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Insurers must improve customer outcomes or risk loss of confidence

Insurers must improve customer outcomes or risk loss of confidence

We are undoubtedly in a period of prolonged crisis. Now more than ever businesses across the world are looking to the insurance market to limit and recover their losses.

But for an industry already rocked by a series of unprecedented crisis events, resulting in one of the toughest markets in insurance history, delivering on the promise to safeguard these organisations is proving challenging. 

These are problems that extend as far back as the last financial crisis where there was a huge shift in the shape of operational risk on a scale never seen before. This has now been deepened by Brexit, a global pandemic, the climate change crisis and cyber risk evolution.

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Commercial insurance has been unable to grasp this impact; the industry has failed to respond to the continual pace of change over a decade and add value. 

Russia's invasion of Ukraine and its global repercussions is unquestionably one of the major crises of our times. Nearly every business has felt the impact of rising energy prices, harmful inflation and seen significant increases in operating costs and severe disruptions to supply chains as a result of the war.  

Mactavish’s own business resilience survey found that 90 per cent of companies expect the Russia/Ukraine war to impact the resilience of their business, while 77 per cent of businesses have already been forced to make changes around their supply chain as a consequence of the conflict. 

Despite support for UK households in the former chancellor’s recent ill-fated "mini" Budget, businesses still remain in the dark, exacerbated by policy U-turns and worrying forecasts.

Around 5,600 company insolvencies were registered last quarter, 13 per cent higher than the first quarter of this year and 81 per cent higher than in Q2 2021. More will clearly follow unless there is additional support for businesses to assist them in the face of rapid changes to the global economy.   

Letters from the FCA  

In September the latest in a long line of Financial Conduct Authority statements criticising the industry has reiterated its expectations of insurers and called for more action to protect its customers.

The financial watchdog warned insurers to protect customers’ wellbeing during the cost of living squeeze from unnecessary products, add-ons or unfair penalties as fears emerged that customers may cut back on the insurance they need.   

It follows a letter in June sent to all market intermediaries by the regulator slamming market brokers for the “poor culture and poor value” for buyers in the market, sharing its concerns that the industry is not keeping pace with its calls for change.  

The FCA stated: “Our view of the general insurance intermediary sector overall is that there are significant risks of potential harm that both the market and individual firms need to address.”