Businesses operating in the automotive, technology, manufacturing and property sectors have complex insurance requirements and therefore, taking a proactive approach to underinsurance is vital.
To avoid underinsurance, businesses can take proactive steps to ensure that their insurance coverage adequately reflects their needs and potential risks.
Insuring your commercial property for an incorrect value, or setting your limits too low results in underinsurance, which can have serious and often devastating consequences for businesses.
Insuring your commercial property for an incorrect value or setting your limits too low results in underinsurance, which can have serious and often devastating consequences for businesses. Therefore, in the unfortunate event of a claim policies will not operate as intended, delivering less indemnity than needed following a loss. Ultimately, this could put a business’s ability to recover in jeopardy.
Difficult. Done Well.
Read our latest case study to see how Jason Cohen, Head of Business Development at Hamilton Leigh helped a CFO Centre client in placing a global insurance programme at a competitive rate in a highly efficient timeframe.
Background
Jason Cohen began engaging with CFO Centre client, Stuart Hood, who is an international leading advisor working within the energy, refining and chemical sectors. Jason provided advice and assistance around the placement of one of Stuart’s clients’ global insurance programmes.
Challenge
The UK Limited company, with international presence, were part of a global insurance programme stemming from the US but given potential forthcoming structural changes, Stuart was keen to explore an insurance programme that stemmed from the UK and could then cover the business on the same international basis of cover.
Stuart and Jason Cohen engaged extensively to discuss the covers the business currently had in place, the markets available and the practicalities around structure of programme. It transpired that this particular year was not the right time for the business to move their insurances but nonetheless, Stuart took great value from his interaction with Jason to understand that this could be done and how.
Solution
The following year, Jason and Stuart put their plan into action and at this point Jason engaged the international team at Specialist Risk Group (SRG). On this case, matters were led by Kevin White, Account Director. Kevin and his team are incredibly experienced and knowledgeable about their markets on a global level and in almost every case give a very understated account of what they do how they do it. The truth is their service level and expertise are invaluable in such complex placements.
SRG’s international team have a vast amount of experience working with global insurance markets, this was paramount to ensuring Stuart had the most comprehensive insurance coverage which captured all elements of risk across the regions they operated within.
Following a detailed review of the Group’s insurances, which involved an in-depth gap analysis of the existing policy wordings, SRG’s international team carried out an extensive marketing exercise which included London, US, and Asian markets.
Outcome
SRG’s international team utilised their Worldwide Broker Network membership relations to ensure that the current insurers were advised of Hamilton Leigh being the newly appointed broker, and to formalise this appointment and access local markets in the US for the Professional Indemnity and Cyber policies.
Working in partnership with their US markets, SRG’s international team were able to secure continuous Cyber cover, with broader worldwide coverage at a competitive rate. Similarly with the Professional Indemnity and Directors’ and Officers’ policies, SRG’s international team negotiated competitive premium rates with insurer’s in the name of the Top Company, which was based in the British Virgin Islands, ensuring global cover for the entire group.
Stuart was incredibly complimentary of the work carried out by Jason Cohen and SRG’s international team quoting “Jason has proven to be an invaluable partner for me and various clients, supporting us in not only obtaining a competitive price but more importantly reviewing the suitability and in some circumstances adequacy of cover. On this particular case, it was vitally important that our cover remained stable and at competitive premiums. Given the more complex nature of this business case mentioned, I am very grateful to Jason and his International counterparts for making it such a seamless process.”
Following BT’s recent announcement of the withdrawal of their Redcare Alert security system, our latest blog discusses how to select a new security system.
Any business that relies on computer systems to store or transfer data is exposed to cyber risks. In today’s digital world, this is most businesses. With more businesses than ever investing in Cyber insurance, we have outlined five things to consider if your business has not purchased this type of cover
In their positions, Directors and Officers have specific duties, responsibilities, and powers. One incorrect move or decision means they can be personally scrutinised by employers, shareholders, and regulators and therefore board engagement with Directors and Officers (D&O) also known as Management Liability insurance, is vital.
