Alarm raised over weak insurance protection – FT.com
Tuesday, 15 March, 2011 2 Comments
A new study of commercial risk by the specialist research firm Mactavish, in association with PwC, reveals what it says are “serious deficiencies in how corporate insurance is arranged and the role of boards in governing those arrangements”. UK companies are said to be exposing themselves to significant and unnecessary losses due to serious flaws in the way their corporate insurance policies are arranged.
The report is based on consultations with over 600 UK companies, more than 100 insurers and brokers, and detailed case analysis. It paints, says PwC, “…. an alarming picture of inadequate disclosure, widespread ignorance of a very challenging insurance law framework, managerial failure to gather relevant information, deeply uncertain policies and a lack of understanding of how large claims are processed”.
The chief executive officer of Mactavish, Bruce Hepburn, comments, “The deficiencies the report reveals in how insurance is arranged are disturbing. What we see today is a system that has prioritised low transaction costs above reliable insurance policies. This approach is not fit for purpose for the environment we are now moving into. UK businesses, especially medium-sized companies, are putting themselves unnecessarily at risk and in today’s economy are far more exposed if a major insurance policy fails to pay out”.
In last years report PwC and Citi were no less critical of the industry…but I’m not sure anyone is listening!
“Customers, brokers and insurers must all start to invest adequate time into securing appropriate insurance.”
Medium-sized companies are especially vulnerable to having claims delayed or disputed, says the report by Mactavish, a research company specialising in risk and commercial insurance, and PwC, the professional services firm.
It warns that more companies face problems such as those at Eurotunnel , which fell from a €7m profit in 2009 to a €57m loss last year as a result of a dispute with insurers over payments following a fire in the tunnel two years ago.
The dangers have increased because companies have taken on greater risk as a result of operational changes made to survive the recession, coupled with a tougher line on claims taken by insurers struggling to make profits in a weak insurance market.