Brokers & Covid-19 – What Will Become the New Normal?

Covid-19 is having an industry changing impact on insurance. From the controversy over business interruption, to the more day-to-day concerns of running remote teams, brokers are facing unprecedented challenges.

The summary outline below was taken from a recent Insurance Times webinar which took place on 13/05/20 and was presented by Insurance Times with an industry panel of Brokers and Wholesalers.

Client Issues:

Possible client issues were discussed with particular reference being made to post lock down business. It was noted that some clients are concerned and unsure of what they are covered form and whether they will have cover at all when things begin to open up again. Clients have been asking what can brokers and insurers do to help them? Will there be any premium holidays? Or any assistance with payment of premiums?

It was stated that brokers must be there for the clients and manage their expectations regarding cover, premiums etc. Given that some sectors, by nature, will be incurring more claims in the current climate, it is important to spend time understanding the wording of policies, consult with legal personnel and then communicate your findings to your clients. As many clients’ businesses will not be operating at the moment, they may well have a lot of spare time on their hands and as such, they will be looking for updates more often than usual. It is important to provide this service even if it requires the reassignment of some staff to the client response team.

It was asked whether clients are being understanding through all of this, or are they blaming the broker for the situation they find themselves in? The response was that, for the most part, they are working with the broker and are recognising the work that the broker is doing.

Insurers:

Insurers were discussed in general terms with the conversation encompassing several different aspects of what they are doing during the crisis. It was claimed that some insurers are not working very well with the clients. They are being non-committal, waiting on other insurers to make decisions and not addressing the ambiguity in their policy wording. According to the panel, there are some brokers who truly believe that many of the claims should be paid out and that the policy wording clearly states that there is cover there. They went on to say that there is a sense uncertainty within insurance companies regarding their cover.  There have been emails circulated that show members of staff stating that there would be cover for BI only for the underwriters to say the opposite. Such a scenario puts the broker in a difficult position, and it illustrates where insurers are falling when it comes to dealing with the current climate.

Connected to this point was the presence of sloppy underwriting and how this has caused a lot of the issues with business interuption cover in the market. It was noted that this kind of underwriting suggests that brokers will have to take more care when assessing policies moving forward to avoid such a reality again.

Claims Moving Forward:

The claims process was discussed and how it might be affected as time progresses. The panel agreed that the full impacts of Covid-19 are still yet to be felt and that there will be a whole host of different claims and issues that will present themselves as time moves on. It was stressed that many of these claims will be very technical and will involve legal personnel, brokers and insurers working together to get through them. This has the possibility to separate ‘the sheep from the wolves’ and it may cause some brokerages who do not take the necessary steps to lose their business or have their reputation irrevocably tarnished.

Director & Office liability was noted as having the potential to garner many claims as the workforce gradually begins to return to work. This will also likely lead to an increase in Employers and Public liability claims; businesses will have to carry out risk assessments for employees to protect against claims. Cyber will also remain an ever-present danger as the number of phishing emails has increased dramatically since the mass change to remote working.

Remote Working:

Working from home and ‘the new normal’ were mentioned. The potential for office space to be severely reduced was outlined as a very real possibility. It was warned that companies will have to revisit their entire business models – not just office spaces – because of the virus. So, the full impact of Covid-19 on the working day will likely extend far beyond the work environment. Resolve, Reset & Redesign was recommended as a mantra for businesses moving forward.

M&A Market

It is likely that some run of the mill, ‘vanilla’, brokers will run into trouble because of the Covid-19 outbreak. This is linked to the previous point surrounding how some brokerages will be in trouble because of the Covid-19 claims still to come. It was agreed that the capital will eventually catch up following the crisis so there is definitely the opportunity for these struggling businesses to be bought by more profitable organisations down the line.

Hard Market

It was  agreed among the panel that we are likely heading towards the hardest market seen for quite some time. The lack of new business being written will mean that rates will begin to rise. Excess will in turn rise to try and counter the rising premiums. The potential for entire lines of business to dry up was also noted as it was stated that significant losses in liability and assets will mean that certain areas of the market will lose their profitability and simply cease to exist.

The overall commission structure was also mentioned and how this hard market may lead to increased calls for the removal of commission entirely. This was not recommended across all policies, but the reintroduction of the debate was suggested as a potential result of this new environment.

Conclusions:

The webinar concluded with the panel calling for steps to be taken as we move into this ‘new normal’ which include:

• Consistency amongst insurers in what their staff are advising, consistent dialogue between broker and client
• Heightened levels of diligence towards underwriting both in how underwriters construct their policies and how brokers assess them for their clients were all highlighted as particularly important aspects as time progresse

The impact of Covid-19 on the entire business world was once again underlined and it was stressed that we are likely only seeing the tip of the iceberg at this point in time.

Reference: Insurance Times – New Normal for the Insurance Industry