We previously held a webinar with expert panellists Gary Gallen, Founder and CEO of specialist law firm rradar, and Nick McGarey, Underwriter at Beazley, who mentioned that in both the legal and insurance sectors, they are seeing an increase in litigation and claims against businesses and senior management teams.
Our panellists provided the following top tips to protect yourself as a Director/Officer:
It is important to remember that Executive Directors, Non-Executive Directors, Shadow Directors, and Officers, including those who have retired, can be held culpable for Directors and Officers claims so now is the time to consider your personal protection.
We are here to help
If you would like to discuss your personal exposures further, or for more information about Management Liability insurance and what it covers, get in touch with Jason Cohen:
Claims inflation continued to be a priority topic for insurers in the UK and worldwide. Increased litigation costs, increases in psychiatric injury claims, and expensive commercial care packages are creating challenges for insurers.
According to Lloyd’s of London, claims inflation refers to the change in the cost of claims of a like-for-like policy over a period1. Claims inflation is the sum of ordinary economic inflation and excess inflation.
Excess claims inflation is the increase in the cost of a claim beyond that of ordinary economic inflation, which is driven by many different types of inflationary factors such as:
In addition to the above economic excess claims inflation factors, social inflation is a subset of excess claims inflation. It is referred to as social inflation because the increased costs are largely attributed to social trends or movements. The ‘social trends’ that are increasing the volume and costs of claims include:
The cost-of-living crisis, professional services spend, the cost of care, and new categories of claims are key inflationary factors driving up the volume and cost of personal injury claims. For example:
The impact of COVID-19, greater use of social media, and the impacts of the cost-of-living crisis have been identified as some of the reasons for the increase. It is also speculated that awareness efforts have contributed to the rise in individuals seeking help for their mental health. In early 2023, the UK government announced £150 million of additional funding would be allocated to mental health services.
Employee mental health and wellbeing have also become a strategic business priority, which is now part of the ‘S’ of their ESG strategy. Simon White, ESG Director at MX Underwriting talks about what the ‘S’ means in ESG here.
Increasing care costs are a significant reason for claims inflation in England and Wales. This has impacted both claims for non-commercial care voluntarily provided by family and friends as well as commercial care required in more complex cases.
Commercial care costs for both directly employed and agency care have also been driven upwards by a shortage of carers and the rising cost of living. Brexit, the pandemic, and a lack of suitable candidates have helped drive these shortages at the very time when there is an increasing demand for care due to the aging population.
In addition, the care sector is suffering from high turnover rates and poor staff retention with other sectors offering better pay, more sociable hours, and better working conditions.
Amputation claims have been subject to hyperinflation in recent years and there are several reasons for this trend. The costs of prosthetic devices continue to increase which can be partly attributed to continued technological developments designed to increase levels of function for amputees.
However, even without technological advancements in prosthetic devices, the market is typically seeing price increases of between 5% to 8% per annum for the same products caused by a combination of general economic pressures in the UK and limited competition in the industry.
New surgical techniques such as targeted muscle reinnervation (TMR) or osseointegration (where a titanium rod is implanted into the stump to which the prosthetic is attached rather than the conventional prosthetic socket) can also add an additional layer of costs.
The recent judgments of Swift v Carpenter [2020] and Riley v Salford Royal NHS Foundation Trust [2022]2 have assisted claimants in their efforts to push the legal boundaries and are often cited by leading claimant firms in relation to accommodation, life expectancy and loss of earnings.
Finally, the catastrophic nature of injuries suffered by amputees means that there are often claims for inter-dependent losses of accommodation and care which have also been subject to inflation in recent years.
Fraudulent claims typically rise during economic downturns. This flux and uncertainty compared with previous economic downturns causes delays in claim processes and increases costs.
