Airmic warns insurers to change response to pandemic and stand by customers

UK risk management association Airmic has warned insurers to change their response to Covid-19 and stand by their customers when interpreting ambiguous wordings, or risk creating a schism that may drive them away for good. The association has urged more “fairness and flexibility” when it comes to both claims and renewals. In a statement following member consultation, Airmic called on the insurance market to adopt a more “responsible and business-sensitive” position on the Covid-19 pandemic or risk long-term damage to trust and reputation, as well as a loss of customers. Airmic believes insurers have a choice. “They can either interpret ambiguous contract wordings with their balance sheet in mind, or they can act as partners to longstanding customers who seek business protection. All parties will benefit from a partnership approach to the current crisis,” it said, implying that practices to date have not pleased the buyers’ association. “With many corporates facing an existential threat from global governments’ lockdown measures and a deep recession likely to follow, we expect brokers and insurers to demonstrate fairness and flexibility with regards to claims and renewals. The harsh market is already straining relations with many corporate clients, and insurers’ rigid interpretation of wordings regarding the pandemic could accelerate this deterioration,” Airmic added. CEO John Ludlow warned that the insurance industry is at a critical juncture. He said members surveys suggest the hardening market is already forcing businesses to look at alternative transfer options, and an ill-judged response to the pandemic could prove the trigger. “We understand insurers are under stress but it is in the interests of all parties that we work together openly, constructively and collaboratively. For years, insurers have said they want to be business partners with our members. Now is the chance to put words into practice,” said Mr Ludlow. The association and its members want to see more constructive dialogue in wording disputes and a willingness to look favourably on claims grey areas when it comes to Covid-19. But it clearly has concerns beyond claims payments. It wants the insurance market to recognise the cumulative impact of the ongoing harsh market and pandemic on renewals. Airmic has specifically called on insurers and brokers to avoid last-minute and poorly communicated changes in underwriting policy, including cover limits and exclusions. UK buyers also want a commitment to avoid Covid-19 exclusions on D&O policies. Furthermore, Airmic has called for flexibility in cover and rebates for reduced risk exposure as a result of current trading conditions and business operations. Its members also want to see business interruption covers that are “fit for modern business risk profiles”, which may include the increased use of parametric tools to protect cashflows. And finally, Airmic has advocated greater collaboration and communication between businesses, insurers and brokers to allow innovation and opportunity to emerge from the pandemic crisis. The association has also reiterated its support for national catastrophic pooling and reinsurance mechanisms to manage and transfer pandemic risks. “They must, however, be embedded in broader national and international risk strategies and should themselves be pooled to ensure the efficient use of capital. Airmic believes a truly collaborative approach, joining up the public, private and academic sectors, may be the only long-term option and Airmic is working with industry and government bodies to explore how to turn this into a reality,” it said.

Airmic warns insurers to change response to pandemic and stand by customers

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