FERMA: Trust with insurers has been eroded

The triple crunch of insurance price increases, capacity reduction and underwriting restrictions is a significant challenge for risk and insurance managers. This is according to panellists at the first day plenary session of the Ferma Seminar 2020, which asked: “Is insurance now on the risk register?”.

Nick Holmes, head of Global Placement Continental Europe, Middle East & Africa at Marsh, said the stress created by the hardening commercial insurance market had “damaged trust that existed”.

Lack of face-to-face

Meanwhile, lockdown restrictions have not helped risk managers in their search for a solution, given that it has not been possible to meet in person with brokers and underwriters.

“This is normally a business where partners can have open discussion to try and solve issues,” said Laurent Nihoul, general manager, Corporate Risk and Insurance, at steel and mining group ArcelorMittal and FERMA board member. ”We have experienced a deterioration in behaviour here.”

“As clients we face underwriters and we are talking only through video conferences with people who are more aggressive than in the past and focused only on their insurance company’s P&L,” he added.

“They seem to have lost control to the C-suite. Now the CUO will make decisions and we face people who are not in the driving seat. The relationship with the client is not the same as before.”

Nihoul noted that the timing of the hard market could prove problematic. At a time when the “airlines and hospitality sector is almost dying… insurance managers are the only ones coming forward with a product that is lower quality and more expensive. 

“The timing is unfortunate because you will really clash with a global economic environment where it will be even more difficult to manage.”

He warned the insurance industry not to put short-term gains ahead of long-standing relationships: “My recommendation to carriers is: ‘do not destroy your product’… we are all in it together - insurance managers understand the dynamics and what has been happening - but we need to go back to a mid- to long-term perspective. If we deteriorate the partnership and the product of insurance, you could have damages over the long run.”

There will be life after the pandemic, added Jochen Kӧrner, managing director of German intermediary Ecclesia Group, “so don’t burn too many bridges”. The hardening market was an opportunity to shine, he added, and a reminder of the role of the broker. 

”We are all in an industry that touches the lives of people and corporations on a daily basis. So we can really shine and create positive touchpoints through the claims management perspective.

“Yes the market is hard but we should see this as an opportunity to show risk managers and their CFOs how good we are and what value you bring.”

Carriers need to find a solution that works for everyone, thought Dr Mukadder Erdönmez, a board member at HDI. 

”We are still here to support you but we also need to optimise our exposures and get a fair price for the exposures we’re taking on our balance sheet,” he said. “It’s a challenging situation where it seems there is a conflict of interest, but we’re in the same boat. We expect some understanidng from your side.”

”It’s a time period where we need to work closely as brokers, clients and carriers to find a solution for everyone.”

While businesses are currently focused on navigating the pandemic and global downturn, Erdönmez noted that other risks and opportunities - including technological disruption - had not disappeared. 

“You are going in a new area which is driven by technology,” he said. “For us now the question is when we have overcome the situation with COVID, how can we continue to be a reliable partner for you, offering reliable and predictable soltuions you can use to be innovative and drive your business? It needs to start now - we’re in it together.