Insurers who adapt to the changing needs of their business clients will succeed in future over those who stick to traditional insurance approaches, Airmic has told underwriters. Paul Hopkin, the association’s technical director, challenged the market to innovate to restore relevance – but stressed that new products must address the needs of 21st century business models.
Speaking at the International Underwriting Association (IUA), Hopkin said that insurance continues to be a critical source of protection, but that traditional types of cover are “losing their strategic value” as companies’ physical assets become less important to business models.
“Companies in the UK increasingly revolve around outsourcing which is a huge change in how businesses are run. Today a company’s most important asset may be non-physical, for example, reputation,” Hopkin said. “Insurance must therefore adapt to this or risk becoming less relevant to corporate strategy.”
Although underwriters have started to respond to the need for new solutions, there has not always been a strong take-up of new products from corporate buyers. “There has been a lot of innovation around supply chain, for example, but how relevant has it been?” he asked.
Current insurance systems are mostly outdated and not flexible
Hopkin said that insurers therefore need a greater understanding of their clients’ needs – and that the challenge is to develop insurances that support the fundamentals of the business strategy, not just its physical operations. Hopkin added that where risks facing companies were becoming increasingly complex and intangible, the most successful insurers will be those that respond to emerging risks, such as cyber, supply chain, reputation and nanotechnology.
Finding solutions for today’s challenge must be a two-way process, he said. “There needs to be a dialogue between the insurer and the insured. There is no point developing innovative products in isolation of the people you are hoping to sell the products to.”
Alongside product innovation, Hopkin stressed that for insurance to act as a strategic control against critical risks, insurance buyers need certainty about the efficacy of the insurance product. Buyers, he said, can be unclear as to how and when a policy will pay out, with over half of Airmic members surveyed actively concerned about the potential for innocent non-disclosure. The Insurance Bill, which recently received its second reading in the House of Commons, goes some way in addressing this concern, Hopkin said. He called on insurers to adopt the default regime set out in the Insurance Bill, “especially remedies for non-disclosure and basis clauses”.