The interplay of environmental, social and economic changes transforming the risk horizon is creating “weird and wonderful” new and emerging risks, and with that, a host of opportunities for insurers and their broker partners to support innovation and entrepreneurship.
The challenge for the market, noted Gary Head (pictured), director of schemes & delegated authorities at AXA UK, is that because these risks haven’t had to be considered before, they don’t have a strong claims history. Without having that frame of reference regarding how they might play out in terms of professional liability or negligence claims, he said, it’s much more difficult to be specific about the risks these businesses are running.
“What we're trying to do is to work with our expert brokers to really understand these exposures so that we can then transfer them and underwrite them onto the AXA balance sheet, allowing these newer businesses to get on with business as usual,” he said. “And what’s been an interesting trend to see in the market, not just in PI but in insurance more generally, is the move towards digital online solutions.
“While they are great and they serve a good purpose, I think it’s more difficult for those digital solutions to assess new business models, where you don’t yet have the data and the claims history, and you’re not able to answer some of the questions quite so clearly. I think that trend has reduced the availability of good, old-fashioned underwriters who are prepared to talk through the risks and understand them at the most basic level.”
The risks of today demand more than a binary yes/no approach, requiring the knowledge and insights of experienced underwriters who can unpick and translate these risks. For his part, Head highlighted that it’s tremendously rewarding to support these emerging businesses, particularly as so many of them are looking to address “what is arguably the biggest challenge we’re all facing at the moment” – climate change and the potential problems it will bring.
New companies launching innovative new climate solutions to help fight that battle are springing up all the time, he said, and AXA UK is keen to support their goals not only by providing risk transfer but also critical risk management guidance. The proliferation of renewable energy sources over the last 10-15 years has been incredible to see, and he expects that trend is only going to increase.
However, the plethora of professionals now actively engaged in trying to support and advise both commercial and personal customers on how to transition from using fossil fuel to renewable energy sources is a source of risk in and of itself. Whenever you have a professional offering guidance that has financial implications you have exposures, he said, and that’s what professional indemnity insurance is there for – to protect these professionals and their livelihoods to ensure they can continue to trade.
“I think we’re closing in on a bit of an inflexion point when it comes to net-zero,” he said. “People are very keen to try and get themselves as far towards net-zero as possible but the problem is that it’s very expensive. Electric cars are expensive, solar polars are expensive etc etc. So, we need to get to the position where people can afford to install and use climate-friendly solutions. Where they can afford to reasonably invest that amount upfront to save further down the line.
“That ultimately is going to contribute to the fight against global warming which is the biggest issue the world faces. And sometimes it does seem that we, as a human race, are sleepwalking towards catastrophe if we’re not careful. A lot of people recognise that and want to contribute but it comes back to the issue of affordability. As the technology improves, the hope is that we will get to a position where it becomes more accessible and affordable and can be rolled out more broadly through government schemes and other methods.”
Insurance has a critical role to play in creating the infrastructure required to make that happen, Head said, both through helping them navigate their risk environment and then ultimately by providing the safety net of an insurance policy if things do go wrong. Effectively, it’s the role of the insurer to understand what can go wrong and to make sure every extreme is covered. Insurance exists to cover those risks that people can’t take on their own balance sheets but also to educate customers through their brokers and bring to life what their exposures look like.
“At AXA we are very focused on not just covering the risks, but on reducing the risk of the front end,” he said. “We’ve got over 50 risk engineers with over 875 years of experience between them who sit down with the customers and say ‘right, how do we reduce your risk before we get to the stage that we've got to pay the insurance loss?’ That demonstrates the scale of AXA and our ability to take our learnings from paying a lot of claims and pass those back to our customers to help them reduce their exposures as much as possible.”
Head noted that AXA’s brokers are its eyes and ears in the marketplace and said his team is delighted to work with so many “fantastic brokers” who are as passionate as they are about the application of these risk management disciplines. They bring a lot of experience and expertise to the table themselves, he said, and go to great effort to make sure that they understand the risks they are presenting inside out.
“What I would say to our brokers in the market is that AXA is open-minded and open for business,” he said. “So, if you have a weird and wonderful risk and you don’t quite know where it fits, then give us a ring and we’ll chat it through with you and find out where the key exposures lie.”
What are your thoughts on this story? Feel free to share them in the comment box below.
