Cyber-terrorism, piracy, Brexit, the Insurance Act and the challenges of an ageing society are just some of the key issues for insurers in coming years, according to DAC Beachcroft’s latest annual report on market trends.
The in-depth report, Insurance Market Conditions & Trends 16/17, now in its tenth year, considers how insurers can prepare for the next decade.
It emphasises the need to focus on “critical uncertainties”, such as the impact of FinTech—the technological revolution currently underway in the financial services sector. Helen Faulkner, head of insurance at DAC Beachcroft, says these “tend to be broader, less clearly defined issues, but the ones that can have the most dramatic effects. The future of the global economy and technology fall into this category—the hardest to predict but with the greatest impact”.
On Brexit, the report notes that it is the dominant issue in the insurance market but should not overshadow other topics since there is little reason to expect a “bonfire of regulation immediately following Brexit”. Faulkner says: “One great trap [insurers] must avoid falling into is directing all their attention to the new critical certainty of Brexit upheaval and ignoring the longer-term critical uncertainties.”
The report makes 50 predictions. These include the impact of proportionate remedies under the Insurance Act, which partner Nick Young predicts will cause many practical issues. With insurers paying half of any compensation, costs and expenses following a commercial insured’s non-disclosure, Young says: “Insureds are likely to want far more involvement in choosing lawyers and handling negotiations.
“Issues may also arise where there are competing drivers causing opposing views, for example reputation concerns. Situations will need to be dealt with on a case by case basis and solicitors will need to ensure clear agreements and procedures are in place to manage any potential conflicts, while also ensuring any following market and reinsurers are in the loop.”
Young also predicts that claims for damages for late payment of insured losses will become common in policy coverage claims in 2017/18. “With the Enterprise Act provisions applying to policies incepted or renewed from 4 May 2017, claims under such policies are likely to be accompanied by demands for damages with little concern about the evidence in support,” he says.
“It will be relevant in every negotiation and mediation despite the Law Commission finding no evidence of systemic late payment. Until we receive judicial guidance on such claims, this risk is unlikely to go away.”
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