McGloin calls for insurers and brokers to change model

When he takes on the role from current chair Nicholas Bailey at the close of the annual conference in Brighton, Mr McGloin is to focus his efforts on trying to persuade insurers and brokers to change their ways. He wants to see the industry do more to remove conflicts of interest, embrace technology to provide more information and an efficient service and provide certainty of claims. "The business models of insurers and brokers need to change," said Mr McGloin, who is currently Deputy Chair of Airmic and risk manager at Invensys Plc.hideIn addition to representing the interests of their corporate clients, a great deal of broker activity is focused on the insurance market, where they act as the distributors of insurance products and provide information and claims services to insurance carriers. Conflicts of interest are of growing concern and brokers need to differentiate more on service, said Mr McGloin. "This is a big challenge for the insurance market. It is difficult to represent customers if you also act in the interest of capacity suppliers," he told Commercial Risk Europe. Risk managers and associations such as Airmic have also raised concerns over perceived industry intransigence. "Insurers and brokers like the status quo and do not want to take risks and embrace change," said Mr McGloin. Growing dissatisfaction among insurance buyers over claims certainty is a key area that demands changes to the industry business model, according to Mr McGloin. "It is clear that insurers do settle a large amount of claims. However, while insurers are settling volume claims well, there is concern around the settlement of large claims. Customers face uncertainty over how much will be settled and there is concern that if a company's balance sheet is threatened that the insurance may not respond," he said. The changes to Insurance Contract Law proposed by The Law Commission and supported by Airmic may provide an ideal impetus for change, but other issues will need to be addressed by brokers and insurers, said Mr McGloin. For example, they could improve the way that primary and excess programmes are stitched together to provide more certainty. "The change in Insurance Contract Law could be a significant driver to look at the broader way in which insurers and brokers respond to their clients' needs. But it is just one step and it will not deal with all the issues," he said. If insurers and brokers want to improve claims certainty they could do so even without a change in the law. "Insurers could contractually agree to remove the obstacles to fair practice - they could be written out of policies - but the tendency is to not rock the boat for tried and tested practices. But clients are saying that these tried and tested practices do not give certainty," said Mr McGloin. Airmic has produced guidelines and standard clauses to neutralise some of the more onerous policy wordings used by insurers, such as reservation of rights, non-disclosure, and more recently, basis clauses. Some insurers say they do not use such wordings unfairly to settle claims, but such practices remain an issue in the market, he said. Mr McGloin would also like to see insurers and brokers produce better information on claims settlement, so that risk managers can see what is happening with a claim in a more timely fashion. "More can be done on sharing information, pre-loss risk mapping and learning lessons post-loss," he said. The current business models of insurers and brokers were developed in the pre-internet age, and the industry could make better use of technology, explained Mr McGloin. "There is a great opportunity for the market to provide information on risk, risk modelling and claims. But I am not sure the industry has quite got its mind into gear on that issue," he said. Insurers concern that buyers would not be willing to pay for greater claims certainty may be one reason why they have held back development, suggests Mr McGloin. "There are clients that just want the cheapest product to fulfil contractual obligations, but there are many others that want to buy real mitigation against risks and would be happy to pay more for products that respond. Insurers should recognise that demand for a high quality product," said Mr McGloin. Airmic continues to act as a catalyst for change in the insurance market, said Mr McGloin. "We are not the lone driver for change. There are brokers and insurers that recognise the issue, but there is a general inertia against change. But there is more money to be made if the market can come up with better quality products," he explained. However, when developing new products, insurers and brokers need to consider the needs of clients and be more transparent about how these needs are met by demand, said Mr McGloin. The deal earlier this year between Aon and Berkshire Hathaway to develop capacity at Lloyd's for large risks is a good example of innovation, said Mr McGloin. But it is not clear how the facility will deal with the issues of most concern to risk managers, such as cyber and supply chain risks, he said.

McGloin calls for insurers and brokers to change model

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