Mactavish, the UK’s leading expert on insurance governance, warns that the Boards of many UK corporates do not have an adequate understanding of the limitations and conditions of their insurance policies, and face a significant risk of insurers not paying out on claims.
Mactavish data suggests that 45% of larger, more complex commercial claims are currently disputed by insurers, and that on average they take three years to resolve, with settlements of around 60% of the initial estimated values.
Mactavish also warns that regulatory developments, such as The Insurance Act 2015 and the update to the Corporate Governance Code earlier this year, are increasing the focus on risks at Board level. However, it believes board members and senior directors are increasingly at risk of not understanding all of the dangers and threats facing their organisations.
This also increases the probability of insurers refusing to pay out on claims because they were not told about all the risks they should reasonably have known. Such outcomes are very damaging for a company and the reputations of the directors, who could be sued by shareholders.
Bruce Hepburn, CEO of Mactavish said: “Generally speaking there is low Board engagement in insurance, which is out of line with their focus on other capital instruments. All chief financial officers, for example would know about their banking covenant conditions but very few would have knowledge about the limitations of their insurance cover.”
Mactavish is the UK’s leading expert on insurance governance. It has been operating in the commercial insurance sector for over 15 years.
Insurance Edge Comment:
This is a classic case of cherry-picking one fact to suit your narrative, something which underpins modern politics and virtue-signalling on social media. We found that Zurich pays 99% of all claims, Aviva paid out on 96% of claims in 2016, and if you browse these tables from the FCA regulator you will see the lowest percentage payout is around 85%, with many companies paying over 90% of all claims.
It is perfectly correct that complex insurance claims in the wake of say Carillion’s collapse, or multiple cases of damage to businesses after something like the Manchester Arena attack, Glasgow Art School fire or a major winter storm take some time to assess, perhaps even years, before a final settlement.
Given that some businesses may fold completely, or that the effects of a fire, bankruptcy or other traumatic event on employees and business owners may be long term, these are not claims that can be settled in 6 weeks. People need to be compensated for the loss of livelihood, as well as their stock, shop fixtures & fittings, office computers etc. and offered help to get their lives back on track.
There are always two sides to every story, which is why we have published the above press release unedited, and posted our comment below.