German risk managers call for greater flexibility and partnership from insurers as virus bites

German risk managers are becoming increasingly frustrated by the inflexibility of the insurance market in its response to the Covid-19 pandemic and are asking what happened to the promises of long-term partnerships with customers that were used to help gain significant price increases at recent renewals. The leading insurers will find coming renewals discussions with German risk managers increasingly tense if they try to push for further significant price increases to bolster their coffers and help them weather the current economic and financial storm, if they are not directly linked to loss experience and exposures. What the risk managers want and need is a more flexible approach and creative solutions to help them weather the storm too. If insurers play hard ball with their leading corporate and smaller business customers in Germany during this crisis, they will be shooting themselves in the foot in the longer run, leading representatives of the German risk and insurance management association GVNW told Commercial Risk Europe. “If the insurers use the crisis as an excuse to impose strong price increases across the board to simply help them through the crisis, then this would not be acceptable. They talked of long-term partnerships and collaboration as they pushed through price increases before the onset of the pandemic. Sadly, we are not seeing a lot of evidence of that partnership now,” said Alexander Mahnke, president of GVNW. The lack of response from business interruption (BI) coverage to the virus is a problem in Germany just as it is across Europe and worldwide, particularly for smaller companies in the retail sector that will have assumed they would be covered for the pandemic risk. The German insurance association GDV was just as quick as its colleagues across Europe to issue a ‘clarification’ on its website, which states clearly that BI policies do not cover the virus unless specific pandemic coverage was proactively bought. This was rarely the case, so very few companies are covered under their BI policies, it explains. “Few companies have cover for this type of risk. There are policies covering loss of earnings due to business interruption. Organisers of concerts or trade fairs can also take out cancellation cover for their events. However, in those instances, cover normally only extends to fire, theft, storm or other natural hazards. It is possible to widen the scope of the cover – for example to business closures due to infectious diseases specified in the contract. However, that is rarely the case,” states the GDV. Mr Mahnke and his colleagues at GVNW – joint managing directors Jörg Henne and Reiner Siebert – told Commercial Risk Europe that they recognise that most companies will not have BI cover for the pandemic but pointed out that there will be exceptions and cases where the cover is valid. In such cases, the insurers need to show flexibility and be creative, they said. “You cannot lump all the insurers together and say they are all taking the same approach to insurance for the virus. But there are certainly cases where the coverage for the virus is vague and not clear. In these cases, creative solutions need to be found to avoid drawn out and expensive legal action as is already happening in the US and which really does not help anyone,” said Mr Mahnke. There are other more practical ways that the insurance market can help customers during this crisis and show a more innovative approach, added Mr Henne. “We are seeing cases of large companies that the insurers are normally very keen to work with being treated unfairly. One member simply asked their insurer defer payments. The management board asked whether the premium could be deferred in the millions or changed from annual to monthly payments. The insurer rejected the deferral and asked for interest on the monthly payment. This is not an isolated case,” he said. Mr Mahnke stressed that not all insurers are being inflexible during the crisis and should not be tarred with the same brush. The GVNW president pointed to one recent example of positive cooperation and compromise that was agreed by insurers, business associations and the Hotel and Restaurant Association in Bavaria, which was brokered by the Bavarian Ministry of Economic Affairs. Under this agreement, which will hopefully be extended across Germany, a number of insurers including Allianz have agreed to pay roughly 10%-15% of the 30% of BI losses incurred by restaurants and hotels but not covered by state and federal aid. “The Bavarian Ministry of Economic Affairs has now worked out a solution together with the industry associations and insurance companies. The joint recommendation stipulates that insurers will pay between 10% and 15% of the daily rates agreed when the company closes, and pay them out to the restaurants and hotels,” explained the ministry in a statement, adding that other insurance companies have already signalled their support and any contributions are voluntary and do not represent any recognition of liability. Economics minister Hubert Aiwanger said: “The result today is a viable and sensible solution for both sectors. The signal is clear: Bavaria will not let restaurateurs and hoteliers down in the crisis. We are in an unprecedented situation. I am therefore very happy that insurance companies, the VBW [chamber of commerce] and the Hotel and Restaurant Association have agreed on this approach. In view of the tense economic situation of many companies, it would be extremely desirable if other insurance companies would now follow this recommendation.” Mr Mahnke said such an initiative is clearly good news. But he warned that as they prepare for the next round of renewals, insurers still need to think long and hard about the true meaning of partnership. The GVNW has always had a positive, constructive and – when necessary – challenging relationship with the insurance market. Its events have always delivered open and honest discussion between carriers, brokers and customers, and the association works hard to represent the interests of all German companies that buy insurance – large and small. The reaction of insurers to this current crisis is being watched closely and they need to tread carefully if they want this positive relationship to continue after the crisis.

German risk managers call for greater flexibility and partnership from insurers as virus bites

Want to read this article?

Read Next

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Want to read this article?

Read Next

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Related Articles