Airmic calls on insurers to ‘look favourably on grey area claims’

The Association of Insurance and Risk Managers in Industry and Commerce (Airmic) believes insurers should have a “willingness to look favourably on grey area claims” as “insurers’ rigid interpretation of wording regarding the pandemic could accelerate” the deterioration of insurer and client relationships.

In a statement published this week, the risk management and insurance trade body – which has 450 corporate members and more than 1,300 individual members – said that the insurance market needs “to adopt a more responsible and business sensitive position on the Covid-19 pandemic or risk long-term damage to trust and reputation and loss of customers”.

It said: “With many corporates facing an existential threat from global governments’ lockdown measures and a deep recession likely to follow, we expect brokers and insurers to demonstrate fairness and flexibility with regards to claims and renewals.

“The harsh market is already straining relations with many corporate clients, and insurers’ rigid interpretation of wording regarding the pandemic could accelerate this deterioration.

“Airmic believes insurers have a choice. They can either interpret ambiguous contract wordings with their balance sheet in mind, or they can act as partners to long-standing customers who seek business protection. All parties will benefit from a partnership approach to the current crisis.”

Member reactions

Following a consultation with members, Airmic is calling for:

• The avoidance of last-minute and poorly communicated changes in underwriting policy, including cover limits and exclusions.
• Constructive dialogue in wording disputes and a willingness to look favourably on grey area claims.
• Flexibility in cover and rebates for reduced risk exposure relevant to current trading conditions and business operations.
• Recognition of the cumulative impact of the harsh market and pandemic on renewals.
• A commitment to avoid Covid-19 exclusions on directors and officers policies.
• Business interruption covers that are fit for modern business risk profiles, which may include the increased use of parametric tools to protect cash flows.
• Greater collaboration and communication between businesses, insurers and brokers to allow innovation and opportunity to emerge from the crisis.

Furthermore, Airmic supports the creation of “national catastrophe pooling and reinsurance mechanisms”, which follow the existing Flood Re and Pool Re schemes. The association added that this must be embedded “in broader national and international risk strategies and should themselves be pooled to ensure the efficient use of capital”.

The statement continued: “Airmic believes a truly collaborative approach, joining up the public, private and academic sectors may be the only long-term option and Airmic is working with industry and government bodies to explore how to turn this into a reality.”

Airmic chief executive John Ludlow added: “The insurance industry is at a critical juncture. Member surveys suggest the hardening market is already forcing businesses to look at alternative transfer options, and an ill-judged response to the pandemic could prove the trigger.

“We understand insurers are under stress but it is in the interests of all parties that we work together openly, constructively and collaboratively. For years, insurers have said they want to be business partners with our members. Now is the chance to put words into practice.”