Insurance sector is ‘going to be seen as uncaring’ as a result of Covid-19 outbreak

The adage ‘there’s no such thing as bad publicity’ certainly has not rung true for the insurance sector during the ongoing Covid-19 pandemic. PIB Group’s chief executive Brendan McManus says the current debate around business interruption (BI) claims, for example, has led to the sector being viewed as “uncaring, maybe lacking in principles and not helping people when they need it the most”.

He continues: “In the last recession, the bankers were the bad people. This time, it’s the insurance industry [that is] seen as the bad people.

“Most insurance policies never covered or intended to cover a pandemic, but through dint of poor wordings, some of them do and there’s been a real light and shade in the way that the industry has dealt with it.

“We’ve seen insurers run away and we’ve seen insurers run towards the problem and solve the problem, so there’s good and bad happening but the public’s perception remembers the bad rather than the good.

“We continue to suffer a negative image because we don’t represent ourselves as well as we might, to the government and to the general public.”

This is exacerbated by the fact that the industry does not present a united front to government, McManus adds, with the sector’s numerous trade associations and representative groups often taking different approaches.

“In a moment of crisis, I don’t think we represent the whole sector with one voice and therefore probably don’t have the impact, certainly at government level, that we should do,” he explains.

“We’ve got to polish our image constantly. I do believe that part of [the issue] is created by having too many representatives for the sector speaking in different voices.”

For McManus, the “next big bad news item” surrounds insurance for tower blocks. Insurer inaction here will lead to government intervention, he predicts, which will again reflect badly on the wider industry.

“At the moment, most of the insurers are burying their heads in the sand and hoping it goes away. The insurance sector has got to stand up and it’s got a social responsibility to make sure that those tower blocks are insured,” he says.

Covid-19 exposure

Closer to home, PIB Group’s coronavirus exposure has been centred around haulage, passenger transport and franchised motor dealers, however McManus emphasises that the Covid-19 impact is still very sector dependent.

“If you’re in the car transportation business, you’ve furloughed all your trucks for the last eight weeks. If you’re in the refrigerated goods delivery business, you’ve had a boom time,” he explains.

McManus adds that PIB Group has not been adversely affected by the pandemic; despite a drop in revenue over the past couple of months, the business is in “good shape” and already beginning to bounce back.

Generally speaking, brokers should be fairly resilient in the face of Covid-19 because “people have to buy what we sell”, McManus says.

The coronavirus outbreak could also lead to an increase in rates, especially considering the weather-related losses from earlier this year – this could pose a problem for cash-strapped small business customers, McManus adds; PIB Group has already seen some policyholders default on their payments or cancel their direct debit arrangements in a bid to retain monies.

Acquisition pipeline

PIB Group is known for its aggressive acquisition strategy; the firm has made 29 acquisitions since December 2015, most recently buying Munich-based Marx Re in June.

McManus says that although the pandemic has slowed down the acquisition process, it is otherwise unaffected – for example, the broker has numerous deals on its agenda, however the ones in due diligence are unable to progress because they require international travel.

If anything, the coronavirus crisis has enabled PIB Group to develop a “strong pipeline” for acquisitions as rival brokers look to de-risk rather than operate through the upcoming recession.

McManus says: “It’s building a strong pipeline for us because through the last eight weeks or so in lockdown, we’ve been approached by a number of brokers for a number of different reasons. One would be that they want to de-risk now, maybe take some money off the table rather than try and manage through another recession.”

McManus has a penchant for specialisms and niches when it comes to his acquisition preferences, especially “specialisms that I think will give sustained, long-term growth” – this includes childcare and healthcare, for example.

In terms of private equity, PIB Group is enjoying its fourth year with investor The Carlyle Group. McManus is looking ahead, however, and admits that the firm “will probably look to move to a new investor in the next 18 months to two years”.