GVNW renewal survey shows “loss of trust”

According to a survey of its members by the German general association of insurance buying companies (GVNW) on the 2020/2021 renewal season, levels of trust in the commercial insurance industry are at an all-time low.

As a result of the hard market and poor levels of communication, two thirds said they were actively seeking alternative risk transfer solutions, including captive insurance and parametric-style covers. 

”That’s quite shocking for the insurers,” Joerg Henne, managing director of GVNW told StrategicRISK. ”For GVNW, the numbers show a real loss of trust in classic insurance solutions.”

Other ways of adapting to the hard market include starting renewal discussions earlier (75%), being more transparent with insurers and sharing more data (52.5%) and improving risk management capabilities (40%).

A very hard market

All of the members polled (100%) said they had seen premium rates rise for at least one line of business at the latest round of renewals, with classes including D&O and cyber some of the worst hit. 

At the same time, 84% had seen capacity reduce and coverage become more restrictive (73%).

Fifteen percent of buyers of D&O cover had seen prices rise by over 100%, with a further 19% saying rates had risen by between 50% and 100% and 32% seeing price rises between 20% and 50%. 

“For the 2020 to 2021 renewals D&O was a really big topic for a lot of companies,” said Henne. ”Prices went up a lot and it was difficult to find capacity, but also this was not based on claims. Ninty-six percent had a loss ratio beow 50% and yet 15% saw an increase of more than 100% in price.” 

The combination of soaring premiums, a reduction in capacity and tightening of terms and conditions is a ”triple blow”, according to Henne, who described it as “a very hard market”.

Industry reputation damaged

He said while it was clear the industry needed to increase rates and withdraw capacity in order to profitability perspective, it was certain renewal behaviours that was causing damage to the relationship between insurance buyers and underwriters.

Sixty percent of those polled said that communication had been poor during the renewal process. “Some members were saying they had asked for an offer in June and three or four times after that, but then they didn’t hear back until a week before renewal and then capacity was cut,” said Henne.

The reputation of the insurance sector has suffered as a result, with 79% stating the reputation of insurers was “very bad”. A further six percent said it was “bad”. 

”Insurance buying has always been about trust,” said Henne. “It’s a face-to-face business and what we have seen has been a loss of that trust.”

By contrast, brokers have a much better reputation with buyers, with 76% rating the performance of their intermediaries as “good” or “very good”

“That’s quite interesting,” said Henne, “becuase it shows that insurance buyers see clearly that it is not the fault of the broker when the communication is bad, the premium is high and the cover is cut. They blame the insurers.”