It may feel like it’s only just acceptable to start talking about Christmas but, when it comes to insurance, we’re already focusing on April 2022. Starting the renewal process early is key, says Alison Goodwin, Public Sector Practice Leader at Aon, especially with insurers reporting that they are busier than normal.
As we head into Autumn, April may feel like a long way off but, to secure the best possible terms on your insurance, it’s prudent to engage with the market as early as possible. Already, there are a considerable number of insurance tenders in the market, or about to go out, and with insurers under considerable pressure, allowing plenty of time for the underwriting and quotation phase is essential.
Market conditions don’t help. Initial indications are that the hard market is not behind us and that further increases may be sought in 2022.
As well as global events including the floods in Germany and Central Europe, wildfires in the US, Greece, Spain and Italy and Hurricane Ida in the Gulf of Mexico, insurers are also seeing claims inflation on property and motor. Increases in the costs of material and labour are adding further pressures to property books.
Most reinsurance deals are due for renewal at year end so, as these negotiations draw to a close, we should get greater clarity on what 2022 holds.
Against this backdrop, detail is king. Insurers appear to be suggesting that they will focus corrective action on accounts where it is justified.
For instance, we’re seeing further widening of coverage restrictions. But, in relation to casualty covers in particular, insurers are considering the risk more closely and, where warranted, imposing less onerous restrictions than the initial market response might have suggested. Some of this is down to broker pressure.
Further ‘tidying-up’ of wordings is also taking place to address Lloyd’s concerns over Silent Cyber. Where a policy doesn’t explicitly exclude cyber, it can be assumed that it does cover it, so Lloyds has asked insurers to insert explicit clauses confirming how the policy would respond to a cyber-related incident.
This requirement will affect many different types of policies where the risks have changed due to increased dependence on IT. For example, criminals hack into an alarm, break into a building and steal computers. This is resulting in lots of new exclusions so it’s important to understand these as they do vary. At Aon, we’ll do our best to mitigate impact.
Given all these factors, starting the renewal process early is highly recommended. If renewal terms are unacceptable, there is more time for other options to be sought, where possible.
This is how the different areas of the insurance market are performing:
Property
Rating increases are likely to continue. As well as higher reinsurance rates, insurers are concerned about claims inflation due to the cost of labour and materials. Cladding remains a concern. The rules have been adjusted but buildings with cladding are still very difficult to insure.
We’ve also seen an increase in enquiries for capital projects. Known as owner-controlled insurance programmes, this suits some large projects and gives wider cover and more control than asking the construction firm to arrange the insurance.
Motor
Increases are still being sought and insurers are concerned about claims inflation. Where increases are sought, they are largely claims driven but we’re still seeing increases of 5-10% for cases that are running well.
Competition exists for most, other than blue light, but the best prices are going to the best risks and where the best information is provided.
Liability
Rate increases are still likely into 2022 although current indications suggest they may not be as large as in 2021. Reasons for increases include poor claims experience, increased reinsurance costs and claims inflation.
Our initial discussions with insurers seem to suggest that they will be targeting action to address clients with claims issues rather than take ‘whole book’ action.
Financial lines
There are some initial signs of hope as the level of increases appears to be slowing slightly but there is still some way to go.
Again, it’s prudent to start the renewal process as early as possible, provide detailed information to your service team as quickly as possible and budget for large increases. Expect more clarification questions and terms to be provided late. Extensions won’t always be offered.
We’re also seeing a shift from Any One Claim to In the Aggregate, which reduces the amount of cover. In addition, there are some large procurement claims in the market, which is likely to affect Officials Indemnity rates.
Cyber
The cyber market is more cautious than ever about public sector risks and access to cover will be determined by the maturity of an organisation’s data risk management and its focus on improvements to risk standards.
Risk still remains high, which can be seen in high levels of events and claims, and insurers requirements are getting higher. For instance, with home working set to stay, insurers are expecting multifactor authenticity as standard and we’re seeing lots of underwriting questions around this.
There are alternatives to traditional insurance and some elements of an insurance product can be arranged without the insurance cover backup.
There may be some signs of improvement but with insurers still cautious, starting the renewal process as early as possible is essential. As more detail comes through on reinsurance rates and claims trends, we’ll keep you informed about how this will affect your organisation.
More information
For more information about any of the issues covered in this market update, speak to your account manager or contact Alison Goodwin at [email protected]