Do insurance coverage companies have to “press the case” for price will increase?

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

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

Clarke is chief insurance coverage officer at Colonial Surety Firm, 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 many years of business expertise. Insurance coverage Enterprise requested him to anticipate what the worldwide business can count on in 2024.

First, he supplied reflections on the yr 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 giant property claims.”

Underwriters face quite a few challenges when nat cats strike. In response to on-line sources, a number of the key points embody the quantity 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 risk stage of cyberattacks continues to peak,” he mentioned. “It goes with out saying {that a} cyberattack has an excellent monetary and reputational affect on a enterprise.”

Clarke mentioned addressing the “distinctive and evolving dangers related to cyber threats” has put extra strain 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 probably add insurers to attempt to pinpoint dangers,” he mentioned.

Insurers proscribing coverage language

One other international business 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 result of insurers implementing limitations in response to substantial claims payouts.”

4 insurance coverage themes for 2024

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

1. Understanding synthetic intelligence

The insurance coverage chief mentioned it’s vital for insurance coverage firms to grasp the affect AI can have on the business, 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 day by day practices,” mentioned Clarke.

“Coping with unanticipated occasions is nothing new within the insurance coverage business,” he mentioned. “Nevertheless, in 2024 it is very important acknowledge that continued exposures, equivalent to 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 to be able to present the required help to their clients.

After a yr of rising prices as a result of international inflation, Clarke argues that it’s more and more vital for insurers to “press the case for price will increase” amongst each private and business traces clients.

“That is vital as a result of the general public is turning into more and more extra fixated upon the associated fee and never essentially the underwriting justification for writing prices,” he mentioned. “This is usually a main problem for insurance coverage firms who could have to lift 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 could hinder the underwriting course of when shoppers flip to social media to grasp insurance coverage coverage pricing,” he mentioned. “[Insurers] should study to correctly navigate these platforms to make sure their processes are accomplished correctly.”

Governance challenges

In an interview with IB final yr, Clarke additionally mentioned governance points. He mentioned administrators and officers (D&O) underwriters are actually challenged to raised 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 most important challenges for the insurance coverage business within the yr forward? Please inform us beneath.