Lon­don ‘risks los­ing in­sur­ance busi­ness’ due to un­suit­able poli­cies

The Daily Telegraph - Business - - Business - By Michael O’Dwyer

LON­DON will lose out to ri­val in­sur­ance mar­kets if it does not re­duce its re­liance on un­suit­able stan­dard­ised poli­cies sold to busi­nesses, a re­port by in­sur­ance ad­viser Mac­tavish claims.

The prob­lems that caused con­fu­sion over Covid-re­lated busi­ness in­ter­rup­tion claims are a grow­ing fea­ture of other busi­ness in­sur­ance con­tracts, mean­ing “no one re­ally knows what they are cov­ered for”, said Bruce Hep­burn, the chief ex­ec­u­tive of Mac­tavish.

Lloyd’s of Lon­don, the City’s in­sur­ance mar­ket, has been try­ing to in­crease the stan­dard­i­s­a­tion of con­tract word­ings so that in­sur­ers can more ac­cu­rately mea­sure their ex­po­sure to pos­si­ble pay­outs. Mr Hep­burn said the am­bigu­ous word­ings in cookie-cut­ter busi­ness in­ter­rup­tion poli­cies was be­ing repli­cated across other types of busi­ness cover, in­clud­ing in the grow­ing cy­ber in­sur­ance mar­ket.

More than a third of com­pa­nies sur­veyed said the cy­ber cover avail­able was un­fit for pur­pose, ac­cord­ing to the re­port. Lloyd’s of Lon­don ex­pects to pay out £5bn on Covid-re­lated claims, but hun­dreds of thou­sands of small busi­nesses have been left in limbo as in­sur­ers re­sist pay­ing out un­der poli­cies de­signed to make good for lost prof­its.

Mr Hep­burn said: “Clients are be­ing let down by poli­cies that are not fit for pur­pose. Rather than craft­ing highly tar­geted word­ings de­signed to meet clients’ unique re­quire­ments, bro­kers and in­sur­ers are in­creas­ingly de­vel­op­ing one-size-fits-all ap­proaches.” Cus­tomers do not un­der­stand the com­plex poli­cies they are buy­ing and stan­dard con­tract word­ings are not be­ing adapted to meet clients’ in­di­vid­ual needs, the re­port claimed.

In one ex­am­ple high­lighted in the re­port, an events busi­ness found its pro­fes­sional in­dem­nity in­sur­ance con­tract ex­cluded cover for all of its ad­vi­sory work due to broad ex­clu­sions in­cluded in its pol­icy. “Flawed poli­cies lead to dis­putes be­tween in­sur­ers and clients, a break­down in trust, and the fur­ther com­modi­ti­sa­tion of in­sur­ance,” Mr Hep­burn said. “This neg­a­tive cy­cle must be bro­ken or the Lon­don mar­ket will de­cline.”

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