29th March 2021
The market’s struggles with COVID-19 have been well documented but as Steven Crabb, CEO of Insurance Services explains, the industry needs to ensure it learns the lessons to avoid future failures.
The industry’s problems with business interruption (BI) cover not only ended up in the Court of Appeal but has dominated the national media. A situation where like so many policies, the industry’s BI wordings had yet to be stress tested, COVID-19 provided that test and policy wordings fell apart. The FCA took the policies to the country’s highest court and they were found to be wanting. It has been the hardest of lessons but one that we all need to learn from.
It’s clear the industry needs to develop the ability to respond quickly to change and evolve, in order to be ready to meet the next test, whether it is another pandemic or systemic risk. Firms need to become more agile and embed this agility to respond into their operational management systems and from what we’re seeing in the market, companies are looking for support to enable various functions across their business.
Even before COVID-19, we saw changes in the market which demanded a reaction. Rapid rate changes in liability classes, particularly in the US, saw captive management companies struggling to respond to the changes the market faced. As the world slowly looks to emerge on the other side of the pandemic, it’s clear that we will be operating in a new normal.
In London market, transformation is gathering pace. COVID-19 and the need for a sudden and complete move to remote operations was handled very successfully, and it has created a legacy that will provide both opportunities and challenges. The use of the Placing Platform Limited (PPL) system surged overnight as the move to electronic and remote placement of business (which was gaining traction slower than some), was accelerated to a level where many in the market now believe the current use of technology would have taken five years to deliver, had COVID-19 not occurred.
This momentum is likely to be maintained as the ‘Lloyd’s Blueprint for the Future’ continues its implementation. However, while COVID-19 has delivered the need for the successful implementation of technology, it’s also changed the face of how we work. The success of remote working has left firms looking to redefine how often employees will be required in the workplace, with a move to agile working. It has increased the understanding of the benefits of moving towards the greater outsourcing of specialist tasks and back office processes, which have become more complex and burdensome.
Brexit has also seen UK regulators looking to create a new regime for the financial services sector. While it’s not likely to see a revolution, there will certainly be changes and nuances that will have to be identified and systems put in place to ensure compliance.
All this is against a background of likely consolidation and disruption of the market. The merger and acquisitions activity amongst the major global brokers is likely to filter down in the months to come and it’s unlikely that the underwriting community will be immune. With rates hardening, MGA mergers have become increasingly attractive in the search for economies of scale. The market is also seeing the arrival of agile, technology-based MGAs and syndicates, which will look to disrupt parts of the market. Based on artificial intelligence (AI) and machine learning, these entities will bring competition and redefine the workplace.
What it has created is the need for expert support and a recognition that post COVID-19, the need for greater agility and responsiveness will redefine the way brokers and underwriters will be required to operate.
For more information and advice, please contact Steven Crabb, CEO of Insurance Services on Steven.Crabb@davies-group.com.
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