As 2020 becomes a thing of the past, we may wish to believe that we can leave it behind, but this is not the case. The truth is, it is important that we bring with us the lessons learned as we are still going to need them in the months to come. The recent good news of the vaccine for COVID-19 seems to have been somewhat offset by the speedy emergence of the new strain of the virus which spreads faster than the original. This acts as an anecdote that virology is going to be an increasingly important element of consideration, potentially for longer than we had assumed. For insurance, as a service which functions as a safety net for people during a time of need, this fact needs to influence permanent evolution in the profession.
For example, the business interruption insurance test case which the British High Court concluded in November should be considered as setting a precedent. How business interruption relates to this pandemic, and potentially others like it, needs to be something which the profession tackles proactively.
Last year also directly confronted the limits of standard private insurance protection in the modern age. The Association of British Insurers has confirmed that UK insurers expect to pay out £900 million in business interruption claims in response to the COVID crisis. This forms only part of the £1.7 billion that the sector is paying out for COVID-related claims across business interruption, travel, and event cancellation insurance. This shows the extent of support offered by the insurance profession during what were completely unprecedented circumstances and provides, to the public, an example of insurance at its best to be taken into the year that has now arrived.
But, as well as COVID-19, there are other challenges still coming down the pipeline for businesses in the UK, most significantly, the end of the transition period for Brexit. For insurance firms, the likelihood is that they may have to establish themselves as trading entities in both the UK and the EU in order to continue to write business.
In January 2020, I predicted that the biggest change coming for insurance was to be found in the changing culture of the profession. Upon reflection, though I certainly could not have predicted the magnitude of the impact that the pandemic would have, I think that I was correct. The financial services professions have proven time and time again that one of the most significant keys to success is the ability and willingness to be adaptable, and 2020 presented an opportunity to prove the value of that flexibility. The very fabric of our day-to-day living changed last year, and insurance needs to continue to adapt to these changes to remain relevant. The profession can do this by providing a service more angled towards helping people and organisations become more resilient as their circumstances change, through a blend of services that go beyond traditional products.
Ultimately, I believe that 2020 was a year where insurance showed that it really has worth, as much in its absence for many who thought they should have it or didn’t realise that they didn’t have it. Imagine if insurance had captured all of these potential beneficiaries as well. This is the real size of the prize for 2021, as the world brings in the new year with a need for optimism and renewed ambition. The insurance profession can continue to be the fuel for this journey onward, as it has been many times before.
