Weathering the Storm

The insurance market may be hardening but it's still possible to get clients the protection they need. Here's how brokers and insurers can partner to secure the right cover...

In the past year, the pandemic has disrupted or stalled so many aspects of our lives. It stands to reason that the insurance industry, which helps to buoy so many businesses in times of disruption, is feeling the ripple effects. Insurers and brokers are operating in a hardening market – a period of rising premiums and decreasing capacity for insurance – and it calls for us to partner in new ways to ensure clients can secure and sustain the protection they need.

We’re overdue

The last truly hard market we experienced was 20 years ago, following September 11th and the global market crash that followed. Waiting two decades for a hard market is unusual: Historically, one arrives every five to seven years, and always after a triggering event. The pandemic, in many ways, is providing that catalyst now, and it presents insurers with challenges on several fronts:

• The current market is delivering lower investment returns and putting downward pressure on share price.
• Businesses facing mounting losses due to COVID-19 have filed business interruption claims with their insurers, and the High Court has ruled in favour of insureds in some circumstances. This has generated higher losses for insurers, as well as a need for greater reserves.
• The recession is restricting spending as companies generate less new business and start-ups hesitate to enter the market.
• Reinsurance rates are increasing to account for an increased rate of claims from insurers.
• Prices are now increasing across the commercial market, particularly in Lloyd’s and financial lines, and we are now witnessing double-digit increases in the regional markets too.

A strategy for sustainability

To manage these challenges and align with current market conditions, Travelers plans to raise rates to a sustainable level. In previous hard markets, insurers have increased rates by 50 to 100 percent or withdrawn from the market altogether. We, at Travelers, are applying more moderate and sustainable rate increases while the market is hardening (but not yet hard). In doing so, we are aiming to avoid unexpected increases in the longer term, better protect our customers and provide certainty and clarity for our brokers.

At the same time, the current market conditions are changing how insurers manage the risks they are asked to underwrite. The underwriting process becomes more complex and time-consuming in these circumstances. But brokers can take several actions to help their clients get the protection they need in a hardening market.

“First, it’s important for brokers to work with us early and proactively on upcoming renewals,” said Stephen McKenna, Head of Distribution for Travelers Europe. “The same applies to new business. For the best results, it’s key we work together early and build a pipeline of future opportunities we can mutually commit to and deliver the best bespoke solutions for our customers.”

Additionally, Travelers is building its e-trading capability to support these efforts.

“We are looking to launch a suite of e-trade products that will support our brokers on fast-flow and non-complex business,” McKenna said. “This will include quote and bind capability via our MyTravelers web portal and/or Acturis.”

https://www.supremecourt.uk/cases/docs/uksc-2020-0177-judgment.pdf