Franck Baron, chairman of Parima, used his closing remarks at the association’s Resilience Week to warn insurers that they cannot expect customers to bolster their profits by accepting higher prices if they are not willing or able to tackle their own bloated cost bases and inefficient systems.
Mr Baron accepts that Parima members enjoyed the long soft market along with their peers across the world for a long time. But he pointed out during his closing address at the end of the virtual conference that the reaction of the insurance market has been too swift and brutal.
He said risk managers and their partners in the broking and insurance sector need to work more constructively to avoid such knee-jerk reactions in future. They also need to work collectively to convince fellow managers that insurance is a long-term risk financing tool that is a critical element of the common strategy to achieve greater resilience.
“Many Parima members are suffering from the hardening market and some don’t know how to cope. My first message is: do not isolate yourself. Reach out to your partners and raise your profile, show the quality of your risk management, don’t hesitate to reach out and push the boundaries,” said Mr Baron.
“I have seen too many people look at this as a short-term business, trying to get the best price in a very opportunistic manner. This sends the wrong message about insurance procurement. This is a long-term challenge. We have to challenge the insurance market but also ourselves as risk managers to make sure that risk financing and insurance procurement are seen as a long-term tool for the organisation to help with resilience,” he continued.
“Let’s be honest, we face a hardening market because this market has been extremely soft for 15 years and this is not right. Insurers in the Asia-Pacific region have not been recognising the impact of natural catastrophe exposures in the race for market share and revenue. They did too much so we can blame the market for this hardening market, which is too stiff now,” said Mr Baron.
“But we have not seen the insurance or banking industry fixing their own houses. We have not yet seen tangible improvements in the way they are addressing basic areas: policy issuance, premium invoicing, claims management and so on to make the process flawless and faster, but also their own costs. I do not think that risk managers should be the victims for this lack of efficiency,” he added.