Last month the London Market Group (LMG) issued a new report focused on the developing needs of insurance customers. Its results emphasise the growing connectivity of businesses and their risks to each other, and the continuing trend away from insuring “bricks and mortar” physical assets towards protecting intangible exposures.
The report , “Beyond Insurance: The Client View”, enlisted the services of Boston Consulting Group (BCG) as an independent body to collate confidential interviews from 45 clients across four key industries – technology, energy, financial services, and the consumer and retail sector.
Sheila Cameron is CEO of the Lloyd’s Market Association, and sponsor of the report. Airmic News caught up with Cameron to ask her own views on the report and to respond to its conclusions.
“What’s most surprising to me is how nebulous risk has become, and how all-encompassing it’s become. Risk is seeping into everything from our clients’ perspective – societal change, technological change, climate change, economic change,” she says.
It is the LMG’s role as a forum to bring together the London insurance market’s core constituencies: Lloyd’s itself; the Lloyd’s Market Association (LMA) representing the market’s carriers; the London and International Insurance Brokers’ Association (LIIBA) to represent London market intermediaries; and the International Underwriting Association of London (IUA) representing the London companies market beyond Lloyd’s.
Cameron explains the purpose of the report and who it attempts to reach. “The report is a listening exercise at a macro level of risk professionals and clients of the London market. It’s aimed at risk professionals, at brokers as their agents, and at insurance carriers. We wanted to provoke thought among all those three communities,” she says.
There is a significant gap between risk professionals needs and the insurance products available for them to buy, Cameron explains, or in places an issue of buyers’ perception of the products available.
“That’s the other thing that surprised me about the report; there is certainly a perception from risk professionals that there is a gap between what the London market offers and what they need,” she says. “For me, there are certain areas for which we do have products already, but clearly we need to do a better job at communicating what those products are about.”
She notes that in some specific areas of demand, such as reputational risk insurance products and insuring the environmental risks of decommissioning structures such as oil rigs, there are products available.
“There are products out there but we either haven’t got the message right, or we’re not meeting what our clients require,” says Cameron. “There’s a lot more to be done about bridging that gap between what we offer as the London market and what the risk professional needs, while also being cognisant of the fact that the risk universe that risk managers are dealing with has become increasingly nebulous and difficult to grasp.”
Individual insurers and brokers are innovating in the right ways, Cameron suggests.
She listed examples such as one cyber risk insurer hiring a security expert from Government Communications Headquarters (GCHQ), the UK’s electronic intelligence body, to consult on product design and policyholders’ needs.
In another example, a broker had hired an expert on wind farms in an attempt to look at renewable energy risks in their entirety, breaking down traditional underwriting and broking silos “to offer a more complete service to clients”.
The LMG report emphasises changes to the risk landscape that have increased the onus on intangible risks, and particularly supply chains that have become more interdependent, all of which means organisations are increasingly under-insured by focusing on risks within and including their own four walls.
She emphasises one reputational risk example that arose during the interview process for the report, in a conversation between a US insurance buyer and BCG, which was of a shooting that took place in the client’s car park.
“This was nothing at all to do with their business, but it still affected their reputation. From the risk professional’s perspective, something like reputational risk is so much more all-encompassing than what we might have considered,” adds Cameron.
The purpose of the report, as a listening exercise, suggests what happens next. Cameron explains that she is working on a series of questions and challenges for the boards of brokers, carriers and risk professionals to consider.
One such question springs to mind, she says: “How are we as carriers going to ensure we have complete products suite, as the London market as a whole, to meet clients’ requirements?”
She notes that before the Coronavirus pandemic, there was a pandemic insurance product on offer for commercial buyers in the market, but this specific product barely sold – fewer than ten policies were bought.
On climate change, the upcoming Cop-26 meeting of governments set for November in Glasgow, will also generate lobbying efforts and partnerships and product development work, she suggests, such as developing solutions for the decommissioning of oil infrastructure.
Once the pandemic has receded into the rear-view mirror, there are also plans to hold an event to bring together the report’s key constituents for a more united view.
“We want to hold a client symposium in 2022 to engage, partner and work together, to ensure the market’s products are better meeting risk professionals’ needs going forward,” says Cameron.
She emphasises the need for risk professionals and the London market to work together on building new solutions.
“Dialogue needs to take place,” she says. “It’s perfectly reasonable for clients to expect that dialogue to take place. We want to help risk professionals to understand the totality of this more nebulous risk universe and to ensure that we close the gaps.”
Click here to read the LMG report.
Paul Clark, a partner and managing director at the consultancy, addressed the Airmic Technology Forum on Tuesday 13 May with a keynote speech and video on “Beyond the future: new technologies, new risks”. When this content is made available online a link will be added here.