AIRMIC has slammed underwriters for charging exorbitant rates for directors' and officers' (D&O) cover.
At a D&O conference staged by AIRMIC, in association with the ABI and the Institute of Directors, the AIRMIC D&O taskforce chairman Paul Hopkin complained about "over-priced policies with inappropriate exclusions and a lack of consultation with risk managers".
ABI head of general insurance John Parker admitted that there was a need for underwriters and risk managers to strengthen communication channels.
"Communication does need to be improved - for insurers and brokers, the important information comes from the CFOs," Parker said. "But it is also important for insurers and brokers to glean soft information. For example, are quarterly targets paramount? [If they are] it may mean [companies] cutting corners."
Hopkin suggested that it would be beneficial for underwriters to attend companies' analysts meetings in order to obtain information.
Trade Secretary Patricia Hewitt said the government will make Operating Financial Reviews (OFRs) statutory for quoted companies. OFRs are designed to help directors become more aware of the risks facing their business. Hewitt said OFRs would mean that companies were better managed and that, as a result, D&O premiums would reduce.
At the end of last year, AIRMIC surveyed members of its D&O task force to find out if risk managers were using alternative types of D&O cover. More than 80% of those surveyed said they had either started to indemnify themselves as a substitute for D&O cover or were considering doing so.
Parker said the cost of D&O cover had risen largely due to law suits being brought against directors in the US. "Premium increases have been driven up by shareholder action in [North] America", he said.