The economic downturn has also seen a significant rise in opportunistic property claims in both residential and commercial lines. In commercial lines, arson and escape of water claims remain prevalent as COVID-19 bounce-back loans and general government support have been withdrawn
Specialist Risk Insurance Solutions (SRIS) Claims Director, Justin Welham, comments:
“Whilst not as obvious as the property sector, claims inflation is also starting to have a real impact on casualty claims.
Rising inflation means that the Judicial College guidelines, used to assess general damages claims for pain, suffering and loss of amenity, are quickly out of date and claimant solicitors are looking for higher damages.
We are already starting to see a relatively sharp increase in the average value of general damages paid, which in turn will drive up renewal premiums. As part of our risk management offering, we actively engage with clients to ensure that the appropriate loss control measures are in place to prevent accidents occurring in the first place.
When accidents do happen, our award-winning claims team are on hand to walk the client through the process every step of the way.”
For more information on claims inflation and how this may impact you get in touch with our expert team.
Find out more about what’s driving Motor claims inflation.
Sources:
1 https://assets.lloyds.com/media/8a9d0449-0d0d-41f4-bf76-7de7bc289293/Allowing%20for%20Claims%20Inflation%20in%20Reserving%20-%20Lloyd%27s%20Reserving%20Thematic%20Review%202022.pdf
2 https://www.dacbeachcroft.com/es/gb/articles/2020/october/swift-v-carpenter-the-answer-to-accommodation-claims-or-just-a-halfway-house/#:~:text=Published%209%20octubre%202020&text=In%20summary%2C%20the%20Court%20allowed,discount%20rate%20of%20%2B5%25.&text=Roberts%20calculation%20(%2D0.75%25%20DR,%2D%C2%A3371%2C385%2C%20so%20NIL
In 2021, the COVID-19 pandemic was dominating news headlines, now, the cost of living and inflation rates are today’s headlines – but how did we get here? This article drafted by our Group claims specialists provides an overview of some of the specifics that are driving inflation rates and as a result, claims inflation.
The impact of Brexit has disrupted supply chains because it has called for new negotiations for cross-border trade. This has resulted in added cost, complexity, and delays in shipping. Some suppliers have even downgraded the UK as a priority market because of Brexit.
Brexit also created a skill shortage, and regulatory changes have made working in the UK less attractive to EU nationals who are increasingly returning home.
UK unemployment is low, which has resulted in high vacancies and more competition for increased salaries, the lack of skilled labourers required for construction, alteration, and reparations of buildings.
The world is seeing record highs in the cost of petrol and diesel, which has been driven by supply challenges. Freight shipping costs have more than doubled since 2020, and machinery and plant have longer lead times as a result, particularly with items that are manufactured outside of the UK1.
We are also beginning to see major impacts of global warming, in the form of increased storm and flood frequency and severity. This coupled with inadequate investment in drainage infrastructure in the UK is adding to the damage.
For example, Flood Re estimates that flooding will have increased between 25% and 80% by 2050, depending on the rate in which weather temperatures increase2.
Specialist Risk Insurance Solutions (SRIS) Claims Director, Justin Welham comments:
“In the property market we’ve seen post-pandemic supply chain bottlenecks, higher energy and transportation costs, and shortages of labour all contributing to higher inflation in 2022.
In 2023 we’ve seen that the war in Ukraine has further fuelled global inflationary and supply chain pressures, causing price shocks for a wide range of commodities, including energy, food and construction materials. This Supply chain disruption and rising prices are driving up replacement and rebuilding costs for property and construction claims.
This will inevitably leave companies exposed to under-insurance across their property portfolios. Our team continue to work closely with our clients in terms of costs mitigation and making sure that their property portfolio sums insured have been recently reviewed to avoid the pitfalls of under-insurance.”
Find out more about why claims inflation in relation to liability.
Sources:
1 https://www.axaconnect.co.uk/siteassets/broker-documents/commercial-lines/product-support-documents/guide-to-property-claims-inflation.pdf
2 https://www.floodre.co.uk/wp-content/uploads/Flood-Re-Response-to-Principles-20Aug2020.pdf