After a long stretch of global and local crises recorded under a relentless social media spotlight, the world is focused on risk in a different way now than it was even a few years ago. Businesses are building their risk management capability by investing in cyber security, flexible working capabilities and risk data and analytics. More firms are hiring risk managers and exploring insurance options that include risk and crisis management. And as our new Risk & Resilience study reveals, they are thinking about insurance differently, too.
The pandemic and ensuing lockdowns appear not only to have shifted business structures and operating models but also to have transformed business leaders’ views and expectations of insurance.
Insurance has always been considered a necessity, but our Risk & Resilience data, which is based on interviews with more than 1,000 C-suite executives in the U.S. and U.K. across 10 different industries, reveals that businesses are now expecting more from their brokers and partners.
Let’s take a look at some of the biggest frustrations around buying insurance for businesses as revealed in this report, and how the insurance industry can use these findings to reshape our approach to risk.
A question of trust: Almost half (48%) of those surveyed said their trust in insurance has increased since the start of the pandemic, but only 54% believe that insurance is meeting their businesses' challenges very well.
Trust in insurance appears to have increased since the start of the pandemic, but what business leaders want from it has extended beyond pure financial protection. Balance sheet strength, a solid reputation and a swift and smooth claims handling process seem to now be expected as a baseline. Today, business leaders are demanding more. They want insurers and brokers to demonstrate better understanding of their operations and the risks they face.
Insurance buyers are looking to us to add genuine value to their business through the provision of regular risk insights, risk management tools, services and flexible coverage tailored to their sector and business size.
Delivering on these expectations in today’s complex, connected global risk environment means the insurance industry needs to take stock. A challenge for the industry is how we better apply data and claims insights to help clients future-proof their businesses against emerging known and unknown risks such as cyber, supply chain and environmental, social and governance (ESG) concerns.
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Closing the knowledge gap: A quarter of business leaders struggle to understand what cover they need, and 19% find it hard to get insurance tailored for their sector or specialist business.
Our findings also show there are elements of researching and obtaining commercial insurance that are perceived as difficult and where there is a need for better clarity and customer education. These include knowing the premium limits a business needs insurance for, comparing quotes and understanding how a policy would respond to real-life scenarios, as the controversy around interpretation of some business interruption coverage in the face of a pandemic has shown.
However, the most important part of buying insurance is knowing the types of risk their business needs to be covered for, which was cited by over a fifth (21%) of respondents. Buyers’ number one ask of their insurers is a deep, specialized understanding of the specific risks they face – and points to the existence of a knowledge gap that they are looking to specialist insurance partners to fill.
Business leaders see the primary value of insurance in terms of financial support provided by a trusted partner. However, there is a tension between clients wanting and seeing the value of a long-term partnership with their insurance provider, but also thinking the insurance industry is too focused on the short term, with a tendency to dip in and out of certain classes of risk and change terms and conditions as market conditions dictate.
While the relationship between insurer and insured has often been predominantly transactional, it needs to evolve more quickly into one that is more strategic, based on partnering to develop effective risk management solutions. For this to happen, the insurance industry needs to bridge the connectivity gap with clients by better demonstrating knowledge and insights around the risks they face.
Creating a better connection: 44% don't think their insurers understand their business.
Building a better connection with clients and increasing the perceived value of insurance will require the insurance industry to improve its understanding of how buyers approach risk. Our findings indicate that buyers appear more inclined to insure when they think risk is real and present.
As an industry, we need to consider how we connect better with clients around the risks that matter, not just today but in the medium to long term, to raise awareness and help them to prepare their business to be resilient against the changing risk landscape. This needs to be done through the lens of sector specialization, increasing understanding of the value of insurance overall as both a risk mitigation and a risk management tool.
To build better connectivity, our research suggests that the insurance industry should reconsider the relationship among brokers, insurers and clients, as solving today’s complex, increasingly connected risks likely requires other skilled experts to be involved, too. As well as offering risk mitigation expertise, coverage and insight, insurers can be a conduit to those other expert partners and service providers with the depth of knowledge and experience required to manage the multifaceted issues created by many of today’s risks.
To achieve a genuine partnership with clients, and to deliver the service that businesses indicate they want, will require regular, productive interaction. The challenge for insurers and brokers is to encourage busy clients to invest time – and determine what a more productive relationship will involve and deliver. As the insurance industry engages more with clients, effective communication and the ability to develop relationships and to share deep technical understanding and also to talk about broader business issues will be paramount.
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The results of our research show that the insurance industry is at a point of inflection, and that it is time for a service rethink.
Our findings show that there is a big opportunity for the insurance industry to support businesses by harnessing data, tools and insights to provide more specialist, tailored and flexible coverage that meets sector needs and provides greater risk and crisis management support and insight. The industry is already making moves in this direction, for example looking at ways to deploy AI and use parametric triggers. Use of these types of innovation is likely to increase.
Moving forward, we have a greater role to play, principally in designing and enforcing protocols and standards to help organizations improve their resilience against a broad range of risks and helping them to be more operationally resilient while operating in a high-risk and uncharted environment.