How to send a message to the challenging market in the future

Profitable insurers mean stable and reliable protection for insured during a period of uncertainty, and Canada’s property and casualty insurance industry should not be shy about promoting this message, industry executives told a NICC conference in Halifax earlier this week.

“I’m thinking about Lloyd’s journey to a place where we can offer a sustainable underwriting appetite and address some big risks,” Mark Lipman, president of Lloyd’s Canada, said on an insurance panel Monday. “I think you can only do that with … financial stability, if not strength.

“You have to have the resources in your home if you want to tackle some of the biggest issues and support customers through that. So, I don’t think we, as an industry, have to apologize for the success.”

Lippmann was alluding to the fact that Lloyd’s global market reported a combined profitable ratio of 91.4% in the first half of 2022, versus an unprofitable ratio of 104.5% in 2018, prompting Lloyd to “fix” some of its unprofitable books of business.

“I think if we talk smart to our clients, and explain why the sustainable insurance industry offers long-term predictability in terms of coverage and protection, there is a compelling argument to be made there,” Lipman said. “But like all messages, it must be delivered in the right tone, not in a way where you don’t hear the tone.”

The 2022 NICC delegates heard many of the risks facing the industry in progress — geopolitical risks, inflation, disrupted supply chains, global recession, climate change, etc. — but reputational risks loomed large during many of the panel discussions.

NICC 2022 President Alistair Campbell, president and CEO of PACICC, laid out a clear framework for risk in his presentation to a panel of insurers on Monday.

“There is some pain in society that the epidemic has caused in part, but it may have just been revealed, and that raises doubts about the institutions,” Campbell noted. “And our industry sells a promise grounded primarily in trust. And if people start suspicious of institutions, we’re on the list of people to be suspicious of.

“I think the idea of ​​doubling down on what we do well, that promise, makes perfect sense. But in that context, how do we feel about being an industry that has just produced the best two years in a row in our entire history — and we’re going to raise prices again? How does that work in terms of confidence in the society? “

In 2021, premiums earned in the industry grew 8.4% and claims fell 10.7%, resulting in more than $10.6 billion in underwriting income, according to MSA research. The industry’s total ratio last year was 83.7%, while return on equity (17.2%) exceeded 12% for only the second time in 16 years.

But this has been done on the backs of the insured over the course of a two-year pandemic, as many of the insured have struggled financially. The result has meant hard times for consumer-dealing brokers, noted lecturer Paul Croft, Aon Canada’s chief operating officer, on a commercial insurance panel.

“One thing we underestimated is the impact of the challenging market over the past two years on our industry and our customers,” Croft said Monday. “We got a lot of hits on this. I can hook a comment on this. I remember in 2020 making a call to a client who phoned. They were paying half a million dollars in insurance and suddenly their insurance bill was two million dollars.

“They called us and said, ‘We value education and you’ve kept us updated on what’s going on. We understand why this happens. But at the same time, you have to realize that this means that I have to give up two people to pay this extra cost. You have to understand that I am now calling someone and letting them go.”

Croft further cautioned, “I think it’s easy sometimes for us to talk about a tough market, and to justify that, ‘Well, we had to do that because [claims costs] It went up,” but the social and economic cost of what we have to do as an industry has repercussions that continue to affect our consumer base.

“And so, as we go forward, it is imperative that we continue to educate the people, and support our employees who have to do this. It is a very stressful time for brokers, adjusters, insurers…but it has also impacted [customers]And I don’t think we can lose sight of that.”

Featured image courtesy of iStock.com/Coppy

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