I have never been one to shy away from controversial discussions, and in fact recently had the opportunity to challenge a very senior executive from the a major insurance intermediary on how his message is undermining the image of the sector. Unsurprisingly the response I got was a little vague and non-committal (i.e. politically correct when representing one’s company). This was after they had said: ‘Property Catastrophe reinsurance delivers the greatest profit to the industry, which is why it’s so important…’
The question I posed was: If premiums are sufficient to meet claims obligations, what do interest rates and investment returns matter? Surely it is only shareholders who demand a profit… Customers just want their claim to be paid.
Now please don’t think I am naïve enough to not understand the mechanics of running a business, and certainly in a world of escalating compensation claims (see Ogden Rate changes), and ever more costly litigation, I fully understand the necessity for risk carriers to maintain robust reserves. However, surely that kind of discussion is something that should be held with internal stakeholders and investors, and not flashed in front of consumers…? If I am standing in twelve inches of water due to my living room flooding after a burst pipe, do I really care if the company questioning the validity of my claim made £-billions of profits??
Insurers get the rough end of the deal all the time, particularly at the hands of the mainstream media. One has only to look at how the recent floods in the UK were reported for an example of this. Within the sector we know that a huge amount is done by insurers and intermediaries both to prevent losses from occurring, or at least minimise their severity, and to support communities after catastrophic events. But the general public only ever hear the stories of how people have been failed.
And how does the sector react to this? ‘Profits hit record levels…’ ‘Share prices continue to rise…’
It’s great that the sector provides a positive return to investors and shareholders. It is fantastic also that this investment funds research into emerging risks and product development so that more people can receive the protection they need.
But when you’re knee-deep in flood water, or standing in a house that has been ransacked by burglars, or watching your business burn to the ground after an arson attack, or having to slaughter your entire livestock due to a foot and mouth outbreak, what do you care more about – profits, or claims?
Why don’t we hear more about how risk management can reduce the likelihood of losses occurring? Insurers and Brokers have such a wealth of data on effective risk management practices that they regularly employ to the benefit of Insureds. They allow factories to continue operating through the early identification of defective machinery, they provide insight in to politically unstable locations to enhance route planning for commercial deliveries, they can help to identify early symptoms of chronic diseases resulting from working conditions, I could go on like this…
As a sector, let’s portray a more positive image to the public. Highlight the social impact, forget the profits. This is a service industry – let’s focus on the service.