COVID-19 Re/Insurance Roundup – July 2021
July 2, 2021 Paul De'Ath
As many of you may already know, throughout the pandemic we produced a weekly roundup of insurance-specific COVID-related news. However, as the country and hopefully the world starts to emerge into a post-pandemic normality the level of COVID-related news has reduced. As such we have decided to reduce the frequency of this update to monthly rather than weekly. It will still include all the key articles that you need to read relating to COVID and how it might impact the insurance industry.
For those who would like to receive the new monthly COVID updates straight to their inbox (along with a variety of real-time research notes), subscribe to UK Market Intelligence here.
Summary
- Insurtech sector sees 2021 unicorn boom as pandemic accelerates digital focus – Insurance Times
- Brokers urged to take action to tackle reputational damage – Insurance Age
- Lloyd’s of London takes out cover to protect emergency fund – Financial Times
- Brokers that failed to invest in tech pre-pandemic ‘exploited’ by rivals – Insurance Times
- Risk exposure changes driven by changing Covid-19 lockdown measures – Insurance Times
- Hiscox agree arbitration settlement over BI claims – Insurance Business
- What should the insurance industry consider as staff return to the office post-lockdown? – Insurance Times
- Zurich CEO: Public-private partnership needed for systemic loss events – Insurance Business
- Insurtech M&A takes ‘upward swing’ as pandemic bolsters digital transformation – Insurance Times
Analysis
Welcome to the new monthly COVID updates
The more avid readers among you will have noticed the lack of COVID updates in recent weeks. Apologies if you missed us but over recent weeks the number of COVID-insurance-specific articles has been on the decline. This is not unexpected. The biggest issues for the sector caused by the pandemic have come from the lockdowns impacting motor claims frequency, business interruption, event cancellation and travel claims. With the country almost at the point of being fully open again, and the majority of insurance policies now excluding any COVID risks, the impact of the pandemic on the industry is receeding. With the hope that we are entering a post-pandemic world, we have decided to reduce our own COVID output to once a month for the time being unless we receive a barrage of emails asking for the weekly updates to be re-instated.
The Oxbow Partners View
Over the past few weeks, there has been a lot of attention on the insurtech sector with the UK boasting three new unicorns in the space. This is evidence both of the excellent businesses within the UK insurance sector but also the fact that the pandemic has significantly accelerated digital adoption across the industry and the wider economy. Tech has proved to be an enabler in the last 15-18 months with those who invested pre-pandemic gaining customers and maintaining customer service better than those who did not. While the nation will hopefully soon be able to ditch mask-wearing and social distancing, digital interaction is here to stay and insurers need to make sure they have the right capabilities to win in the new world. Stay safe out there.
Roundup
Insurtech sector sees 2021 unicorn boom as pandemic accelerates digital focus – Insurance Times
2021 has seen the UK insurtech sector crown three unicorns (tech start-ups valued at over $1bn) in Zego, Bought by Many and Tractable. The pandemic has accelerated the digital focus of firms and customers alike which has enhanced the appeal of tech-focused businesses in the insurance sector. One of the biggest changes in the post-pandemic world is likely to be the adoption of digital technologies and the ability to do more things remotely. This has benefitted a number of companies within the sector and the investment in insurtech is just one of the outcomes. The trend for insurtech investment is likely to continue for some time.
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Brokers urged to take action to tackle reputational damage – Insurance Age
Panellists at the CII Conference have discussed how the industry needs to rebuild public trust after the expectation gap between consumers and insurers has widened during the pandemic. Julie Page, president of the CII, noted that work needed to be done to address the negativity from personal lines pricing issues and business interruption claims from SMEs. There has been a view from customers that insurance companies have been looking for reasons not to pay claims, rather than trying to find ways in which they can help.
