As 2022 gets underway, Insurance Times asks the industry about what new business brokers can gain by exploring and prioritising protection gaps
Graeme Trudgill, executive director, Biba
Our 2022 manifesto theme is ‘managing risk’, highlighting the key role brokers play in closing insurance protection gaps.
Underinsurance remains a risk, particularly with significant inflation in the cost of materials and labour.
The Chartered Institute of Loss Adjusters conducted research for our manifesto, which was published in January 2022 - this found that 40% to 45% of businesses are underinsured by up to 35% to 40%. We will produce new guidance on underinsurance and valuations for our members to help them combat this problem.
Another gap is the low take-up of comprehensive cyber insurance. The Department for Digital, Culture, Media and Sport reported in March 2021 that only 6% of SMEs have a dedicated, standalone cyber policy, yet the threat of attacks and ransomware demands has exploded during the Covid-19 pandemic. Another gap is created by many property insurance policies now excluding all cyber-related perils, which is concerning.
Covid-19 has also created protection gaps, which we are keen to close by working in partnership with insurers and government. For example, the social care sector now faces Covid exclusions on public liability policies, leaving care operators potentially vulnerable to claims.
We are also keen for existing government interventions to support the film, TV and live events sectors from disruption caused by Covid to remain in place until the insurance market is ready to take such exposures back.
Peter Blanc, chief executive, Aston Lark
Inflation and supply chain disruption continues to be one of the major challenges for 2022. The insurance implications of these economic problems are obvious. When you set sums insured at the start of the year, how do you deal with the fact that some supplies are now up to 100% more expensive than they were last year? This includes timber, for example.
Many vital pieces of equipment, parts and vehicles are simply not available to replace damaged or destroyed items, impacting business interruption (BI) losses. Brokers should be making sure that every client properly reviews their sums insured and indemnity periods to take account of the realities of their marketplace.
This is a year for brokers to earn their stripes and help their clients to navigate a really challenging period.
Richard Tomlinson, managing director, Percayso Inform
Looking at property insurance, the construction industry as well as policyholders have been severely affected by the rising cost of materials in 2021 - this looks set to continue this year.
This has an immediate and direct impact on rebuild costs and means that many businesses and residential property owners will be underinsured as a result – so the solution for brokers is threefold.
Firstly, brokers must proactively engage with policyholders at the earliest opportunity to increase awareness and enable mitigating steps to be taken to bridge any evident protection gaps ahead of time.
Secondly, they need to have a precise and up to date view of the delta between current and required levels of cover. This insight comes through access to accurate, detailed and real-time datasets covering all aspects of risk.
Finally, brokers need the ability to use new technologies to identify and track real-time risks, enable frictionless communication with policyholders and easily manage changes in circumstances and policy details.
These same principles apply across many insurance lines as financial drivers, climate change, motoring habits, as well as consumer and commercial trends are all subject to constant change and flux, meaning brokers in 2022 need to be more dynamic than ever before.
Tim Mullin, director of product and insurer strategy, Arc Legal
According to research carried out by legal regulator the Legal Services Board in July 2021, an estimated 3.6 million people in the UK each year have an unmet legal problem.
Legal expenses insurance (LEI) offers an affordable solution to help individuals and their families access justice when they need legal support. This can cover legal disputes resulting from a motor accident, employment, personal injury, consumer matters and property rights - plus much more.
Yet, the number of people who actively seek out and use their LEI policy when needed is at odds with the number of legal disputes occurring every year.
We know how valuable this type of product is, but with add-ons facing historic reputational challenges, LEI just isn’t getting the promotion it needs, leaving customers unprotected and, in some cases, facing significant legal costs for advice or when taking legal action.
The new FCA fair value assessment for existing products will help to build trust through greater transparency and improved satisfaction of LEI products.
As a result of this, in 2022, we’d love to see brokers have the confidence to champion LEI products and highlight their value to customers to close what is a pretty significant legal protection gap.
Ashwin Mistry, executive chairman, Brokerbility
Risk management and mitigation have never been so important amid today’s cocktail of challenges, which include Brexit-induced labour shortages, raw material and supply chain issues, rising inflation and the prospect of increasing interest rates and punitive tax changes.
