When considering the new risks of the age, the re/insurance industry needs to go back to basics and prioritise educating people around the benefits of insurance, according to John Neal, Chief Executive Officer (CEO) of Lloyd’s of London.
As emerging and systemic risks such as cyber and climate change, to name just a couple, continue to reshape the global risk universe, Lloyd’s and the broader, global re/insurance market needs to ensure that people understand the intangible balance sheet.
This is the view of Lloyd’s CEO Neal, who in a recent interview with the Global Chairman of broker Aon’s Reinsurance Solutions arm, Dominic Christian, highlighted the need for the industry to return to the fundamentals.
“On the one hand, we’ve been intellectual about it, but I don’t think we’ve been educational about it. We really need to go back to the basics. And, now must be the time, mustn’t it, when businesses feel under stress, and really work hard to explain the intangible balance sheet versus the tangible balance sheet, and what the value proposition is around insurance and transferring that risk to an insurance balance sheet,” said Neal.
For the average business owner, he continued, acquiring insurance protection for the tangible risks is well understood as entities of all shapes and sizes look to protect their assets and the interests of their employees. However, when it comes to the intangible exposures, Neal stressed that the industry needs to do more to promote the comprehensive value proposition of insurance.
“I worry slightly that some insurance has fallen into the trap of people buy it if they have to buy it. Why do people insure their home? Because they’ve got a mortgage and the bank says they have to. Same as employers liability, workers comp, motor,” said Neal.
Of course, making insurance compulsory is one way to boost penetration levels but according to Neal, this is neither the answer nor is it constructive.
“I think we’ve got to get back into the basics of really educating people around what insurance can do for them. And, of course, the more product that is sold, the cheaper the price of the product will be. So, I think there’s quite a big education piece to do around the overarching value proposition here,” explained Neal.
Lloyd’s, like much of the industry, continues to navigate the challenges of the ongoing COVID-19 pandemic, an extremely active Atlantic hurricane season and persistent challenges like social inflation in the US.
However, the reinsurance market is firming after a prolonged softened state and with the important Jan 1st, 2021 renewals fast approaching, the Lloyd’s market is confident of growing by as much as 13% next year as it looks to take advantage of more favourable market conditions.