Use insurance to take more risks, IoD and Airmic urge directors
Business leaders must stop seeing insurance as a ‘grudge purchase’ and start using it to enable them to take risks as they grow their business, the IoD and Airmic have said today.
In conjunction with Airmic, the IoD has brought together industry leaders in a new guide for company directors, urging boards to view insurance not just as a necessary precaution, but as a way to help them launch into new markets and expand their business.
Simon Walker, Director General at the Institute of Directors said:
“For some directors, insurance may traditionally have been a ‘grudge purchase’ – something they felt obliged to spend money on, but did so reluctantly, at the lowest possible price and with little understanding of the cover acquired. If so, the dynamic nature of today’s business environment demands a new approach.
“The right business insurance acts as a strategic enabler, underpinning companies’ ambitions and allowing them to seize new opportunities. The size and complexity of insurance contracts alone means they demand board-level scrutiny to ensure that cover is ‘fit for purpose’ and that it also represents good value.”
The new report, Critical Business Insurance, identifies four reasons that boards should take an active interest in their insurance programmes:
- The modern risk environment is constantly changing and becoming more diverse, with the emergence of new and less tangible threats such as cyber and supply chain disruption
- Insurance policies are among the largest commercial contracts many companies enter into, and boards therefore have a duty to understand them
- The Insurance Act comes into force next August, providing greater protection for commercial policyholders, but also placing greater obligations on them
- Insurance can act as a strategic enabler, underpinning companies’ ambitions and allowing them to seize new opportunities.
John Hurrell, Airmic chief executive, stressed the importance of making sure businesses buy the right insurance policy:
“All too often companies assume that policies will pay out when needed. While most policies do indeed pay out, such complacency can be costly. When a large risk materialises that is uninsured, or where a claim against it is delayed, unpaid or only partially paid, the consequences can be disastrous.”
Alpesh Shah, partner at PwC, said:
“Insurance is a fundamental enabler for Boards to realise their strategic objectives. The responsibilities of determining appropriate cover and procuring it cannot be ‘outsourced’ by the board but must form a key part of the risk management discussion around the board table. This guide outlines the drivers which make that effective. We are increasingly seeing successful companies as those which embrace insurance and their insurance providers as key business partners supporting the ambition and strategic drive of the organisation.”
Alisa King, Head of Sales at Willis, said:
“All businesses face the challenge of meeting their goals and ambitions, both now and in the future. The good news is that having the right insurance and risk management programmes in place can support and enhance businesses’ ability to achieve their strategic objectives.
“The fundamental value of good quality insurance can be seen in the certainty it brings, which in turn opens up a plethora of opportunity, and ultimately helps to build a resilient and sustainable business.”
Andy Macfarlane, Regional Manager for Scotland at Ace, said:
“In many cases there is either insufficient engagement at board level on the design of insurance programmes, or more emphasis on cost than value. If boards want to mitigate the potential impact of the risks that worry them most – including emerging threats such as cyber, environmental, terrorism and political violence risk – they must proactively engage with risk managers on risk identification, risk evaluation and risk control. A focus on these three areas will not only help to protect the company’s balance sheet but also underpin its survival and growth.”
The guide, published today will be sent to the IoD’s 35,000 members and can be downloaded here
ENDS
Contacts for further comments or to arrange interviews:
Edwin Morgan
Head of Media Relations
Institute of Directors, 116 Pall Mall, London, SW1Y 5ED
T: 020 7451 3392
M: 07814 386 243
Jake Cordell
Communications Officer
Institute of Directors, 116 Pall Mall, London, SW1Y 5ED
T: 020 7451 3285
M: 07525 886 941
Mark Baylis
Airmic PR
T: 02380 651473
M: 07775 693994