Most months, when it comes to composing this column, the most difficult question is what subject to write about. It needs to be interesting, recent and, ideally, something to do with insurance. But it also needs to be something other people haven’t written about. As yet another sign of how all our lives have changed these last few weeks, this time I am not faced with such choices. Coronavirus, the nation’s and our industry’s response are the only topic of the day. So here are a few musings that have come to me over the last couple of weeks as I have adapted to life away from EC3.
Catastrophes such as the world is currently facing are an opportunity for insurance to shine. Reacting to crises and putting people’s lives back together is what we do best. But equally they are fraught with challenges. To the wider public, the argument ‘if you are not covered you cannot claim’ is very hard to accept. They see this as insurers trying to weasel out of claims.
It is natural to assume that, if a business has bought business interruption insurance, when its business is interrupted it will be insured. The idea that, somewhere along the line, a broker will have offered to extend that cover to provide for a circumstance that the client could not conceive happening and which they then declined is alien to most people. What they do see is an industry not responding to a national emergency.
So, we need to do something to compensate. Clearly paying claims on policies without coverage would be an existential threat to the sector and that is in no-one’s interest. But if government money was to be made available to help the worst affected, the most efficient mechanism of getting it to the needy would be to utilise our claims infrastructure. Money would get to the right people faster and more efficiently than anything government could put in place. And it would keep free government resources to deal with other aspects of the crisis. This discussion is already in train both here and in US. It is similar to the model delivered to provide continuity of coverage in the trade credit market in the wake of the financial crash in 2008.
That would be a solution following the key principle for our reaction to the challenge – put customers first. Yes, firms have shareholders and other stakeholders to consider. But their interests are best served by doing the right thing by the client. So, insurers need to be sympathetic to the need to extend policies on current terms if there are difficulties getting broker and underwriter together to renew. They need to accommodate extended premium payment terms for the businesses that need them. And they need not to seek to introduce blanket, and often poorly worded, exclusions to policies that can seek to confuse more than they clarify coverage. Remember London is the market where the world takes risks, not the market where we seek to remove it at all possible junctures.
Regulators can play their part as well. Now is very much the time to supervise to principles not rules. All our firms have the sizeable majority of staff working remotely. In large part this is working very well. Use of our electronic trading platforms is increasing and commerce continues. Our operational resilience is bearing up. But it won’t be perfect. There will be areas where complying with the letter of the handbook will be very challenging. We have already raised with the FCA that, where firms are still receiving cheques from clients, banking them within the prescribed time limits in the client money rules may not be possible. But we will still be working to the spirit of minimising risk to those clients. Equally some regulatory reporting may be more difficult away from the office – especially where it is the responsibility of extremely stretched staff, and an understanding on the part of the FCA is important. Thus far they seem to be recognising this. We are in frequent contact and the mood is very much “what can we do to help?”
It is going to be a while before we all convene again in and around Lime St. And the world we go back to is likely to be very different to the one we knew before. Electronic trading will be the norm. Physical face to face negotiation will not have happened for months and yet the sky will not have fallen in. A remoter, systems-based process will have prevailed. But the core of our culture will not have been compromised. Finding ways to make the most difficult things work; providing the oil that helps the global economic machine whir away; delivering complex solutions for our sophisticated clients. That is what we do through good times and bad. Let us keep on providing the foundation upon which everyone’s lives are built.
