Times have remained tough for the insurance market since the last market update, with rates still under pressure. But, as Bill Sulman, Public Sector Chairman at Aon, explains, a combination of information, robust risk management and time can help an organisation secure competitive cover.
Wildfires are continuing in both the US and Australia, which is keeping the pressure on global insurance rates. Recent earthquakes in the Far East have not helped either, and there is a feeling that reinsurance property rates might soon be on the increase.
Although there’s still pressure on rates, the insurance market remains competitive and there are plenty of insurers happy to compete for business. While tenders for liability classes have become less competitive, there is still room for savings on property and motor risks, providing the claims picture is an improving one.
Property surveys remain vital for properties with sums insured of £25m or more and for unusual properties such as museums and listed buildings. Providing insurers with an external report that helps to identify the type of construction and maximum possible loss can greatly improve the chances of a competitive rate.
For all classes of business, it’s also essential to allow plenty of time for the tender. We recommend that anyone looking to tender for next April should begin the process now, if they haven’t already.
In the motor market, new insurer Edison Motor is now trading and has had some success mostly in the commercial market. However, it is looking forward to being competitive for local authorities and the blue light organisations this year.
We’re also still seeing an increasing appetite for risk management from motor insurers, especially around technology-led solutions. Some specialised providers can also provide telematics, which can help with driver behaviour as well as accident identification. Most unions have agreed to this course of action as it helps prevent or minimise accidents to their members. If anyone is interested in hearing more about this please let us know, as we can possibly arrange free trials of the technology.
Competition is still restricted to a small number of insurers and some areas of risk are seeing significant rate increases. In particular, professional indemnity (PI) rates are spiralling for organisations involved with cladding or high-rise properties.
Previously PI limits have been relatively low but, since the Grenfell tragedy, requests for higher limits have resulted in higher premiums and a reduction in market capacity. This has not had a direct effect on rates for public sector risks yet but might have the overall impact of reducing market capacity.
We are also recommending that clients review limits of indemnity under employers’ and public liability for the same reason. This also applies to officials’ indemnity, where limits have traditionally not been high.
The Local Government Association continues to explore options for a cost-effective alternative to the conventional insurance market products and services and a few local authorities have now signed up as founder members.
We understand that the mutual may well be open for business in April 2019, although this will probably be too late for most 2019 tenders. It is also unclear whether it intends to compete in the market or make direct approaches to local authorities. Our concern with the latter is whether this will be sufficient for those authorities that need to demonstrate competition.
Discount rate developments
Another area where clarity is still evading the market is the discount rate. As yet there has been no announcement by central government with regard to when the rate will be relaxed and we must assume that Brexit is taking up most of their attention. We will keep you updated when we hear anything.
GDPR and cyber risk
What is clear though, is GDPR is now in place. Unsurprisingly, we’ve had many enquiries regarding data breaches and how a cyber policy will respond. The need for cyber cover is definitely gathering momentum and our view is that most organisations should not be without this cover.
Our specialised wording provides data breach response in many vital areas where our clients have neither the resources nor the time to provide a solution.
Tenders and renewals
Although the market is a little more challenging, there is still plenty of competition for the right risks. As always, starting renewal negotiation early and having all the necessary information for insurers will help.
This applies particularly to property surveys and information on high rise property, where a much more detailed approach is being taken by insurers. We also recommend that larger authorities continue with fund audits as these are vital when considering changes to the insurance programme.
Reviews of the total cost of insurable risk can also be invaluable, especially when authorities and blue light organisations are under pressure to continue with budget reductions. These reviews do mean additional expenditure, but often pay for themselves many times over by identifying both risks and opportunities to make savings.
We will be assisting many of our clients with market tenders and encourage everyone who might be tendering for April 2019, to start now.