For brokers and their customers the softening insurance market brings some welcome relief. Premiums, including for cyber and directors and officers (D&O), have stopped rising steeply and some have even dropped in price. Capacity has also returned bringing a wider range of coverage options across a number of insurance lines.
However, with relatively high interest rates, cost-of-living pressures continue and some industry stakeholders are concerned about ongoing insurance affordability issues and the challenge of vulnerable customers. Industry reports also suggest that insurance gaps continue to grow.
Damian Browne (pictured), suggested that the industry has a tricky balancing act ahead. Insurance Business asked the DUAL New Zealand underwriting manager what he sees as the biggest current challenge?
“Keeping insurance sustainable,” said Browne.
The underwriting leader’s firm regards itself as “one of the world’s largest MGAs” and, apart from New Zealand, has offices across Australia, Europe, the Americas and the Middle East.
“As an industry we all feed the usual cycles of boom or bust and, as a result, we lose sight of the customer and protecting them,” he said. “Vulnerable customers are a growing challenge we must recognise and many insureds now need to reduce or eliminate cover to be able to afford what they can.”
Browne suggested that affordability issues have reached a stage where united industry action is necessary.
“When we start to get to a point that an insured says it is better for them to cover their own risk than to insure… this highlights a challenge we must all face as an industry,” he said.
One way the industry can help ease some of these problems is through charity work. Browne said he’s seen more insurance firms get involved over the last 12 months.
“The levels of volunteering, charity and work in the community has been a joy to see and something we should encourage daily,” he said.
However, another challenge, said Browne, is the increasing frequency and intersection of major insurance challenges, from climate events to political instability disrupting supply chains.
At the recent Australian and New Zealand Institute of Insurance and Finance (ANZIIF) awards, he said there was a common thread in the discussions among insurance veterans.
“As an industry, we no longer have any quiet times,” said Browne. “I would say no longer having the ability to take the time to be able to step back and breath in our industry is a challenge for every company.”
A Geneva Association report, published in November, surveyed 28,000 households across seven advanced economies including the United States, the UK and Japan. Inclusive Insurance in Advanced Economies found significant protection gaps impacting key insurance lines including property, motor and health.
“Insurance premiums for properties in high-risk areas – like flood-prone regions or bushfire zones - have skyrocketed and hundreds of thousands of homes could become ‘uninsurable’ by the end of the decade,” said Kai-Uwe Schanz, the association’s director of social and financial inclusion and the report’s author.
Schanz said “exclusionary policies” are becoming more common as insurers manage increasing risks. He said across the seven countries surveyed, vulnerable communities including low-income earners, Generation Z, older people and immigrants tend to have less insurance and suffer more severe inclusion gaps.
The report also detailed some strategies insurers can adopt to make insurance offerings more inclusive and close protection gaps.
Following the 2010 Canterbury Earthquake, the Human Rights Commission surveyed New Zealand insurers to understand how the industry was responding to the insurance claims of vulnerable customers. The result, published in 2016, was a set of vulnerability guidelines developed specifically for members of the Insurance Council of New Zealand (ICNZ) and insurance brokers.
The guidelines listed a number of factors that can give rise to customer vulnerability including their health, living or family situation and age.
In recent years, the ICNZ has repeatedly said that insurers are prioritising claims from vulnerable customers.
Are you an insurance professional? What steps can the industry take together to help close insurance gaps and help vulnerable customers? Please tell us below
