A weaker economic outlook could begin to reshape claims behaviour across the insurance market, with insurers and brokers being urged to stay alert to shifts in fraud, disputes and customer vulnerability as economic pressure increases.
Despite this morning’s rosy GDP figures – representing a reporting period prior to the impact of the Iran War – there have been a host of recent downgrades to UK growth forecasts and persistent inflation has focused attention on pricing and underwriting. Attention is now turning to how claims patterns may evolve if conditions tighten, particularly across lines already under strain.
Alistair Kinley, head of policy development at Clyde & Co, said past downturns offer a clear warning, with claims patterns often shifting as financial pressure builds.
“Experience of past downturns suggest insurers should be alert to shifting claims patterns in a tougher economy. But heightened vigilance must remain consistent with complying with the consumer duty. That will include recognising financial stress as an element of customer vulnerability and ensuring fair treatment throughout the claims process.”
That creates a growing tension for insurers. While economic pressure can increase the risk of problematic behaviour, firms are also expected to identify and support vulnerable customers under regulatory requirements.
Kinley added that this risk should remain firmly on the radar across both underwriting and claims functions, from policy inception through to settlement.
“At the same time, a heightened risk of problematic customer behaviour should remain firmly on the radar of both underwriters and claims handlers – whether this takes the form of incomplete or inaccurate ‘fair presentation’ at policy inception, or speculative and inflated claims submissions. In this context, robust and proportionate anti-fraud screening measures remain essential.”
For brokers and claims specialists, the impact of a downturn is less about new trends emerging and more about existing pressures intensifying.
Neil Grimes, claims director at Clear Group, said the market is already dealing with supply chain disruption, claims inflation and rising complexity across key lines.
“In the current soft market conditions, the claims world is already dealing with supply chain issues, claims inflation with higher labour and material costs, increased PI/D&O/Cyber claims and a higher frequency ‘reservations of rights’ being issued by insurers, so the IMF downgrade is unlikely to create any new claims trends for us to deal with but it will certainly accelerate the issues that the industry is currently experiencing.”
He said this is likely to drive increased volumes in areas such as trade credit and personal injury claims, as well as a greater use of cash settlements.
“Some behavioural shifts we are seeing are more disputes with quantum, indemnity, with higher excesses being applied creating cashflow challenges for clients,” he said, adding that this is placing greater emphasis on preparation and policy design.
“From a broking perspective, claims preparedness and ensuring the policies are fit for purpose and the correct indemnity limits are in place is key.”
Taken together, the comments suggest the impact of a weaker economy is unlikely to introduce entirely new claims dynamics, but instead to intensify existing pressures, increasing both the frequency and complexity of disputes while placing greater scrutiny on how claims are managed in practice.
