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The Evolving Insurance Market and the Challenges Ahead

by Keerat

By Danny James, Managing Partner – NFU Mutual Central Warwickshire

 

The last 12 months have been the most challenging that many of us have ever faced in our business lives. 2020 has taught us a number of things and within my own business we have increased focus on the things that are central to our values. Supporting customers and always being available for a conversation regardless of the medium we use and delivering honesty and integrity while having some of the hardest conversations we have ever had to have and challenging ourselves to find solutions to new problems that face us and our clients.

Despite the challenges that 2020 has raised, it never fails to inspire me how our clients have managed to adapt and be resilient and I have now doubt that they will thrive in 2021.

Looking back at 2020. Various issues have contributed to a changing insurance market as well as a number of new and evolving risks. 2021 will continue to see hardening of the insurance market. The immediate thought is that this is due to COVID-19. In my opinion there are multiple reasons for this from COVID-19, Brexit, Market uncertainty, Severe weather and some significant insurance loss events. What does this mean to businesses?

Well I would expect us to see some reduction in capacities, increased premiums, potentially more stringent policy terms and an increased focus on business risk management. The changes in the market may also have an impact on the property insurance capacity availability.

As mentioned above the two big headlines in 2020 have been COVID-19 and Brexit and these raise different but also similar challenges in terms of risk.

 

COVID-19 has and will lead to increased scrutiny on business H&S protocols, risk assessments, diversified business activities, employee welfare as well as the obvious increase in remote working practises (and many more).

Within the NFU Mutual Central Warwickshire we have been working with our customers to ensure that they have the support they need in these key areas, through risk management consultancy and lots of open conversation about their evolving businesses. We have also focussed on their protections. Two key areas being D&O and Cyber.

In the ever-changing landscape, understanding your business and management exposures is critical and ensuring you are protected against the difficult decisions that you have to make as a business owners is imperative. A comprehensive D&O and Employment practises insurance is high on the list of requirements.

With the ever-increasing cyber risk that we face alongside the higher volume of staff working from home, Cyber risk management has become ever more important. Understanding your exposure and potential interruption to business based on a data loss or system hack (to name a few) is so important. Working with an I.T specialist as well as your insurance intermediary to highlight these risk as well as working on a continuity plan and transfer mechanism should be a focus.

 

In terms of Brexit there is still much to be seen, especially following the recent Trade Deal, but one are of significant conversation this last year has been regarding supply chain management. You will start to see a pattern here but having a well thought out and tested business continuity plan is crucial. Trying to limit the number of critical points of failure in the supply chain can significantly reduce the potentially for business interruption. Solid agreements with other businesses if required rather than a casual conversational agreement.

At NFU Mutual Central Warwickshire the focus has been on understanding the business process and supporting customers to identify what and when things could be effected. For me risk management and pro activity are key here.

I think 2021 will continue to be a challenging year and there is no doubt in my mind that the hardening market will be tough for businesses. But I think there are a few things you can do:

  • Work closely with your intermediary and ensure that you have good conversations about what you can expect at renewals. Deal with this early and if looking for alternative quotes make sure you engage with providers early.
  • Focus on risk management. It is this that sets you apart and in a hardening market the best managed risks rise to the top. Make specific effort to focus on business resilience to ensure you are in the best position to ride out the various challenges you could face.
  • Be open about changes in your business to ensure you have adequate cover in place. There can be a tendency to reduce sums insured as premiums increase. Make sure you have good advise regarding the impacts that this could have to ensure that you make informed decisions.

We are always here to have a conversation and offer support and it is a critical time for insurance brokers/intermediaries to deliver on the service their customers expect.

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