German buyers to ‘push’ insurers over claims and innovation

Dr Alexander Mahnke, chairman of the German risk and insurance manager association, Gesamt-verband der versicherungsnehmenden Wirtschaft e.V. (GVNW), told CRE that members continue to notice a “decrease in the quality of insurers’ claims handling”. Speaking ahead of the GVNW’s annual symposium in Munich, Mr Mahnke said the association will now “push” insurers on the issue of claims handling. However, the drive to improve the quality of claims handling is still in its early stages. “We want to discuss this issue with the insurance industry and see what can be done. There is interest in the market but some insurers bluntly refuse to accept that there is an issue with the quality of claims handling. Our counterparties first need to accept that this is the case,” he said.hideNear-term concerns over claims handling pale when compared with the bigger challenge of insurer innovation and the industry’s ability to demonstrate its value in today’s changing world of risk. The availability of capacity and competition is not an issue for commercial insurance buyers at present. However, risk and insurance managers are concerned about the value and relevance of cover, according to the GVNW. “I am concerned [about] the value commercial insurance brings to clients. We need to encompass the relevancy of risk transfer solutions and better tell this story to the businesses that we represent. If you go and see your CFO, you better be prepared to explain why it is a good idea for your company to spend money on insurance,” said Mr Mahnke. He believes that over the years the insurance industry has lost its ability to demonstrate value. “There are a number of good reasons why commercial insurance makes sense to corporates and insurance risk managers, but insurers and brokers need to be able to provide good answers when the questions around value are asked. We need to be able to transparently explain why we spend money on premiums,” said Mr Mahnke. Insurers are being challenged by the changing risk profile of German companies. In the past, risk managers were able to take out insurance for the risks that were important to their companies but the relevance of cover has decreased as corporate risks change with growing speed, according to Mr Mahnke. “As you move along the value chain, we see more and new risks emerge – for example, business inter-ruption has become more important, with the increased complexity of supply chains,” he explained. “We see a growing gap in the cover companies may get from insurers and what the industry is willing and able to offer. If this continues, commercial insurers will lose relevance,” he said. If insurers fail to respond to their clients’ needs, more and more risk will be held on company balance sheets or self-insured under large deductible structures and through captive insurance, Mr Mahnke warned. Innovation is not “embedded in the minds” of the insurance market, Mr Mahnke warned. “It is not a lack of want or ability, but the market has lost the knack to innovate. It used to have it – but not so anymore,” he said. “The insurance industry is boiling in its own soup and all of a sudden people may start to ask: why are you still here?” he continued. According to GVNW’s chairman, the lack of innovation is related to insurers’ limited understanding of their clients’ risks and the need for more bespoke risk transfer solutions for large corporates. For example, German industrial groups are facing a changing risk landscape with Industry 4.0, the digitalisation and automation of manufacturing and heavy industry. Insurers are struggling to keep pace with such developments and offer adequate risk transfer solutions. “Our partners need to understand the risks our industry faces, such as with Industry 4.0. We need people working on the insurance side that are interested, capable and can technically understand what we are doing, [as well as] the effect on the risk landscape and how to go about transferring some of that risk to our partners,” Mr Mahnke said. “We are looking for partners that understand our risks and that can provide the right financial solutions,” he added. There is concern among German insurance buyers that some traditional insurance systems are not good enough, or no longer have the same importance for large companies and certain sectors as in the past, according to Jörg Henne, the recently appointed managing director of the GVNW. Topics like Industry 4.0 will challenge existing risk and insurance concepts, he believes. “We will look to lobby and work with insurance partners on development in industry, and make sure they are met by developments on the insurance side,” he said. Insurers need to be more open to individual risk solutions and work closely with companies to deliver, believes Mr Henne. Rather than focussing on traditional risk transfer methods, insurers need to ask what they can underwrite and how they can find new solutions to help transfer risk from clients’ balance sheets, he added. For example, suppliers face increasing contractual risk in addition to liability exposures that are more easily transferred to insurers. While insurers have not been willing to insure contractual risk in the past, some are now beginning to do so, explained Mr Henne. GVNW can play an important role in encouraging insurer innovation for both large companies and small to medium-sized enterprises, according to Mr Henne. “We can support the development of market standards and look critically at new concepts. GVNW can listen to the concerns of members and transfer their needs to the insurance market,” he said. Smaller companies face similar issues to large companies – such as cyber risk – but may find they are not able to get the solutions available to large corporates, explained Mr Henne. “We have a duty to raise awareness of risks where there are not solutions or where they may not be available to all companies,” he said. German insurance buyers are also growing more “cautious” when dealing with insurers that face challenging market and macroeconomic conditions. In particular, there are concerns about the performance of some large insurer groups, which have announced substantial job cuts following disappointing results. “We not only pay for capacity, but also for service. Some insurers have announced layoffs and this has the potential to hit services. When choosing insurance partners, it is important to not only look at capacity and price, but also underwriting, claims and other services,” said Mr Mahnke.

German buyers to ‘push’ insurers over claims and innovation

Want to read this article?

Read Next

AXA P&C increases premiums by 7% as rates rise at AXA XL

Hong Kong and Shanghai to cooperate on captives and ILS

Swiss broker Kessler names head of special risks

Supply chain cyber risk concentrated in 15 top vendors with ‘below average’ cybersecurity

US insurers expected to increase casualty pricing as social inflation rises

AXA P&C increases premiums by 7% as rates rise at AXA XL

Hong Kong and Shanghai to cooperate on captives and ILS

Swiss broker Kessler names head of special risks

Supply chain cyber risk concentrated in 15 top vendors with ‘below average’ cybersecurity

US insurers expected to increase casualty pricing as social inflation rises

Want to read this article?

Read Next

AXA P&C increases premiums by 7% as rates rise at AXA XL

Hong Kong and Shanghai to cooperate on captives and ILS

Swiss broker Kessler names head of special risks

Supply chain cyber risk concentrated in 15 top vendors with ‘below average’ cybersecurity

US insurers expected to increase casualty pricing as social inflation rises

Related Articles