Altus has taken an in-depth look at the future for the UK insurance sector after the impact of the Coronavirus. Altus UK MD Mark Andrews begins the report by noting the industry cannot insure all risks, known and unknown. There have been some great initiatives from By Miles, So-Sure, Cuvva, ThingCo and many more companies too.
“The expectation for the industry to just pick up the tab for a once-in-a-century crisis like this is just not reasonable. There have been calls from some for the industry to retrospectively change their policies to cover the pandemic. There are policies available that cover pandemics, as demonstrated by the LTA with Wimbledon and also the Tokyo
Olympics. These insurance carriers will take a hit, but the claims will be paid.
To suggest all Business Interruption should be retrospectively covered is simply wrong. Customers had the option to buy these policies, and perhaps more notably, brokers had the option to sell them.”
Some key points that Altus notes in the report are;
There will be longer-term impacts on pricing as a result of increased claims for some lines of business, e.g. the resulting travel claims are predicted by the ABI to cost £275m across the industry.
• There may be a short-term reduction in premium in some areas, e.g. in Travel, it may take some time before people return to their holiday plans, and businesses which do not survive this period will not be seeking cover In the longer term.
• We are likely to see changes in customer behaviours linked to the pandemic event and altered perceptions of risk, which will impact the nature of the insurance cover they seek and most likely increase the extent to which they want to be covered.
• Reductions in RTAs and claims costs should flow through to pricing. For most insurers operating in the motor insurance market, there will be significant cost savings in the short term, although with lower fuel prices we may see an increase in mileage and concurrent claims costs once things resume to normal.
• There will be an increased exposure to cyber risk as insureds move staff to home working, with weaker IT security measures in place. This may, however, also lead to increased growth in this area, as businesses identify it as a gap in their insurance cover.
• There will be a reduction in marketing activity, as some insurers take steps to avoid an increase in in-bound new business calls.
Altus notes that some insurers still using legacy IT systems may struggle to adapt to remote working in the short term. Then there are brokers in particular specialist areas that rely on a human element in underwriting risk. In future those brokers will need more support, and perhaps extra information tools from insurers, so that they can service their clients future needs. There are going to be many more questions asked now before people sign a binding insurance contract.
As many have noted, car mileage has dropped and accidents are less frequent. The Claims sector has seen a downturn in demand and in some ways this benefits insurers and brokers. But once the lockdown eases there will probably be a spike in claims as people begin driving, visiting relatives and socialising. Demand in FNOL and Claims may well see something of a rollercoaster effect over the next 12 months, depending on factors such as the severity of next winter and whether the Coronavirus returns, even if only localised to larger towns and cities.
Altus suggests the following for companies within Claims;
Review and Implement surge plans, to alleviate pressure on front-line staff and
manage customer expectations.
❑ Consider flexing the FNOL capability, e.g. by temporarily aligning motor claims staff to
manage the surge in new travel claims.
❑ Engage third party technology vendors, loss adjusters and existing suppliers to
understand how propositions may provide a short-term solution to the current
challenges, and support greater operational resilience.
❑ Update faster settlement processes for simple claims (self-serve route where possible)
and consider increasing authority limits for claims handlers and loss adjusters. There
will be a need for updated controls alongside this, to reduce the potential fraud risk.
❑ Extend periods for temporary vehicle replacement and alternative accommodation
where vehicle and property repairs are taking longer than usual to complete.
You can read the full report by Altus here by the way.