There is also the well documented NHS challenges with Covid and Omicron.
Typically, brokers should be talking about reducing capacity, which will impact affordable business travel, cyber, directors’ and officers’ (D&O) and professional indemnity (PI) limits. The concerns about credit insurance also make for an interesting discussion.
With challenges also come opportunities, so brokers should look at asset protection - this includes focusing on staff welfare, opening opportunities with new international trade deals following Brexit and offering well structured, imaginative, comprehensive remuneration packages to retain and attract talent. Protecting your own intellectual property is important too.
What a great time to be an independent broker.
Max Carter, chief executive, New Dawn Risk
I cannot overstate the ever-increasing importance of cyber insurance cover, particularly for SMEs. Penetration of this product among this group remains very low – 86% of British SMEs lack cyber insurance, according to research published by Aviva in June 2021.
This is in spite of the fact that the risks are very high around cyber attacks and, of course, highest of all for businesses which lack in-house IT security support.
What can brokers do? I’d say that the key is to equip ourselves with both technical knowledge and product knowledge – we must take time to learn what the current vulnerabilities are and how they can impact our clients.
Brokers must keep updated. Even if tech isn’t your ‘thing’, there are plenty of companies that supply regular cyber breach updates. Insights offered by brokers can help make the risk of cyber security issues real for SME clients and elevate the need for cyber insurance up the priority list and into the ‘buy now’ box.
Michael Brunero, head of tech, media and intellectual property, CFC
The biggest protection gap facing businesses that brokers should be aware of is also probably firms’ most valuable asset - their intellectual property (IP).
There tends to be a view that this is covered in existing policies, which is not often the case. While PI policies provide some protection, it often excludes certain infringements, such as patent infringements, and not all businesses hold PI policies.
There is a real opportunity for the insurance industry to provide comprehensive protection for businesses’ innovation - but often customers, particularly at the micro and smaller end of the scale, are not aware of the risks or options available in the market.
Businesses have taken to protecting their physical assets and, more recently, their data assets, but often their innovations go unprotected. This is especially prominent in emerging sectors, such as tech, which now increasingly infiltrates into traditional sectors like manufacturing, entertainment, healthcare and financial services.
Defence of IP infringement actions are costly, not uncommon and can often be used as a commercial tactic to cripple new talented disruptors from joining the marketplace.
Comprehensive IP protection should be seen as a business enabler, assisting and encouraging innovation in the marketplace.
Alex Traill, partner, BLM
Brokers need to be well versed in the issues and potential insurable risks surrounding environmental, social and governance (ESG) factors.
For some of brokers’ clients, ESG will be a relatively new concept, but it is an increasingly important one for them as it covers a whole suite of current corporate concerns - whether that’s a commitment for more diverse hiring, better corporate governance or a pledge to reach net zero carbon emissions by a certain date in the future.
What brokers need to be focused on is the risks around action, or rather inaction. These could be picked up by a D&O policy. It will be important to check and make sure adequate cover is in place.
Neal Lumb, group sales and marketing director, Verlingue UK
If the Covid-19 pandemic has highlighted anything, it is that a large proportion of big SME and mid-sized corporate companies simply do not understand the full extent of risk within their business - whether these risks are insurable or not.
Those that have come through the pandemic most strongly tend to be those that have evaluated risk at an enterprise level and understand their tolerance in any area. This has facilitated faster and more informed business decisions.
There are two main gaps that many brokers need to continue to address with clients.
Firstly, supply chain resilience and how this informs their business interruption cover and business continuity plans.
Many clients have had a taste of supply chain interruptions caused by simple under supply issues. Many do not have a plan B and have failed to adequately assess the impact on their business if they were to completely lose a key supplier for a prolonged period due to a catastrophic loss.
Secondly, cyber resilience continues to be a major and ever increasing issue, which many businesses have failed to adequately address.
The increase in flexible working arrangements, with employees accessing IT through unsecured networks on poorly protected equipment, creates a perfect environment for hackers to strike. Many customers remain blissfully unaware of the cost and reputational damage that even a small cyber incident can incur.