Airmic has urged the insurance market to choose a more responsible position on the COVID-19 pandemic or the sector will risk long-term damage to trust and reputation and the loss of customers.
The UK association explained that as many corporates are facing the "existential" outcomes from global governments’ lockdown measures and "recession likely to follow", it expects brokers and insurers to demonstrate fairness and flexibility with regards to claims and renewals.
Airmic said: "The harsh market is already straining relations with many corporate clients, and insurers’ rigid interpretation of wording regarding the pandemic could accelerate this deterioration."
However, Airmic stated that insurers have a choice, “they can either interpret ambiguous contract wordings with their balance sheet in mind, or they can act as partners to long-standing customers who seek business protection. All parties will benefit from a partnership approach to the current crisis”.
It also called for the avoidance of last-minute and poorly communicated changes in underwriting policy, including coverage limits and exclusions; constructive dialogue in wording disputes and a willingness to look favourably on grey are claims; flexibility in cover and rebates for reduced risk exposure relevant to current trading conditions and business operations; and recognition of the cumulative impact of the harsh market and pandemic on renewals.
Additionally, the association asked for a commitment to avoid COVID-19 exclusions on directors and officers policies; business interruption covers that are fit for modern business risk profiles, which may include the increased use of parametric tools to protect cash flows; and greater collaboration and communication between businesses, insurers and brokers to allow innovation and opportunity to emerge from the crisis.
Similar to PARIMA’s call to the insurance market, Airmic is also looking beyond the COVID-19 pandemic as the association supports the creation of national catastrophic pooling and reinsurance mechanisms, such as the existing UK pools for terrorism and flood.
The association highlighted that they must be embedded in broader national and international risk strategies and should themselves be pooled to ensure the efficient use of capital.
A collaborative approach, such as joining up the public, private and academic sectors may be the only long-term option, according to Airmic.
The association noted that it is currently working with industry and government bodies to explore how to turn this into a reality.
Airmic CEO John Ludlow commented: “The insurance industry is at a critical juncture. Member surveys suggest the hardening market is already forcing businesses to look at alternative transfer options, and an ill-judged response to the pandemic could prove the trigger.”
“We understand insurers are under stress but it is in the interests of all parties that we work together openly, constructively and collaboratively. For years, insurers have said they want to be business partners with our members. Now is the chance to put words into practice,” he concluded.