The pace at which the insurance market is hardening is slowing and demonstrating signs of ‘green shoots’, says a new pulse survey by Airmic.
The survey, ‘The harsh market: moving forward together, the future of the London market’, was conducted in the context of a post-Brexit, post-pandemic London market.
Airmic notes it is also currently contributing to an inquiry by the House of Lords Industry and Regulators Committee into the regulation of the UK’s commercial insurance and reinsurance market to explore post-Brexit possibilities for optimising regulatory policy.
Although it was found that the pace of market hardening has slowed since late 2021, the majority (44 per cent) of survey respondents expressed concern that insurance market conditions could yet deteriorate.
Renewal characteristics identified in the survey include reduced insurer capacity, insurers asking for additional information, increased in imposed cover exclusions and, crucially, higher rates at a slower pace.
For the latter, the survey notes that, although record rate premium increases for cyber are tapering, increases of more than 100 per cent are still common and in some cases are as high as 400 per cent.
Airmic adds that the heightened use of digital technologies by its member organisations, driven by necessity in the COVID-19 pandemic, has accelerated the longer-term trend towards digital transformation. 53 per cent of survey respondents say that this change in the insurance market, created by the COVID-19 pandemic, is currently being sustained.
This, alongside the 65 per cent of respondents citing that Brexit has not impacted the London market’s perceived influence in the global insurance industry either way, positions the London market in good stead for the future — but there is still work to be done.
The survey says: “Insurers can be proud of the way they have adapted during the pandemic, for an industry not typically celebrated for its agility. But the legacy systems of the London market will act as a millstone around its neck, unless it takes much bolder strides towards the digital and talent transformation required for its post-pandemic future.”
When asked about the problem of legacy systems and infrastructure, 67 per cent of respondents say that the market’s current IT infrastructure system is not fit for purpose but is gradually improving, while 33 per cent say it is not fit at all.
The most significant obstacles to improving market infrastructure, according to the survey, are a lack of collaboration between insurers, lack of investment, and lack of sufficient understanding of technology among key decision makers.
Insurers and brokers need to be more proactive in attracting talent, especially from other industries, as greater diversity of thought and digitalisation will be key to alleviating these inefficiencies in the London market.
The survey report concludes: “The insurance industry needs to rise to the challenge urgently. It needs to shift its focus from protection to prevention. New technologies such as artificial intelligence and machine learning will be key to reducing costs and creating value for all parties.
“Silos between the ‘risk’ and ‘insurance’ buckets are being removed, but the insurance industry still needs to respond in a more connected way. The insurance industry, risk professionals and the government need to collaborate and move forward together.”
