Hardening market is a long-term shift, warn Airmic and GVNW

Separate surveys of the insurance environment for corporate policyholders in the UK and Germany have demonstrated a fundamental shift in pricing and the scope and availability of cover and revealed widespread dissatisfaction with the handling of the changing conditions by insurers and brokers.

The surveys were conducted by the UK risk and insurance management association, Airmic, and the German risk and insurance management association, GVNW, in January and February 2020. The results reveal very similar trends in both countries: rates have risen for almost all businesses (94 percent UK, 93 percent Germany); and the impact of the hardening market goes beyond price, with reduced capacity, an increase in exclusions, and unavailability of cover for some, having a significant impact on 2019 renewals.

The surveys also found that D&O rates have been hardest hit, with over 80 percent of respondents noting price rises in the UK and over 60 percent in Germany. In the UK, 13 percent have seen D&O rates more than double.

There is frustration at poor or late communication from insurance partners (43 percent UK, 62 percent, Germany) and over half of policyholders are only partially satisfied or not satisfied with service from brokers.

The majority of businesses (65 percent UK, 53 percent Germany) are exploring alternative risk transfer solutions, including new and greater use of captives, for their 2020 renewals, and over a third (33 percent UK, 46 percent Germany) plan to invest more in risk management solutions.

Airmic and GVNW believe the results are a clear message to the market to improve service or trigger a long-term change in insurance buying habits.

“With prices rising, the service provided by insurers has to shine even more – it has to be perfect, and yet both surveys reveal customer dissatisfaction,” said Joerg Henne, managing director of GVNW. “Communication and transparency need to improve and good risk management should be rewarded. Businesses understand their risks better than ever before and the fact that we are seeing risk professionals exploring alternative risk transfer solutions for 2020 renewals should be a wakeup call to the market.”

Airmic and GVNW believe that the survey results strengthen the view that current pricing conditions represent a long-term shift in market behaviour: “Today’s market conditions are notably different to previous hard markets which were cyclical and focused on price,” said Julia Graham, deputy CEO and technical director at Airmic. “Today, by comparison, we are also seeing reduced capacity, an increase in exclusions and in some cases the complete withdrawal of cover. There are also early signs of changing claims behaviour which we are monitoring closely. This is a seismic shift. To stay relevant, the market must become more customer-centric, make better use of technology to improve service, and provide more innovative solutions.”