Is there a need to "press the case" for rate increases?
Is there a need to “press the case” for rate increases? | Insurance Business Asia
Insurance News
Is there a need to “press the case” for rate increases?
Colonial Surety leader on 2024’s global challenges
Insurance News
By
Daniel Wood
“I do anticipate four major themes that we can expect in the insurance industry,” said Richard Clarke (pictured above).
One of these themes, he said, is the need for insurers to “press the case” for rate increases with both their personal and professional lines customers.
Clarke is chief insurance officer at Colonial Surety Company, a US insurance firm with a focus on business liability insurance and with other offerings including surety bonds and fidelity bonds.
Clarke has more than three decades of industry experience. Insurance Business asked him to anticipate what the global industry can expect in 2024.
First, he offered reflections on the year that was.
Reflections on 2023: Nat cats and cyber threats
“2023 brought to light a handful of big insurance challenges,” said Clarke. “The heightened impact of natural disasters highlighted recurring difficulties in underwriting responses to claims, especially in large property claims.”
Underwriters face numerous challenges when nat cats strike. According to online sources, some of the key issues include the volume of claims, limited resources, the difficulty verifying data and the complexity of assessing damage, particularly its extent.
One answer to these challenges is investing in technology to improve efficiencies. One of Clarke’s roles is leading insurance strategy and operations, including building out his firm’s online platform into a one-stop-shop for SMEs.
However, globally, insurance technology is challenged by cyber threats, said the chief insurance officer.
“We also witnessed cybersecurity take centre stage as the rise and threat level of cyberattacks continues to peak,” he said. “It goes without saying that a cyberattack has a great financial and reputational impact on a business.”
Clarke said addressing the “unique and evolving risks associated with cyber threats” has put more pressure on insurers’ underwriting operations and pushed them to engage in additional and specialised underwriting efforts.
“This means insurance companies had to reassess their resources and potentially add insurers to try to pinpoint risks,” he said.
Insurers restricting policy language
Another global industry trend Clarke noticed in 2023, he said, was how insurers’ use of more restricted language on policy documents exerted an influence on some exposures.
“Insurance policy language restrictions are exerting an influence on management liability exposures,” he said. “Typically, due to insurers implementing limitations in response to substantial claims payouts.”
Four insurance themes for 2024
In the year ahead, Clarke expects the global industry’s challenges to be driven by “four major themes.”
1. Understanding artificial intelligence
The insurance leader said it’s important for insurance companies to understand the impact AI can have on the industry, particularly on underwriting and the sale of insurance products.
“Once we understand the impact we can work to integrate them into our daily practices,” said Clarke.
“Dealing with unanticipated events is nothing new in the insurance industry,” he said. “However, in 2024 it is important to acknowledge that continued exposures, such as natural disasters as well as machinery malfunctions, can happen and that these exposures can morph into risks.”
Clarke said insurance companies need to be able to navigate these risks in order to provide the necessary support to their customers.
After a year of rising costs due to global inflation, Clarke argues that it is increasingly important for insurers to “press the case for rate increases” among both personal and commercial lines customers.
“This is important because the public is becoming increasingly more fixated upon the cost and not necessarily the underwriting justification for writing costs,” he said. “This can be a major challenge for insurance companies who may have to raise their rates as costs continue to increase.”
Clarke also said social media’s popularity as an “information platform” can be problematic for insurance firms.
“At times this can hinder the underwriting process when consumers turn to social media to understand insurance policy pricing,” he said. “[Insurers] must learn to properly navigate these platforms to ensure their processes are completed properly.”
Governance challenges
In an interview with IB last year, Clarke also discussed governance issues. He said directors and officers (D&O) underwriters are now challenged to better understand the companies they work with, as these emerging issues in governance — including cyber and ESG — blur the boundaries of coverage.
What do you see as the biggest challenges for the insurance industry in the year ahead? Please tell us below.
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