Risk and insurance managers in the UK and Germany say there has been a fundamental shift in pricing and the scope and availability of cover, and have revealed widespread dissatisfaction with the handling of the changing conditions by insurers and brokers.
UK risk association Aimic and its German counterpart GVNW have conducted surveys among risk managers and corporate insurance buyers to evaluate the state of the market today.
The results found that the hardening pricing conditions across Europe have been a significant cause for concern and that policyholders are displeased with how insurers and brokers alike have responded to the new market conditions.
Airmic and GVNW believe the results are a clear message to the market to improve service or trigger a long-term change in insurance buying habits:
“With prices rising, the service provided by insurers has to shine even more – it has to be perfect, and yet both surveys reveal customer dissatisfaction,” comments Joerg Henne, managing director of GVNW.
“Communication and transparency need to improve and good risk management should be rewarded. Businesses understand their risks better than ever before and the fact that we are seeing risk professionals exploring alternative risk transfer solutions for 2020 renewals should be a wakeup call to the market.”
The results showed very similar trends in both countries, including:
- Rates have risen for almost all businesses (94 per cent UK, 93 per cent Germany).
- The impact of the hardening market goes beyond price, with reduced capacity, an increase in exclusions, and unavailability of cover for some, having a significant impact on 2019 renewals.
- D&O rates have been hardest hit, with over 80 per cent of respondents noting price rises in the UK and over 60 per cent in Germany. In the UK, 13 per cent have seen D&O rates more than double.
- There is frustration at poor or late communication from insurance partners (43 per cent UK, 62 per cent, Germany) and over half of policyholders are only partially satisfied or not satisfied with service from brokers.
- The majority of businesses (65 per cent UK, 53 per cent Germany) are exploring alternative risk transfer solutions, including new and greater use of captives, for their 2020 renewals, and over a third (33 per cent UK, 46 per cent Germany) plan to invest more in risk management solutions.
Airmic and GVNW argue that the survey results strengthen the view that current pricing conditions represent a long-term shift in market behaviour:
“Today’s market conditions are notably different to previous hard markets which were cyclical and focused on price,” comments Julia Graham, deputy CEO and technical director at Airmic.
“Today, by comparison, we are also seeing reduced capacity, an increase in exclusions and in some cases the complete withdrawal of cover. There are also early signs of changing claims behaviour which we are monitoring closely.
“This is a seismic shift. To stay relevant, the market must become more customer-centric, make better use of technology to improve service, and provide more innovative solutions.”
Airmic and GVNW conducted separate surveys of their senior membership during January and February 2020. The content of the surveys was the same so that the results can be compared.