It is quite another matter where a company is buying a commodity whose value may alter in the future and there may be an opportunity to hedge against possible fluctuations. But with insurance policies, it should be very much a here and now approach. The insurer should know what it is selling and the buyer know what it is buying at the time the agreement is made. Both should be prepared to sign up to a written contract at that time.
It is appalling that buyers do not get final confirmation of wordings when they agree the contract. It has to be said also, that issuing a bland cover agreement without any legal information back up can be a danger for insurers too. The events of 9/11 and the subsequent argument about whether the destruction of the World Trade Center towers constituted one event or two, is just one illustration that the only winners in a world without contract certainty are going to be the lawyers.
The insurance industry has been very successful in turning the basic tenets of supply and demand on their head. Somehow it is never a buyer's market. Well it ought to be. Risk managers should not be waiting for insurance companies to say that they are going to guarantee contract certainty. They should already be demanding it as an automatic part of the buying process. Which means in turn that they too need to get their house in order and know exactly what their requirements are before renewal.
