Do insurance coverage companies must “press the case” for charge will increase?

“I do anticipate 4 main themes that we will anticipate within the insurance coverage trade,” mentioned Richard Clarke (pictured above).

One in every of these themes, he mentioned, is the necessity for insurers to “press the case” for charge will increase with each their private {and professional} strains clients.

Clarke is chief insurance coverage officer at Colonial Surety Company, a US insurance coverage agency with a concentrate on enterprise legal responsibility insurance coverage and with different choices together with surety bonds and constancy bonds.

Clarke has greater than three a long time of trade expertise. Insurance coverage Enterprise requested him to anticipate what the worldwide trade can anticipate in 2024.

First, he supplied reflections on the 12 months that was.

Reflections on 2023: Nat cats and cyber threats

“2023 dropped at gentle a handful of huge insurance coverage challenges,” mentioned Clarke. “The heightened affect of pure disasters highlighted recurring difficulties in underwriting responses to claims, particularly in massive property claims.”

Underwriters face quite a few challenges when nat cats strike. In keeping with on-line sources, a few of the key points embrace the amount of claims, restricted sources, the issue verifying information and the complexity of assessing injury, significantly its extent.

One reply to those challenges is investing in know-how to enhance efficiencies. One in every of Clarke’s roles is main insurance coverage technique and operations, together with constructing out his agency’s on-line platform right into a one-stop-shop for SMEs.

Nevertheless, globally, insurance coverage know-how is challenged by cyber threats, mentioned the chief insurance coverage officer.

“We additionally witnessed cybersecurity take centre stage because the rise and menace stage of cyberattacks continues to peak,” he mentioned. “It goes with out saying {that a} cyberattack has an important monetary and reputational affect on a enterprise.”

Clarke mentioned addressing the “distinctive and evolving dangers related to cyber threats” has put extra stress on insurers’ underwriting operations and pushed them to interact in extra and specialised underwriting efforts.

“This implies insurance coverage firms needed to reassess their sources and doubtlessly add insurers to attempt to pinpoint dangers,” he mentioned.

Insurers proscribing coverage language

One other world trade pattern Clarke observed in 2023, he mentioned, was how insurers’ use of extra restricted language on coverage paperwork exerted an affect on some exposures.

“Insurance coverage coverage language restrictions are exerting an affect on administration legal responsibility exposures,” he mentioned. “Sometimes, as a consequence of insurers implementing limitations in response to substantial claims payouts.”

4 insurance coverage themes for 2024

Within the 12 months forward, Clarke expects the worldwide trade’s challenges to be pushed by “4 main themes.”

1. Understanding synthetic intelligence

The insurance coverage chief mentioned it’s necessary for insurance coverage firms to grasp the affect AI can have on the trade, significantly on underwriting and the sale of insurance coverage merchandise.

“As soon as we perceive the affect we will work to combine them into our every day practices,” mentioned Clarke.

“Coping with unanticipated occasions is nothing new within the insurance coverage trade,” he mentioned. “Nevertheless, in 2024 you will need to acknowledge that continued exposures, resembling pure disasters in addition to equipment malfunctions, can occur and that these exposures can morph into dangers.”

Clarke mentioned insurance coverage firms want to have the ability to navigate these dangers so as to present the required help to their clients.

After a 12 months of rising prices as a consequence of world inflation, Clarke argues that it’s more and more necessary for insurers to “press the case for charge will increase” amongst each private and business strains clients.

“That is necessary as a result of the general public is changing into more and more extra fixated upon the associated fee and never essentially the underwriting justification for writing prices,” he mentioned. “This generally is a main problem for insurance coverage firms who could have to boost their charges as prices proceed to extend.”

Clarke additionally mentioned social media’s recognition as an “info platform” will be problematic for insurance coverage companies.

“At occasions this will hinder the underwriting course of when customers flip to social media to grasp insurance coverage coverage pricing,” he mentioned. “[Insurers] should be taught to correctly navigate these platforms to make sure their processes are accomplished correctly.”

Governance challenges

In an interview with IB last year, Clarke additionally mentioned governance points. He mentioned administrators and officers (D&O) underwriters at the moment are challenged to higher perceive the businesses they work with, as these rising points in governance — together with cyber and ESG — blur the boundaries of protection.

What do you see as the largest challenges for the insurance coverage trade within the 12 months forward? Please inform us beneath.