By Julian James, Chief Executive Officer, International Insurance at Sompo International
As an industry we have a tendency to put ourselves at the centre of our thinking – our capacity, our pricing, our processes. Instead, as risk managers grapple with the huge challenges presented by the COVID-19 pandemic, we need to make sure that we keep their needs at the front of our mind. Many are having a tough time at the moment. They have a wider range and a greater number of risks to deal with and need our help in finding solutions now more than ever.
Setting the right strategy
This starts with setting the right strategy, one that is not dictated by the pricing cycle. After all, the cycle is always broadly the same. Market competition chases prices down to levels that are unsustainable, and then capacity withdraws and those that remain can raise prices.
For me, running an insurance business should not mean basing your strategy around hard or soft markets. Instead, it needs us to focus on long-term balance to give clients greater certainty by offering products and delivering service that address their changing needs.
In the current trading environment, it is all about risk transfer. Risk managers want to transfer their risk to carriers who they are confident will be able to pay claims, and this will be more important than ever in the post-Covid world. We have to offer meaningful capacity to help customers through the current crisis and we are increasing capacity in the classes where it is right to do so.
Having the right conversations
The reduction in underwriting capacity has meant that brokers have had to really focus on what they are best at: finding the right cover at the right price for their clients. It has definitely been harder than previous years and demonstrated the importance of brokers’ expertise. My sense is that by and large they have done a good job at getting renewals over the line.
The key thing is for brokers to understand the business and industry of their client and then be able to present it to the underwriters. I think everyone in the chain benefits from transparent dialogue with proper planning. Cutting out any single party will make for a less successful process for everyone.
The risk manager, broker and underwriters sitting down together in partnership is always key – there should be a strategic alignment between partners; buyers should not view this as a one-off capacity purchase. Preparation is crucial, then you can properly discuss the specifics of what the contract needs to cover – this industry has never been about cookie-cutter answers and it should remain that way.
With the prospect of potentially some tough negotiations, discussions about renewals need to be opened as soon as possible. A willingness to share data will also be a tremendous help. Working in close partnership with their brokers and underwriters, we should encourage risk managers to prepare as detailed and accurate risk information as possible, that will deliver the best result for all in what will continue to be challenging market conditions.
Moving with the times
Putting our clients first also means ensuring that the products we offer are fit for purpose or addressing new risks. I think the evidence of the pandemic shows we can and must do a lot better in this area.
First, we need to re-examine our existing solutions. If we look back 20 years, 9/11 was the trigger for resolving the issue of contract certainty. The key learning from today’s pandemic will be around ensuring clarity in policy wordings and that clients understand what is, and is not, covered.
The risk profile for clients is changing dramatically, not just the number of risks they face but the quantum of losses that they can incur. We need to understand those risks, develop solutions to them and ensure that we are properly capitalised to take them on.
Ultimately, we need to do a better job at being long-term partners for our clients and understanding better that our role is not just about writing a cheque. Increasingly clients want some service element to their policy and not just indemnification of a financial loss. We need to have more of this thinking as we consider how our offering develops so that it does a better job of serving the people it is designed for, our clients.