VIEW: On COVID-19 and insurance

March was going to be a big month for us at the CII. The FCA was going to publish its discussion paper, Transforming Culture in Financial Services. We had led an insurance working group, which had carefully prepared one of its chapters. The FCA’s paper, like everything else, was swamped by the global disaster unfolding around COVID-19. But I’m still glad we did that work. It taught me some useful lessons about where the insurance sector should be heading – lessons that have been put into even more stark relief in recent weeks.

The key controversy around COVID-19 and insurance has been around the scope of business interruption insurance, with many businesses angry that their cover did not give them more protection from the massive economic impact of the virus.

This kind of controversy is not new. We have seen similar gaps between expectations and reality with cyber insurance and before that, with different forms of liability insurance. Given the limits to which our clients can bring themselves to focus on the finer points of their insurance policies, it is not credible for us, as a profession, to tackle the problem through policy literature alone. We need to start by thinking about all the risks our clients face, not just the insurable risks. For example, one leading broker has adopted this new approach simply by rethinking is annual meetings with corporate clients.

It had always put renewal of cover at the top of the agenda, and uninsured risks at the bottom. It has now switched this around, talking about uninsured risks first, along with how clients plan to manage these risks, and renewal of cover at the end. This means clients come out of the meeting with a much greater understanding of the risks they face and the part insurance plays in managing those risks. It gives clients the ability to understand the limitations of their cover without feeling cheated later on.

When life begins to return to some form of normality, this lesson – about looking at the whole customer and prioritising their biggest and most difficult risks – is one our profession must not forget.

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