas, such as cyber, have seen notable progress.

“However, the sheer pace of change within the business environment of their customers has left them struggling to keep up.”

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