How to send messages to the hard market in the future

Profitable insurance companies mean stable and reliable protection for policyholders during a time of uncertainty, and Canada’s property and casualty insurance industry should have no qualms about reinforcing this message, industry executives said at the NICC Conference in Halifax earlier this week.

“I think about Lloyd’s journey to a place where we can deliver sustained underwriting appetite and address some of the big risks,” Marc Lipman, chairman of Lloyd’s Canada, told an insurance panel on Monday. “I think you can only do that from a position of…financial stability, if not strength.

“You have to have the resources in your house if you want to tackle some of the biggest issues and support customers through that. So I don’t think we don’t have to, as an industry, apologize for the success.”

Lipman was alluding to the fact that the global Lloyd’s market reported a combined profitable ratio of 91.4% in the first half of 2022, compared to an unprofitable ratio of 104.5% in 2018, leading Lloyd’s to ” remedy” some of its unprofitable stock books. business.

“I think if we talk to our customers in a smart way and explain to them why a sustainable insurance industry provides long-term predictability in terms of coverage and protection, there’s a compelling argument to be made,” Lipman said. “But like all messages, it needs to be delivered in the right tone, and not in a tone-deaf way.”

NICC 2022 delegates heard about various risks facing the industry in the future (geopolitical risk, inflation, disrupted supply chains, global recession, climate change, etc.), but reputational risk loomed large during several of the NICC panels. discussion.

NICC 2022 emcee Alister Campbell, president and CEO of the Property and Casualty Compensation Corporation (PACICC), clearly framed the risk in his presentation to a panel of insurers on Monday.

“There is some distress in society that the pandemic has caused in part, but maybe only exposed it, which has raised questions about institutions,” Campbell observed. “And our industry sells a promise that is fundamentally based on trust. And if people start to doubt the institutions, we are on the list of people who could be doubted.

“I think this idea of ​​doubling down on what we do well, this promise, makes a lot of sense. But in that context, how do we feel about being an industry that has just produced perhaps the best two years in a row in our entire history, and are we going to raise rates again? How is that going to work in terms of trust in society?

In 2021, the industry’s earned premiums grew 8.4% and claims declined 10.7%, generating more than $10.6 billion in underwriting revenue, according to MSA Research. The combined index for the industry last year was 83.7%, while the return on equity (17.2%) exceeded 12% for the second time in 16 years.

But this has been done at the expense of policyholders over the course of a two-year pandemic, in which several commercial policyholders have suffered financially. The result has spelled tough times for consumer-oriented brokers, as panelist Paul Croft, chief operating officer of Aon Canada, noted on a commercial insurance panel.

“One thing that we have underestimated is the impact of the tough market in the last two years on our industry and on our customers,” Kroft said Monday. “We’ve taken a lot of hits on this. I can relate a comment on this. I remember in 2020 I had a call with a client who had called. They were paying half a million dollars in insurance and all of a sudden the insurance bill was $2 million.

“They called us and said, ‘We appreciate the education and keeping us up to date on what’s going on. We understand why this happens. But at the same time, you have to realize that this means that I have to lay off a couple of people in order to afford this additional cost. You have to understand that now I’m calling someone and letting them go.

Kroft further cautioned, “I think sometimes it’s easy for us to talk about the tough market and rationalize, ‘Oh, well, we had to do this because our [claims costs] went up,’ but the social and economic cost of what we had to do as an industry had ramifications that continue to affect our consumer base.

“So as we move forward, it’s imperative that we continue to educate people and support our staff that have to do that. It’s a very stressful time for brokers, adjusters, underwriters… but it also affected [customers]And I don’t think we can lose sight of that.”

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