Dutch risk managers frustrated by insurers’ response to Covid-19 and hard market

Risk managers in the Netherlands are becoming increasingly frustrated by the attitude of insurers and warn that their behaviour may well damage relationships for the long term. Dutch risk managers taking part in our Risk Frontiers Europe survey are fairly angry at the attitude of many insurers, accusing them of vastly overreacting to the Covid-19 pandemic. “It is so difficult now to know whether our policies will cover us or whether insurers will declare a link to Covid-19 and then point to a newly added exclusion,” said Bernard van den Berg, director of insurance at Royal BAM Group. His views were echoed by others in the group. As one said: “There must be clarity and also some common sense. If we didn’t intend to buy cover for something – ie Covid – and insurers didn’t intend the policy to cover Covid, then we must all accept there really isn’t a valid claim.” “Insurers in some parts of the world, particularly the US, are facing having to pay claims for which insurance premiums were never collected. That is not fair, but it’s not fair either if insurers exclude other claims that would have been covered were it not for Covid,” they added. Mr Van den Berg said it was the same with the Millennium clause and then terrorism. “The insurers overreact and start adding clauses and then upset the other parts of the policies. All reason has gone,” he said. Annemarie Schouw, risk and insurance manager at Tata Steel Europe, agreed: “Suddenly, nothing is covered. Insurers are panicking and it’s not good for either side of the relationship.” The insurance buyers stressed that clarity is extremely important. “We need to know what is covered. For example, if we have a fire at our plant but one of the firemen has developed Covid-19 and can’t come on the call and the fire crew are delayed, the fire may become far worse. Will our insurers still pay out or will they use the Covid-19 clause? It is very unclear from these new wordings and we need to know. There is too much doubt out there,” said Mr Van den Berg. Part of this, believes Ms Schouw, is a result of being forced into virtual meetings. “You need to look people in the eye when you agree these insurance renewal programmes and be able to understand their intent. We know terms and conditions are tightening, so it is even more important that we all understand exactly what is covered,” she said. And one risk manager reported that insurers seem to be avoiding Covid-19 claims altogether. “We hear all the time that insurers are having to set aside so much money to cover Covid-19-related claims, but I am yet to hear of anyone who has managed to make a claim,” they said. “If Covid-19 is costing insurers so much, then why don’t we know about it on the ground?” The risk managers understand that the insurance industry cannot take on all pandemic risk and agreed that the economic fallout from Covid-19 will be enormous and beyond the capacity of any insurer. “If you look at the consequences, there is not sufficient capacity in the total insurance market to cover this,” said Mr Van den Berg. He believes that some sort of state-backed pandemic solution would be extremely useful for the SME segment, which has been hit so hard by Covid-19. Adri van der Waart, director, global insurance at Arcadis, said a pandemic pool would give certainty and trust. “But I think any pandemic cover would only work if it was not full cover and say stepped in over certain limits and operated purely as a proper backstop. Without such a solution, any insurer that offers cover will only be selling it at sky-high premiums that no one will want to pay,” he added. The group complained about rising prices, changing terms and conditions and higher deductibles in the hardening insurance market. While they understood the arguments from insurers about the need for sustainable portfolios, they again feel insurers are overreacting. “I think the market has gone crazy this year,” said Mr Van der Waart. “They are refusing to cover portfolios from which they have had few, if any, claims and which they have insured for years. We understand that now they are not just facing underwriting losses and also have been hit hard on the investment side of their business, but it seems they are using Covid-19 as an excuse,” he added. Overall, the group agreed that the most unfair element of insurers’ behaviour is that 20 years of relationship building seemingly counts for nothing in the current climate. There is real risk that when insurers next knock on the door looking for business, risk managers will keep it firmly closed, they warned. Meanwhile, the economic downturn is also likely to force companies to cut back on their insurance programmes. The combination of higher prices for less cover and a need to cut internal costs could well result in firms underinsuring in a damaging way, warned Mr Van den Berg. He fears it could effectively become a casino as people take such risks. Mr Van den Berg also fears a loss of experience in the insurance industry just when it is badly needed. “There was always a solid base of knowledge in the insurance market. But now I am dealing with people who have less experience. Those older, wiser heads are disappearing and it is causing us a problem. We may be old enough to remember the Millennium clause or the terrorism wordings being introduced. We know what happened, the impact and how it was eventually resolved. But now we are talking to people who have little knowledge of those market events,” he said.

Dutch risk managers frustrated by insurers’ response to Covid-19 and hard market

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