Expectations and relevancy: What’s at risk for the P&C industry

If the property and casualty insurance industry doesn’t “come to grips” with meeting client needs, the industry is at risk of losing relevancy in the marketplace, warned an industry consultant.

Phil Cook, who is also chairman of Omega Insurance Holdings, told a recent Insurance Institute of Ontario webinar that there’s a whole new host of issues keeping risk managers up at night and they’re looking to the insurance industry to help them navigate through those challenges.

“My issue here, really, is can we accommodate the sort of expectations that policyholders and risk managers on the commercial side expect from us?” he observed.

He listed 15 issues that keep corporate risk managers up at night, including economic slowdown, damage to reputation and brand, accelerated rate of change in market factors, business interruption, business competition and cyberattacks.

That’s vastly different than 20 years ago when they had many different things on their mind, he noted. Cook’s presentation was called Industry Trends Revisited. He typically gives out his predictions for the year in January but decided to revisit those trends given the events of COVID-19.

“I can guarantee you what kept them awake at night were the much more conventional types of exposure like fire, flood, lightning, wildfire, ice storms, hurricanes. All of which our industry over that period of time has addressed. That’s why those items no longer are on that list,” Cook said.

Eliminating those issues is a compliment to the insurance industry, he pointed out. But what about the new challenges?

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“My concern is, how many of those things that I just listed are we actually addressing now and how many of them will we be able to address going forward?” he asked. “Of the 15 top risks that keep them awake at night, by my expectation, we are only proving coverage for four. So there are 11 items that are keeping risk managers awake at night.”

And a pandemic isn’t even on that list. So the industry needs to figure out how to meet client expectations and provide ways to manage the challenges ahead.

“One of the trends we are going to have to come to grips with is meeting client needs,” he said. “We probably have to redefine some of our coverages; we have to re-imagine some of them; we have to re-align some of them; and I think we are going to have to prioritize whether we spend a lot of time looking at creating cover for COVID-19 or COVID-21 or COVID-22 because there will undoubtedly be some more.”

However, that would entail wading into unfamiliar waters. The industry will have to decide if it’s willing to do that. “Or are we going to concentrate our efforts at our capital, on expanding our scope of the coverage we already have and already understand?” Cook said. “I think, again, if I was advising the industry, which I’m not — I’m just an observer — but if I was advising the industry, I would advise them to stick with the latter option of increasing participation in the business that we know and understand.”

In whichever direction the industry goes, the marketplace will place expectations on the industry to deliver. Failure to live up to those expectations means less relevancy in not just the marketplace, but in the eyes of the government. “Keep in mind, it’s the same government that regulates our industry. So relevancy — or irrelevancy — [is something important to consider]. And it’s a dangerous thing in terms of attracting new capital.”

Cook pointed out that it’s the government that is, in reality, the largest insurer of pandemic and other disaster exposures. “And the government is picking up where the industry did not cover, and it’s important that we keep that in mind as we move forward and make our plans,” he said.

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