Insurance Agenda’s eight-point guide to surviving the recession

Know your customer

Personal lines and commercial customers will be looking more closely at their spending habits. Insurers and brokers that best understand the needs of their clients, offering products and services they want, will be more successful than those that do not.

Service, service, service

If customers feel they are not getting value for money from the products and services they buy, they will look elsewhere. Excellent customer service is a key part of this.

Advice not price

Customers are more focused on price than ever, leaving brokers at risk of losing business to cheaper rivals such as the direct writers. High-quality advice to help companies buy the right insurance at the right price becomes even more important.


Some sectors of the economy will be hit harder than others, such as construction, transport and non-food retail. Brokers and insurers heavily weighted towards these sectors should diversify as much as possible to hedge against the potential loss of business.


Investment returns will no longer compensate for underwriting losses, so insurers will need to achieve underwriting profits. Reinsurance costs are rising and prior year reserves are dwindling, which means premium rates must rise. Failure to do this will erode capital. Insurers must have the courage to walk away from business that is not profitably priced.

Claims costs

Claims increase during a recession. To control this – and to control legal costs – insurers will have to recover as much as possible under subrogation rights and cut claimant lawyers out of the personal injury process. False claims also rise during a recession.

Supply chain

Insurers must ensure their claims supply chain is robust and that a contingency plan is in place in case key suppliers go bust. This could include alternative suppliers or cash settlement of claims, although the latter can push up the cost per claim.


Insurers must continue to look at distribution costs, such as commission levels and internal expenses, to safeguard profit margins. They need to look too at affinity partnerships and cull or renegotiate any unprofitable deals. On the direct side, insurers should examine the effectiveness of distribution through price comparison websites and consider outsourcing and offshoring. Brokers must also look at their cost base.

Insurance will not face the same level of job losses as other parts of the financial services sector, but there will be cuts. Companies must ensure that their skill base is not irreparably damaged and training budgets should be maintained wherever possible.