Insurers are failing to provide cover for two of the biggest risk exposures: reputation and cyber

UK risk managers are struggling to purchase cover for some of their biggest exposure concerns, a survey of Airmic members has revealed. The results suggest that the insurance market is not keeping up with demand for solutions in emerging areas.

For example, the survey revealed that reputational risk is the number one worry for risk managers, and yet of those that flagged it as a concern, the vast majority (93%) do not buy cover, with lack of availability or inadequate cover given as the main reasons. Cyber risk features twice in the top-six concerns, and yet approximately two-thirds of UK risk managers said they are unable to buy insurance for the risks of loss or theft of personal data and business interruption, largely because of inadequate cover and high costs.

The only risks in the top six with substantial insurance availability were catastrophe events and public liability.

The survey of Airmic members – who buy approximately £5bn of insurance a year – was conducted in May and provides a comprehensive snapshot of the views and concerns of risk managers on key insurance and risk-related topics.

Given these findings, it is perhaps no surprise that lack of innovation once again topped the list of concerns about the insurance market, with 60% marking it in their top three. Broker conflicts of interest was also a significant worry (41%) along with multinational insurance programme compliance (31%).

Almost one-quarter of members were concerned about a rise in claims challenges. These fears were justified given an increase in the proportion of members reporting having had a claim challenged, reduced, delayed or declined in the past three years – up from 29% in 2014 to 34% this year. The top three reasons given were: late notification; basis clauses / conditions precedent; and being unable to obtain information requested by insurers.

The survey painted an encouraging picture of the standards of risk governance within businesses, with the 97% of respondents agreeing that their board assumes “ultimate responsibility for risk”. Similarly, over two-thirds of risk managers believe that risk management has become more important in their business over the past five years. Only 3% believe it has declined in importance.

There is more work to be done, however. In particular, the survey highlights that breaking risk management out of its traditional silo is one of the biggest challenges. 42% of risk managers believe that risk culture is not embedded in their organisation, and 36% reported that risk management and risk education are not integrated into the wider business.

The results also suggest that businesses may be complacent about complying with the Insurance Act 2015 and revised UK Corporate Governance Code – two of the most important legal and regulatory developments of past years. More than a quarter of risk managers have done nothing to prepare for the Insurance Act, due to come into force next year. Meanwhile, more than half believe their company is not yet compliant with the updated corporate governance guidelines.

John Hurrell, Airmic chief executive, commented: “These results show that it’s more important than ever that insurers, risk managers and brokers work together to find risk transfer options fit for 21st century businesses. Creating relevant products is no easy task but will benefit everyone in the market – underwriters, brokers and policyholders alike.”

He added: “We are, however, delighted to see that risk management is growing in status and that the vital work of risk professionals is being recognised. This is good for the profession but also good for business.”