Tackling the big risks

We spoke to Claire McDonald, country manager for the UK and Ireland at Risk Frontiers Europe sponsor HDI Global, about the big issues facing risk managers, including Brexit, claims and other key topics.

Uncertainty, mostly as a result of Brexit, continues to impact the insurance market and its customers, not least as businesses grapple with potential implications for their multinational insurance programmes.

Claire McDonald, newly appointed country manager for the UK and Ireland at HDI Global, said many insureds and their insurers are still working through their options, as everyone remains unclear about what might happen next.

“The Brexit decision may have been pushed back to October,” she said, “but we still need time to prepare for the final decisions and many businesses are definitely concerned about that.”

She puts the Brexit saga in her top three risks for the year ahead, stressing that HDI Global can help customers in both a pre- and post-Brexit world.

Beyond that, she sees cyber as a continuing challenge for insureds, partly because the speed of technological change means a continuous re-evaluation of exposure and scenarios.

“It is still a relatively new class of insurance and there are still questions. For example, what limits should you buy and how, as an insurer, do you measure the accumulation risk?” asked Ms McDonald.

However, she believes the decision about whether or not to buy cyber cover has moved on to questions about what to buy. Insureds simply cannot afford not to have cover any more, she argued.

“Recent attacks, such as the one on Marriott, should show insureds that the risks are very real and they cannot afford not to buy cover,” stressed Ms McDonald. “For some companies, there are still questions around quantifying the risk. And for some, the question is really about survival – the damage done to their reputation can simply put them out of business.”

She believes a separate cyber policy is the best transfer solution because it allows insureds to feel confident about what is, or is not, covered, and ensures nothing falls through the gaps.

She said cyber risk has become an all-pervasive spider’s web, cropping up in the most unexpected parts of a business. “Who thought a few years ago that hackers would be able to invade a car system and take control of the vehicle? Everything from our fridge to our kettle is becoming connected, and those myriad links contain risks we never dreamed of a decade ago,” Ms McDonald said.

Her third-largest risk for the year ahead is natural catastrophe. “In recent years, we have seen so many one-in-100-year floods, hurricanes and earthquakes – and they are all getting more and more expensive,” began Ms McDonald.

Adding: “I think the insurance industry is well placed to assist companies with this – we have an immensely rich pool of data that can help inform risk managers. We see best practice in action amongst our clients and can share those experiences.”

Ms McDonald believes that helping customers become “more resilient” is crucial. That can be through advising on their business locations or sharing best practice.

“Most of the businesses we insure will have some sort of foreign exposure too, whether that is with physical plants or through a complex supply chain. But even if you look at the UK only, we are seeing snow in May, or unnaturally high temperatures as we did last summer. Subsidence has hit record highs in the past year, while flash floods are on the increase. We can expect denial-of-access claims to rise as companies are affected by these events,” the insurer warned.

In terms of the insurance market itself, there are signs of change, according to Ms McDonald. For the first time in a long time, prices and terms and conditions are on the move upwards, she said.

She welcomes the change, saying it will create a more sustainable insurance market. “It is a sign of maturity and integrity that we have been open about our need to make these changes and now it is clear that we are not alone in shifting prices upwards towards sustainable levels,” she said.

Transparency is key, however. Ms McDonald believes in being able to have honest conversations with insureds.

“It is not a commodity product that large companies are buying when they are buying high limits, it requires individual underwriting, pricing and terms and conditions, and in the case of property classes, attention to risk engineering. At the end of the day, we offer good value for money in terms of balance sheet protection,” she said.

She also believes insurers can use their experience to reassure buyers when a claim hits.

“For many of our clients, a significant loss could be the first major claim that they have faced. But it is not our first major claim. That is something we deal with very regularly. We understand their needs and insurers can really add value. We can help explain what is going on and what will happen next. It is not our first rodeo and that has immense value,” said Ms McDonald.

“A large claim is like a journey,” she said, “we need to accompany our customers every step of the way.”

Ms McDonald advocates practising loss and claim scenarios. “At HDI, we hold scenario-testing days with clients and their brokers. It puts us all in a so much better place should the worst actually happen,” she explained.

She also suggests involving claims experts in the tender or renewal process, because they can provide invaluable experience and understanding.

“Having that dialogue is critical,” said McDonald. “It also evidences the value for money that we can provide our clients and is part of our duty of care towards our customers. If, when there is a claim, we can provide a good service, our clients will remember that and they will tell others, and that is what HDI strives for,” she said.