A View From Me on ’23 – Experience will be vital as world looks to a new year and new risks

Charles Bush, head of property and energy, marine & construction claims for Zurich UK, says data will be key as insurers look to support clients in the year ahead.

After such a busy year, January 2022 seems like a lifetime ago, but take a quick glance at that month’s headlines and you could be forgiven for mistaking them for todays. Supply chain disruption, inflation, and the then-emerging energy and cost of living crises dominated the news agenda, issues that haven’t gone away, and in some cases have become worse.

Next year, a new cohort of risks will emerge onto insurers’ radars. The most obvious are those posed by the downturn in the economic cycle; the Bank of England recently warned that the UK economy could experience its longest recession in decades, with unemployment nearly doubling by 2025. This raises the level of risk in multiple areas – for example, the frequency and severity of opportunistic fraud is likely to increase. There may also be an uptick in claims relating to commercial crime, while bankruptcy issues driven by the recessionary cycle will have an impact on D&O policies.

Supply chain disruption will continue into the new year and could be made worse by increased strike action across multiple sectors. Inflation continues to be rampant, with CPI at 10.7 per cent. This will likely raise the risk of underinsurance, as increases to material and labour costs mean pay outs may not be enough to cover damages in the event of a claim.

When balance sheets are squeezed, companies will try to find savings wherever they can, and as a result the industry may see an increase in claims owing to reduced investment in health and safety and risk mitigation. For example, when performing a task at height, a business may decide to cut costs by sending a worker up a ladder rather than hiring a cherry picker or building scaffolding to ensure the job can be done more safely.

Meanwhile conversations around cyber, linked to the geopolitical and economic environment, will continue at pace. The continued uptick in ransomware incidents and changes in sanction requirements will be at the front and centre of these discussions.

As well as these more immediate issues, there are a host of longer-term risks which may accelerate next year.

Climate change and the emergence of more immediate macro weather-related issues such as the wildfires we experienced in Britain last summer is an ongoing concern, as is the emergence of more extreme and more volatile weather.

The rise of e-scooter use could lead to an uptick in accidents, particularly among young users outside of the official trial schemes. Rental versions of these devices are limited to a maximum speed of 15.5mph, while some privately owned e-scooters are capable of hitting 68mph, making accidents both more likely and more dangerous. Questions relating to safety and liability must be at the core of any policy decisions on whether to legalise these devices fully.

Then there is the fire risk associated with the devices’ batteries. Fires sparked by e-bikes and e-scooters have surged 149% in recent years. Investigators say blazes are often linked to poor quality, damaged or incorrectly charged lithium batteries, which can explode if not handled properly. This trend could be made worse by the cost-of-living crisis, which could potentially drive more consumers to buy cheaper products that may not meet safety standards.

More broadly, as we move towards a more sustainable world, we need to be mindful of the associated risks. For example, as more people fit solar panels onto their homes, we can expect to see more fire claims. Poor installation practices are the most common cause of solar panel fires, which can leave homeowners with bills running into thousands of pounds and have been increasing in recent years.

Our industry has a huge amount of claims data to support informed guidance to customers, and as a sector we must continue to use this data to campaign around prevention and mitigation. We are as well place placed as any other industry to understand the real-world dangers that we face next year, and by harnessing our experience we can help to mitigate this risk for both ourselves and our customers.