Insurance sector must deal with trust issues
There has been a lot of talk this last month about a lack of trust in the insurance sector. A leadership reshuffle at the Association of British Insurers (ABI) was prompted by a bid to “redouble the industry’s efforts to boost customer trust” and enhance the sector’s reputation.
Recent research suggests the level of trust between insurers and insureds has seldom been lower, and not just at the consumer level but also among corporates both big and small. Of course, the pandemic has not helped. An opportunity to demonstrate the value and effectiveness of insurance has not been taken.
Instead, there are numerous business interruption (BI) claims waiting to be resolved, some of these via the courts.
Most worryingly, a report produced by Guidewire Software shows that the demand for pandemic insurance, described as coverage for pandemic-triggered losses, has gone into reverse since last year.
The Love, Hate or Indifference study of insurance attitudes shows that the demand for pandemic-related coverage against job loss or sickness has gone down, and only protection against identity theft has gone up, by 2%.
The figures are in contrast to the rest of Europe, where the demand for pandemic insurance remains high.
The lack of trust was evident before the pandemic, however. A study by EY in May 2019 found that 55% of insured clients and 68% of uninsured people believed that insurers would do what they can to avoid paying claims, despite the fact that 95% of claims are paid.
Affordability was cited as a reason and this same issue is evident in 2021. A June study found that many small businesses in the UK are struggling to pay their insurance bills and are turning to credit.
The concern is that we will see a rise in underinsurance at a critical time. Many UK businesses will be boosted by the planned reopening of the UK economy later this month – the hospitality sector for one. However, the proposal to drop or ease many Covid restrictions, such as mandatory mask-wearing, creates a new set of liability concerns.
To add to the concern, many business support schemes are coming to an end.
National chairman of the UK’s Federation of Small Businesses, Mike Cherry, has called for clear and comprehensive guidance from the government and said: “Risk must not be passed on to small-business owners.”
Others have called for a state-backed insurance scheme.
This a critical time for UK businesses and another opportunity for the insurance sector to prove itself.
“We must lift our ambitions and work closely with government and regulators on the challenges ahead,” said newly appointed ABI president Barry O’Dwyer. It is hard to disagree.
