Need to educate insurance buyers?

The latest Airmic casualty benchmarking survey provides a valuable market snapshot and highlights several areas where action needs to be taken, according to Chris McGloin, chair of the Insurance Steering Group.

Most media coverage of the survey has highlighted the fact that rates are flat, and that risk managers expect them to rise over the next two years. Dig a bit deeper, however, and the data provide an insight into how the market works that, when fully digested, will have more lasting value.

“A few things do rather jump out. A lot of it is quite reassuring, but there are also things that are disconcerting,” says Chris McGloin who, as well as being Airmic deputy chair, heads up the steering group that oversaw the report.

So what exactly does jump out? He says three findings especially merit a response: the continuing high levels of uncertainty about disclosure; the large number of contracts that are only issued after inception; and the record keeping of many Airmic members.

Disclosure – still a thorn in the side

Airmic and many of its members have done much to improve the level of certainty over the disclosure obligations to underwriters needed to guarantee policies will pay out on large claims. These range from the Airmic model clause unveiled last year to a series of side agreements reached by individual buyers when acquiring or renewing their insurance.

Despite this progress, 40% of those who took part in the survey expressed concern about disclosure, and 50% were unclear as to what constitutes material information.

“The one thing that buyers consistently say is that certainty of claims is key. If half have concerns over materiality and disclosure, then Airmic is right to continue plugging away at this issue,” he says.

Policy paperwork delayed despite ‘contract certainty’

Whilst members’ difficulties with disclosure were already well known, it was more surprising to learn that the London market’s much trumpeted success with ‘contract certainty’ has not always meant that insureds receive their policy paperwork before inception.

It is, as McGloin says, “pretty basic”. Yet 48% of respondents reported difficulty in this respect – a much higher figure than the target demanded by the FSA.

Buyers should be doing more to maintain records

He is especially concerned that a third of risk managers admit they do not maintain records of data assembled during the insurance buying process. Many of them might be relying on their brokers to provide this service. Nonetheless, he sees it as a shortcoming with the potential to undermine the buyer’s position; it could come back to bite them in the event of a large claim.

“This is unquestionably an area where Airmic should be doing more to educate its members. It is something that goes to the heart of claims certainty,” he says.

‘No need’ for price increases    

One of the most positive aspects of the survey from a buyer’s perspective is that the market is awash with capital for casualty insurance.

“Whilst that continues, there’s no reason why prices should go up. What we have is supply and demand working well. There’s a buoyant market, and it will maintain pricing stability for the immediate future. This should also provide the climate for innovation to address the new and emerging risks,” he concludes.

"There’s a buoyant market, and it will maintain pricing stability for the immediate future."

Chris McGloin