Strong response from insurers as risk profiles evolve

  • The turbulent marketplace has been made worse by investment markets, austerity, inflation and legislative changes
  • Insurers have responded with stronger underwriting practices and by helping customers manage their risk profiles
  • Zurich Municipal looks at how working with customers can protect against the market’s emerging risks

The past year has been one of transformation for the public and voluntary sectors. Throughout this period of growth and change, Zurich Municipal has strived to evolve its business to better serve its customers, and help them to adapt to this ever-changing landscape.

The past 12 months has seen a host of external factors that have influenced both the capacity and risk appetite of insurers.

As Zurich Municipal looks to the challenges ahead, we analyse the issues that have impacted the market to better understand their effects on our customers, and how insurers have had to rethink their operating models so that they can best protect customers against the market’s risks.

The changing market landscape

Speaking at Zurich Municipal’s Customer Risk and Insurance Forum at the end of 2014, Cecile Fresneau, UKGI Chief Underwriting Officer, outlined how the landscape has been shaped over the past 12 months by investment markets, austerity, inflation and legislative changes.

“Investment markets continue to be low for short term holdings such as cash, but we have continued to see improvements in investment returns,” notes Cecile. “Nevertheless, we are under on-going pressure to make an underwriting profit, which is enforced by our own regulators, so a sensible approach to underwriting is needed.

“We, along with other insurers, respond to low investment returns with strong underwriting practices and by understanding the latest risks while helping customers with their risk profiles.”

Industry evolution

Within the insurance market, premium costs will always fluctuate, depending on the capacity available, but external factors, such as the difficult economic climate, has led to increased levels of social unrest, producing more claims, especially involving fraud.

Fraudulent claims are already costing the industry £2 billion a year, so customers need to consider potential risk at all stages of their business.

On top of this, there is on-going pressure on the cost of risk, placing additional responsibilities on companies over health and safety requirements and statutory duties.

The regulatory and legal landscape has changed significantly in recent years with changes brought by the Ministry of Justice reforms (no win / no fee, whiplash reforms), and also a focus on solvency and good customer outcomes.

Working together to manage risk

Customers’ insurance costs are primarily based on the specific risks that they face. However factors that have affected the market, such as inflation and regulation, cannot be ignored, as they all have an impact.

“The MOJ reforms were really specific to motor road traffic accidents, but being extended to claims up to £25,000 to include employers and public liability,” says Larry Stokes, Underwriting Manager, Zurich Municipal.

Zurich Municipal has been building awareness by frequently talking to customers, having regular meetings and focusing on looking after customers’ interest as well as getting a fair settlement.

Larry adds: “Most of our larger customers have sizeable excess where they pay the first part of any claims, so you know we have to be extra careful that any settlements made are within the terms of the policy.

“As we deal directly with our customers, our claims and sales teams work very closely with them. Each customer has a designated underwriter and, in many cases, a claims person. All of this helps to promote a strong two-way exchange of information and advice.”