Change pandemic response or risk long-term damage, warns Airmic

Airmic, the UK association for risk and insurance professionals, has urged the insurance market to adopt a more responsible and business sensitive position on the COVID-19 pandemic or risk long-term damage to trust and reputation and loss of customers.

The association has called on re/insurers and brokers to avoid making last-minute changes in underwriting policy by including cover limits and exclusions, and the industry to promote greater collaboration and communication between businesses, insurers and brokers, which it believes will allow innovation and opportunity to emerge from this crisis.

Airmic asks insurers to avoid COVID-19 exclusions on directors & officers policies, and calls for business interruption covers that are fit for modern business risk profiles, which may include the increased use of parametric tools to protect cash flows.

Furthermore, it suggests flexibility in cover and rebates for reduced risk exposure relevant to current trading conditions and business operations; recognition of the cumulative impact of the harsh market and pandemic on renewals; a constructive dialogue in wording disputes and a willingness to look favourably on grey area claims.

"With many corporates facing an existential threat from global governments’ lockdown measures and a deep recession likely to follow, we expect brokers and insurers to demonstrate fairness and flexibility with regards to claims and renewals," Airmic said in a statement. "The harsh market is already straining relations with many corporate clients, and insurers’ rigid interpretation of wording regarding the pandemic could accelerate this deterioration."

"Airmic believes insurers have a choice," it added. "They can either interpret ambiguous contract wordings with their balance sheet in mind, or they can act as partners to long-standing customers who seek business protection. All parties will benefit from a partnership approach to the current crisis."

The association supports the creation of national catastrophic pooling and reinsurance mechanisms, such as the existing UK pools for terrorism and flood. However, it noted they must be embedded in broader national and international risk strategies and should themselves be pooled to ensure the efficient use of capital.

"Airmic believes a truly collaborative approach, joining up the public, private and academic sectors may be the only long-term option," it said.

Airmic CEO John Ludlow commented: “The insurance industry is at a critical juncture. Member surveys suggest the hardening market is already forcing businesses to look at alternative transfer options, and an ill-judged response to the pandemic could prove the trigger. We understand insurers are under stress but it is in the interests of all parties that we work together openly, constructively and collaboratively. For years, insurers have said they want to be business partners with our members. Now is the chance to put words into practice.”