A BALANCING ACT
Delivering Profitable Growth Whilst Treating Our Customers Fairly In Challenging Recessionary Times
by Sandra Harvey-Graham, SME Development & Schemes Manager, RSA Insurance
When I was asked to present to the members of the Insurance Institute of Ireland, I asked myself what would be a key topic which would be of real interest, relevant to the current market conditions and informative to the audience. Hour of preparation and over 90 slides later, I was armed and ready to hit the stage with my presentation.
I asked myself the burning question - as insurers we must continue to write our business profitably but also be very conscious of protecting the customer and their ever changing needs during these challenging economic, social and political times.
The presentation focused on how to address this balance under some key headings:-
Growth in new start up's grew exponentially in the Celtic Tiger years but established businesses have fallen victim to the lack of consumer spending, upward only rent reviews and lack of capital/available finance leading to company insolvency's and liquidations. Its important to note that when either a liquidator or a receiver is appointed then the insurable interest in the policy contract ceases and the current policy should cancel.
Driving across the country you will also see first hand the number of vacant properties left idle which tend to be perfect targets for damage. Combine this with outward migration (reducing population) and over a 50% reduction in construction sector growth and there is a real problem. The survey / inspection element is key here to ensure the customer has the best available insurance protection through a customised underwriting approach rather than a broad brush strategy. But critically there is a key role for the insurer and broker to communicate the onus on the policyholder to disclose the occupancy status.
The current economic backdrop also brings with it a social impact. Riots are more common, fuelled by consumer anger and organised groups. Social media provides a platform to organise this chaos but also allows us to monitor planned activity. The recent riots in the UK clearly demonstrate the risk of a ground swell of anger.
THEFT & MONEY
According to the Central Statistic Office, burglary is on the rise, peaking in 2009. In the current environment 'cash is king' and more attractive as the recession bites and unemployment rises. Recent media coverage of tiger raids and cash hold up's are stark realities of a ever increasing problem occurring across the country. From an insurance perspective, the main preventative action is to increase security with a strong focus on physical (boundry, doors & window) and electronic (alarms, CCTV, controlled access) protections. Todays criminal is much more prepared and sophisticated so our role is to advice our policyholders of preventative measures to protect them and their business.
Slips, trips and falls are common place during a recession. Actions brought as a result of injury can be expensive and extremely damaging to a business. Risk management works on the premise that 60% of all accidents that occur are predictable. If something is predictable then it must also be preventable. The good news is that, in many cases, effective solutions are often easy and inexpensive to implement.
Recession can add its own stresses to the workforce through redundancy programmes, shorter working hours, reduced wages etc there is it critical to maintain a good working relationship with workforce during this time. Public Liability is becoming a recessionary attraction with a reported 12% rise in Public Liability Claims in the Dublin licensed trade. The 'compo culture’ is well and truly rearing its ugly head. There are some simple but effective measures to minimise the risk through a good cleaning & maintenance regime, wet day and spillage policy, be vigilant for obstructions, CCTV and good lighting and flooring are imperative.
There has been a surge in the number of cases of possible insurance fraud following tip-offs to the country’s main insurance fraud hotline. Statistics from the Irish Insurance Federation (IIF) show an 18.5% increase in the number of cases investigated following tip-offs made via the phone line or the www.insuranceconfidential.ie website. In 2010 there were 813 cases investigated regarding potentially bogus claims, up from 686 in 2009 and 308 cases in 2008. Anything that reduces the estimated €100 million a year lost to fraud is welcome. What is interesting is the increase in Insurance application fraud with policyholders misrepresenting their circumstances at the inception of a policy or not disclosing material facts asked of them at the time of inception. ‘Identity manipulation’ is one of many types of application fraud that impacts all aspects of the insurance business including Sales, Marketing, Pricing, Underwriting and Claims. The industry response to the growing fraud issue is to employ effective fraud indicators and sharing of industry claims data (i.e. claims and underwriting exchange).
In summary, as Insurance professionals, we need to help navigate our customers through the increased risks recession brings. Through our collective technical know how and capability, we need to treat our customers fairly and get the balance right between underwriting profit and providing essential core cover without unreasonable conditions. Don't forget this recession will eventually end and collectively our industry needs to be remembered for our 'valued add' guidance and support.