Opinion: Value add support services must be promoted to avoid cover corner cutting

According to figures published by the Office for National Statistics (ONS) in May 2022, inflation in the UK is now at a peak of 9%, as recorded in April 2022.

This is an increase on the 7% Consumer Prices Index inflation metric reported for March 2022 and is also the highest inflation level recorded by the ONS in the last 40 years, driving a cost of living crisis for many British households and businesses.

In the world of insurance, rising inflation exacerbates two main issues – it pumps up claims costs due to raw material price bumps, which are already affected by supply chain delays, and can also contribute to underinsurance, as financially stressed individuals look to cut cost heavy corners in an attempt to rein in spending.

Inflation-motivated cost cranks have followed hot on the heels of hard market conditions and the myriad economic ramifications of the Covid-19 pandemic, providing no respite for the purse strings of many an insured.

It’s little surprise that so many policyholders are reducing or cancelling their cover in order to make their money go further – despite the fact that underinsurance can then lead to further financial straits in the event of a claim.

There is no ‘get out of jail free’ card here and no easy answer to inflation-driven problems.

Our cover story this month (June 2022) details how brokers have a role to play in mitigating underinsurance caused by inflationary pressures.

However, I would also like to flag the role of claims departments and the value added risk management services that many insurance firms provide.

Insurance is fast becoming so much more than a simple claims payout, thanks to various support services and innovative ways to plug protection gaps to put policyholders back on their feet. Surely these kinds of aids can help amid inflation, alleviating pressures policyholders may be experiencing elsewhere in their lives and business operations?

As insurers filed their 2021 year-end financial reports, almost every chief executive I spoke to cited inflation as the risk to watch this year. It has certainly shaped H1. Whether inflation will remain as heavy a burden in the second half of 2022 remains to be seen.