Brokerbility chairman Ashwin Mistry is a panellist on our webinar ’Brokers & coronavirus - what will become the new normal? To join our webinar on May 13 at 1:30pm register details here. You can listen in, join the debate by asking our panel questions and take part in polls.
1. How have recognised bodies like FCA, ABI, BIBA and CII performed during the crisis from a broker’s perspective and the public at large? What could have they done better?
As bodies representing our sector in one way or another, we assume, perhaps incorrectly, that they should consult before making comments. There is a growing feeling of unease that they are representing the broking fraternity in an inappropriate manner. In fact almost by promoting a possible mis-selling scandal. We cannot allow this to continue unchallenged.
2. It’s ’All In The Small Print’ - do clients via the broker channel have the time, inclination and desire to understand the intricacies of policy wordings and insurer differentiation, or have we just gone down the price route? Should insurers and brokers have worked better together once policy interpretation became an issue from mid March 2020?
Pandemic cover was never intended to be covered. So no one will ever know what the cost for this type of cover would have been if this was discussed between client and broker.
The Insurance Act clearly puts the onus on the prospective policyholder to submit a “fair market presentation“ disclosing all material facts. Brokers have a responsibility for assessing risk and providing guidance on cover and mitigation areas.
Furthermore, brokers now have to read each policy in granular detail to investigate any loose wording that may be there. Some policies have either Boiler Plate Clauses inadvertently or coupled with sloppy underwriting.
This has caused the issue. Recent interventions by the FCA will possibly change the entire landscape. Finally, some insurers went public far too early and now face the prospect of eating their words. They should have worked much closer with brokers
3. Distribution, distribution, distribution..
Why is it now so apparent that wordings from the same insurers are different depending on the distribution channe - brokers, direct, schemes, MGA’s, Nationals to bancassuarance - same capacity provider, different wordings and huge price differentials?
Not in favour of brokers … are Insurers now facing paying the price?
There was an insatiable desire to grow, grow, grow pre crisis. Premiums were getting lower and lower in certain classes whilst policy cover was getting wider and wider to remain competitive.
This has clearly shone a light on the differing routes to market.
General broking wording is possibly the most limited and perhaps most expensive.
Now it seems this so called greed, to secure a larger piece of the pie, will certainly bite those insurers who extended cover beyond underwriting principles.
Going forward, any and all extensions will come under greater scrutiny and it will now be priced correctly without doubt.
4. How can the insurance industry repair the reputational damage over it’s handling of business interruption?
Firstly, people have to be reminded of the fundamental principal of insurance - the losses of the few are to be paid for by the many. It seems now that the losses of the many will be paid for by the few.
Secondly, the sector paid out over £7.5bn last year and recent examples of massive flood claims have proved that insurers are there when needed.
Quality travel Insurance products have responded magnificently. Insurance is now in the eye of the storm. People need to blame someone when something goes wrong.
Whether that be Government for not identifying the gravity of the situation; a lack of PPE equipment; banks for not supporting businesses; or finance companies for not supporting individuals.
Now insurers are in the spotlight for not paying claims. It’s a human function. Insurers still have the opportunity to do the right thing. I dearly hope it’s not too late.
I have long called for ‘One Voice’ and this is a great opportunity to bring together a host of stakeholders under the cause to put forward this united voice and plan jointly how we work through this crisis, together and without blame.
5. What should the insurance industry be doing in terms of future planning? In particular making sure that firms are not discouraged from purchasing BI cover in the future?
There are lots of suggestions including the concept of Pandemic Re. The scale of the losses cannot be borne by private sector insurers alone. It requires Government intervention akin to Flood and Pool Re.
Crucially we must all work together to understand the gravity of substantial loss and not limit this just to large scale pandemics. What will be the next unforeseen catastrophe?
As for firms not taking out BI cover, this would be short sighted in my opinion. There is still more chance of a fire or flood closing businesses than a pandemic.
Those known risks do not disappear overnight. Furthermore, most businesses would find out very quickly that banks would withdraw funding immediately, let alone provide funding for projects and business ventures, without adequate cover including Business Interruption