The natural catastrophes of the last few months may or may not have been sufficient to move the market, but what they have clearly exposed is the chronic level of under insurance of many of those impacted by these events. From earthquakes in Italy and rain deluged Houston, to the as yet untested up to 90% of homes in California without earthquake cover, underinsurance is proving to be an unexpected problem in the developed world. In addition to this landscape of insufficient property cover, is the yawning gap in cover for the economic damage that a major catastrophe can cause. Business interruption is clearly a class where there is a significant need for more insurance cover.
The first issue that needs to be addressed and overcome is the massive public relations (PR) problem our industry has outside of the EC3 bubble. Because out there in the real world, the buying of insurance is just a “grudge” purchase.
Secondly, the industry needs to focus less on the fierce competition for existing, established insurance business, and focus more on winning completely new or under-insured business.
Clearly these two issues are inextricably linked, and while I know it is a very simplistic view, there needs to be a fresh approach to selling insurance to a whole new audience while at the same time employing a new and targeted pro-active PR approach that makes the case for the insurance product.
In a recent speech Catlin founder Stephen Catlin, speaking in his role of chair of the Insurance Development Forum (IDF), highlighted that this communication gap was driving the protection gap, leaving around 70 percent of risks globally uninsured, rising to a staggering 98% in the developing world.
This is where I believe MGAs are well placed, particularly in niche markets, to step up and deliver the protection that is needed. These are exactly the high-quality MGAs that Asta is activity looking to back with investment and management services. With their proximity to the client, knowledge of local markets and economic conditions, MGAs are ideally situated to come up with new, tailored products that can truly serve the interests of policyholders.
Innovation will be key to MGAs succeeding in this space and those MGAs that can mobilise the forces of InsurTech and artificial intelligence are likely to be able to come up with the cost-effective answers that can deal with the problem and help bridge the protection gap.
Hamilton Re chief executive, Kathleen Reardon, has even pointed to the cost-effective solutions the bring much needed affordable cover to the developing world also being applied to the problem of underinsurance in more mature markets, commenting: “If you can figure out how to sell a policy for a dollar, you can reverse engineer that to the developed world.”
While the insurance industry, remains complacent about over capacity and focused on cutting costs to achieve improved profitability, I believe that MGAs can lead the charge and write new lines of business in underinsured sectors and succeed in not only building a successful business case but offering insurance where it is needed most.
John Holm has a strong background of corporate banking in the City, specialising over the last 30 years in relationship banking, debt origination, and M&A transactions in the insurance sector across the UK, Europe, Bermuda and North America.
After senior roles within RBS, National Australia Bank and Clydesdale Bank, John moved to a new role within Capita Insurance Services Ltd where he worked with start-up Managing General Agencies (MGAs), providing working capital, taking minority equity stakes and NED roles on behalf of Capita.
John moved to Asta in 2015 as MGA Executive, working on the development of Asta’s MGA platform and developing a new business pipeline of MGA investment transactions.
020 7743 0809