Some hard-hitting comment and analysis from Mactavish – but is it time to make Business Interruption and Travel Insurance do EXACTLY what it says on the tin, even if premiums have to substantially rise?
Mactavish, the leading independent outsourced insurance buyer and claims dispute expert, is highly critical of the formation of a new UK Insurance Industry Steering Group looking at how the sector should respond to the current Coronavirus crisis and future pandemics. It believes it will become little more than a PR gimmick.
Bruce Hepburn, CEO, Mactavish said: “In terms of pandemics, SARS and MERS means the industry has had ‘trial runs’ to learn from, but still it failed to make itself sufficiently relevant to this crisis.
“The sector has failed in its response to Coronavirus and by the time this new steering group makes any recommendations, thousands of businesses will have gone bust. It’s a cynical ploy and PR gimmick to help draw attention away from its failings unless it focuses more on how it can help right now.
“The steering group’s current membership consists solely of insurance professionals, meaning it’s a little like marking your own homework. Will they really hold the industry to account and shine a proper light on its failings and make the radical recommendations for change that the sector needs, or will they simply pass the buck on to the government?”
“Why wasn’t this group formed to look at this risk after SARS, MERS and the other trial runs the World has had? This problem needs to be solved by a new generation of people with a different perspective on the role of insurance in society”.
Mactavish says that the problems which have been laid bare during the crisis are not new. A long-term focus on price over value of cover has led to considerable erosion of insurance contract quality, growing opacity around broker fee structures and an increasing one-size-fits-all approach to complex risks.
On 4th March prior to the crisis and the insurance industry response, Mactavish rather presciently launched its own Reform Agenda to expose the failed direction of travel of the industry over the last 20 years in terms of insurance contract quality and fitness for purpose.
The document states: “It is our contention that erosion of contract quality, opacity around broker fee structures and one-size-fits-all approaches to complex risks are having a detrimental impact on the value of insurance to the real economy and the reputation of the industry.
“Over the last thirty or forty years, the commercial insurance market has made a collective strategic error. By marketing insurance as a price-driven commodity it sowed the seeds of its current difficulties. A complex financial instrument capable of preserving or breaking a company’s balance sheet has been sold as if it were essentially interchangeable. All too often, policyholders only realise that this is not the case when they have a claim reduced or denied unexpectedly – causing real economic damage and further tarnishing the reputation of our industry.”