Richard Webb, director at Manchester Underwriting Management, outlines the global situations impacting the insurance industry and how brokers can best weather the ongoing uncertainty
The insurance industry touches many peoples’ lives in more ways than they could ever imagine.
There is little in the western world that occurs in everyday business and life that doesn’t have an insurance aspect at some point. It is all around us, yet people are often blissfully unaware of it.
This blissful ignorance could be evidence of how insurance works. You don’t buy an insurance product to get a feel-good buzz, but you do buy it for peace of mind and to remove the risk of the unknown.
As the world moves on from Covid-19, so does the insurance industry. Not only are we returning to the office, but the outcome of claims arising from the Covid-19 pandemic is beginning to crystallise.
In certain cases, the result is not as bad as some feared, but there are still sizeable business interruption claims being made against insurers and insurance brokers.
Speaking to a large independent broker this week, we agreed that one aspect of life that is being felt by all is the change in the economic background.
Just as the country is starting to recover from the pandemic and the looming prospect of how the government can pay off the debt that it has amassed from dealing with Covid-19, we are now faced with spiralling inflation, increased interest rates, supply chain issues and potential hunger.
These are all unintended consequences of the economic actions taken during the pandemic in the UK, the effects of Covid-19 on the other side of the world and a horrific war in Ukraine.
These issues have a wider impact than many realise.
Increased delays and cost of manufacturing and construction due to a shortage of supply yet rising demand also works its way into insurance, for example.
Delayed construction projects may lead to litigation. The cost of settling claims therefore increases, but claims inflation will impact existing claims as well as new ones. Reserving for existing claims that have yet to settle must factor in the impact of increasing costs within the supply chain.
Insurers have to look at these cost increases carefully. Predicting the future cost of claims has become even more difficult.
At Manchester Underwriting Management, we write a lot of casualty and professional indemnity business. Both of these markets have hardened in recent years, which was long overdue and well documented.
In the good old days, the soft market would follow the rapid rise of the hard market - but this time it is different.
What is different is that the world is changing - and that creates uncertainty for us all.
In such uncertain times, what brokers can look for is insurance businesses that have been writing in their specialist areas for many years without the need to make radical changes.
A lot of clients have begun to realise that in the hard market, insurers can come and go easily.
If brokers want peace of mind, then it is better to be aligned with a business that brings as much certainty as can be given, while the world turns and we wait to see what comes next.