Insurance industry needs to get real

The insurance industry is failing the people who pay its salaries, Julian James, chief executive officer of Lockton International told the AIRMIC conference. He went on to say that smarter thinking, rather than simply focussing on price and coverage issues, was required to trade through tough economic times.

‘It is simply not realistic to ask for higher insurance premiums in this economic climate’ said James. ‘Quite simply this is the toughest time that any of our clients have ever experienced. The formerly unthinkable has become routine.’

He added: ‘And yet the insurance industry seems to think that this is the time to ask for more money. Their argument is that they have been engulfed in a perfect storm of large losses and disastrous investment returns – so premiums must rise. Conveniently, they are forgetting the four successive years of profit between 2003 and 2006.’

James suggested that instead of fixating on price alone, the industry needs to be more considered in its thinking – looking to the long term, not just the here and now – by doing the following:

• Invest for the future. There is no other market where clients, brokers and underwriters come together face to face – where there is so much access to expertise – and yet job losses, short time working etc are rampant across insurance. Getting away from a simple price debate and delivering creative solutions will be impossible if so much expertise is being lost from the sector. Now is EXACTLY the time when the insurance market should be hiring talent and investing in its human resources.

• Ensuring risk mangers are not victims of the recession. When asked by Lockton, 83% of underwriters said that if a company has a risk management function it favourably influences their view. But risk managers are as vulnerable to the recession as any other employee. The industry needs to work together to ensure that risk managers retain their value in their organisations – delivering a clear explanation of the total cost of risk, quantification of total value etc.

• Engaging with risk management – thinking about loss prevention not cure. Reducing claims is to everyone’s benefit – not just for cost but also the disruption it causes across a business. So, everyone needs to work harder to share expertise and experience to prevent accidents, reward the right behaviour and help businesses to manage risk.

‘Some positions are very polarised in this debate’ concluded Mr James. ‘It is our job to get the insurers to understand the commercial imperatives of life in UK plc today and to get all parties talking about a more realistic view on pricing and coverage so that they can demonstrate their empathy for their clients’ position.’