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Lloyd’s of London takes out cover to protect emergency fund – Financial Times
For the first time in 20 years, Lloyd’s of London has taken out £650m of cover, placed by Aon, to protect its near- £3bn emergency fund against extreme Covid or crisis-related losses in a five-year engagement which will reimburse total annual losses exceeding £600m, with an upper limit of £1.25bn. The exposure is held by a combination of reinsurers, including Munich Re, Scor and Berkshire Hathaway, as well as a newly created company financed by JPMorgan. Underwriters at Lloyd’s have expected an overall hit exceeding £6bn, stemming mostly from business interruption and event cancellation policies, and as well as providing a safety net this should improve the market’s central solvency ratio, and enable it to grow its premiums by 30-40%.
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Brokers that failed to invest in tech pre-pandemic ‘exploited’ by rivals – Insurance Times
The head of sales and distribution at Aviva has stated that brokers that failed to invest in the relevant technologies prior to the pandemic have been exploited by their bigger rivals which will have had the resources to invest heavily in tech as a part of their normal business investment plans, gaining business on customers who could not get through to their smaller brokers and therefore turner to other offers. The Insurance Times revealed that 77% of brokers are investing in cloud-based technologies, and 70% in data analytics to improve operational efficiency. The key areas of focus for brokers around this digital adoption seem to be communication mediums, broker management systems and greater IT security. Although historically, e-trading has been used primarily for smaller or bundled insurance products, now it is being brought into areas such as speciality lines, to broaden the scope of use and increase adoption levels.
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Risk exposure changes driven by changing Covid-19 lockdown measures – Insurance Times
The Institute and Faculty of Actuaries has given indications going forward on how to consider lockdowns within risk rates in general insurance pricing. The “risk exposure changes” experienced by the UK home and motor insurance markets have been affected by the changing severity of lockdown measures, influencing the number of cars on the road, or the occupancy and use of the home. The IFoA have recommended measures such as the review of TAS to recognise the advances in data science and machine learning techniques related to the current situation, or engaging with new FCA regulations in relation to personal lines pricing and product governance to help implement the required changes aiming to improve overall consumer outcomes.
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Hiscox agree arbitration settlement over BI claims – Insurance Business
Hiscox has revealed that it has reached a settlement agreement with the Hiscox Action Group regarding business interruption claims caused by the pandemic. The details of the settlement are not being made public but both parties are now satisfied with the outcome following the Supreme Court ruling on the FCA test case.
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What should the insurance industry consider as staff return to the office post lockdown? – Insurance Times
With the world returning to increasing levels of normality and staff returning to the office (at least in part), Insurance Times has asked a number of people in the sector what companies should be considering, with a particular focus on employee mental health. The general consensus is that a slow return to the office is best and that each employee will be different, with some keen to return to five days a week in the office and others more anxious about the prospect. A slow return allows for all employees to come back at their own pace and gives employers the scope to understand the needs of their staff. 60% of insurance professionals suffered from depression, anxiety, emotional distress or another mental health condition during the pandemic.
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Zurich CEO: Public-private partnership needed for systemic loss events – Insurance Business
The latest estimates for insured losses due to the pandemic sit within the $40bn to $60bn range. While this is a sizeable event for the industry it is not so large as to cause significant long-term damage to capital buffers. This is just the tip of the iceberg, however, in terms of the total losses suffered around the world, particularly in business interruption. Mario Greco, CEO of Zurich Insurance Group, has spoken this week about how the only way to fully cover customers for pandemic-related losses is through a public-private partnership as the insurance industry would not have the capacity to do it alone. While there have been many discussions around the world about this kind of partnership, none have yet been announced. Mr Greco believes that governments are too short-term in their outlook and may not want to spend public money on something that may not happen for another 20 years.
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Insurtech M&A takes ‘upward swing’ as pandemic bolsters digital transformation – Insurance Times
Market intelligence platform Sønr believes that there has been an upward swing in insurtech M&A as the pandemic has forced many businesses to accelerate their digital strategies. The number of insurtech M&A deals has risen from 41 in 2018 to 62 in 2020. In 2021 there have already been 45 deals and Sønr’s CEO believes that the number of deals will double by the end of the year.
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