How should the insurance industry be responding to the COVID-19 pandemic? According to risk management association Airmic, some changes in approach are needed.
The risk and insurance professional association wants the market to take a more business sensitive position – or risk losing trust and harming its reputation.
“With many corporates facing an existential threat from global governments’ lockdown measures and a deep recession likely to follow, we expect brokers and insurers to demonstrate fairness and flexibility with regards to claims and renewals,” it said in a statement. “The harsh market is already straining relations with many corporate clients, and insurers’ rigid interpretation of wording regarding the pandemic could accelerate this deterioration.
“Airmic believes insurers have a choice. They can either interpret ambiguous contract wordings with their balance sheet in mind, or they can act as partners to long-standing customers who seek business protection. All parties will benefit from a partnership approach to the current crisis.”
After consulting with its members, Airmic has highlighted the need to avoid last-minute and poorly communicated changes to underwriting, including both exclusions and cover limits; a constructive dialogue on wording disputes; flexibility in terms of the cover and rebates offered; and recognition of the cumulative impact of the pandemic on renewals.
“Looking beyond the COVID-19 pandemic, the association supports the creation of national catastrophic pooling and reinsurance mechanisms, such as the existing UK pools for terrorism and flood,” it said. “They must, however, be embedded in broader national and international risk strategies and should themselves be pooled to ensure the efficient use of capital.
“Airmic believes a truly collaborative approach, joining up the public, private and academic sectors may be the only long-term option and Airmic is working with industry and government bodies to explore how to turn this into a reality.”
CEO John Ludlow added that the industry is at a critical juncture.
“Member surveys suggest the hardening market is already forcing businesses to look at alternative transfer options, and an ill-judged response to the pandemic could prove the trigger,” he said. “We understand insurers are under stress but it is in the interests of all parties that we work together openly, constructively and collaboratively. For years, insurers have said they want to be business partners with our members. Now is the chance to put words into practice.”