04 November 2020

CRE: Insurers’ reputation at risk because of clumsy renewals: GVNW

GVNW president Alexander Mahnke has warned insurers that the sector’s already tarnished reputation will be battered even further if they continue with an all too often disproportionate, confused and clumsy approach to renewals.

As German risk and insurance managers grapple with the pandemic’s ongoing impact, they also face increasingly tense and difficult renewals as capacity dries up and industrial insurers seek to increase rates further.

The industrial insurance market was hardening before the arrival of Covid-19 as leading insurers sought to re-underwrite their portfolios after a lengthy period of soft market conditions and unacceptable combined ratios.

But the pandemic has accelerated market hardening and left many risk and insurance managers worried about their ability to secure adequate cover in coming renewals.

And Mr Mahnke used his speech to the GVNW general assembly this week to warn insurers about their behaviour at renewals.

He said GVNW understands that industrial insurers need to make an adequate return. But he added that there are currently too many examples of supposedly long-term partners dealing with their customers in a wholly unprofessional manner.

“We have a fundamental understanding that many market partners are currently trying to make their portfolios adequate again. Unfortunately, this includes adjustments in underwriting and, in particular, in terms of capacity and pricing. Industrial insurance only works as a business model if the providers also earn money with it,” said Mr Mahnke.

 “However, we hear stories like this almost every day in the association: ‘We have been waiting for an answer from our property insurer about our renewal for two months – now (mid-October)! We are verbally informed that only one third of the capacity is offered and the premium will be increased by 85%, and this with a damage rate of 25%,’” said Mr Mahnke.

The GVNW recognises that hardening in the industrial market was inevitable after so many years of soft conditions. But the pandemic has “significantly aggravated” the situation and led to some disproportionate behaviour among insurers, pointed out Mr Mahnke. This needs to stop, he said.

 “As GVNW, we have repeatedly called for a sense of proportion when adapting the business. For us, such behaviour has nothing to do with a sense of proportion. A member experienced a similar experience when a syndicate insurer terminated its share from the D&O programme at very short notice, without consulting the syndicate leaders and, above all, without notifying the broker, instead going directly to the individual insured board members,” said Mr Mahnke.

At the beginning of this year, GVNW conducted a member survey about their experiences in the previous renewal round. The findings showed that policyholders were particularly unhappy about poor or late communication from insurers.

Sadly, it seem insurers have failed to pull their socks up and the situation has got worse in the pandemic.

 “We have shared this with the market at various points and the large brokers have often referred to comparable experiences. Unfortunately, it seems that this has not been accepted by many insurers. This is particularly unfortunate and such behaviour is, and will remain, unacceptable for us, as it damages the reputation of the entire industry,” said Mr Mahnke.

 “I can therefore urgently warn against too much brutality and above all without sufficient, clearly communicated justification and the ability to negotiate all available options. Otherwise, in the future nobody will believe our industry’s assertions that industrial insurance is about long-term partnerships that are characterised by mutual respect and trust,” he added.

The ongoing market discussion about what pandemic-related risks are covered by business interruption insurance is exacerbating the problem, and demands more positive and creative solutions, said Mr Mahnke.

 “Lately, the courts that have been involved and seem to have decided more often in the interests of the policyholder, or the insurers and policyholders are coming to out-of-court settlements. Here, too, we called for creative solutions very early and called for the avoidance of legal disputes,” said the GVNW president.

 “In our view, the market has really not covered itself in glory on this topic. What is even worse, however, is that in the future, once again, the usefulness of insurance in general and the reputation of the insurance industry in particular, will be called into question. It seems to confirm the prejudice that many insurers do not want to pay in the event of a claim. In our opinion, the topic should have been, and must be, handled better,” explained Mr Mahnke.

 CRE

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