A View From Me on ’23 – Insurers will need to deliver clarity as challenges continue

IUA CEO Dave Matcham says insurers will need to engage with clients and regulators to explain the underwriting cycle and its impact in the price and availability of cover.

Global uncertainty has surged in recent years. The International Monetary Fund tracks volatility in economic and political events across 143 countries and its World Uncertainty Index reached unprecedented levels with the outbreak of the Covid-19 pandemic. The past 12 months has seen another surge with the Russia’s attack on Ukraine.

Uncertainty is bad for economic growth, but does highlight the vital role played by the insurance industry. In 2023 IUA member companies will need to understand closely the concerns of their clients and will, indeed, share many of their challenges.

With general inflation rising above 10% the cost of raw materials, goods and services has soared throughout supply chains and this has, of course, had a significant impact on claims. There are also indirect impacts, such as an increased time to adjust and settle claims, whilst an economic downturn invariably leads to higher levels of insurance fraud.

Within the London company market different classes of business are experiencing different market conditions with some already seeing softening premiums. It will be important for the IUA to engage with clients, government and other organisations to explain the influence of market cycles – especially in areas where there have been concerns about the availability and affordability of insurance cover, such as professional indemnity and contingency.

Contract clarity and the effectiveness of policy wordings is another vital topic to be addressed in the year ahead. Market discussions continue on issues such as cyber warfare and the operation of automatic terminations of cover resulting from a nuclear detonation. The IUA will be working closely with the risk managers association Airmic, participating in a regular special interest group on wordings and hosting a wordings masterclass for delegates at its annual conference.

In order to provide the clients with the services they expect it necessary for insurers to attract the right talent into our industry and provide junior practitioners with effective training opportunities. Research by the London Market Group (LMG) has shown that only 4% of UK graduates considered a career in insurance and that the percentage of staff in our sector aged under 30 fell from 23% to 20% between 2014 and 2019. In 2023 the IUA will be supporting a major new initiative launched by the LMG to establish specialty insurance as a destination career choice. New social media content will explain the societal value of insurance and promote the rewarding and exciting roles available in our industry in a manner that will appeal to those seeking their first full-time job. An outreach programme will begin with around 20 universities offering risk, insurance and finance courses and information provided to a further 15 careers offices. Meanwhile, a partnership programme will be established with sixth forms in 50 schools around London and the south east, leading to at least 100 students participating in an LMG work experience academy.

Two major regulatory reviews will continue their progress in 2023. The Financial Services and Markets Bill has now reached its report stage in the House of Commons. As the legislation is passed into law we will be monitoring closely how a new statutory objective, compelling UK regulators to consider the international competitiveness of the London Market, works in practice. The detailed drafts of a new Solvency II reform package will also require close attention to see that the removal of duplicative reporting requirements imposed on UK branches of overseas insurers is achieved.

2023 is also a big year for the digitisation and automation of London Market central services. Following the agreement of a new joint venture deal between the IUA, Lloyd’s and DXC Technology in 2022, work will continue on services for risk submission and digital contract storage, risk and accounting query management and nett settlements.  A new data centre migration will be completed and the early part of the year will see a next generation service release for the London Market’s electronic placing system. PPL handled 200,000 contracts last year and the updated design aims to further improve the use of digital contracts and capture of structured data.