In this chapter of our Annual Insurance Review 2023, we look at the main developments in 2022 and expected issues in 2023 for brokers.
Key developments in 2022
Covid-19 related cases did not make the impact that was anticipated by the market in 2021. However, Covid-19 related issues have not gone away. The vigilant broker may be considering policy wordings in this regard, particularly in respect of business interruption and whether a policy provides sufficient protection for a particular client's needs.
Overall, the brokers market appears to have weathered the recent storms well in terms of the war in Europe and political uncertainty. However, there is significant uncertainty with regards rocketing inflation, supply chain issues and the cost-of-living crisis. This has inevitably brought new challenges and opportunities to brokers. For example, the rising costs of construction materials have meant that many commercial and residential properties are currently significantly underinsured. The savvy broker will be considering current policies and will look to optimise the potential for new business.
There has been a significant rise in natural disasters which has also created new opportunities for brokers, for example in developing new products together with insurers. There are also new opportunities in the ever-popular topic of Cyber insurance. Cyber policies are notoriously complex and technical. Therefore, a detailed understanding of a policy wording is required before it is recommended to a client. As with all complex policies, there are risks, for example with misrepresentation. A client may claim that it misunderstood the extent of cover provided on the basis of how the policy was presented to them by its broker before inception. Whether such a claim will have any merit will of course depend on the scope of cover that was discussed, and the advice given before inception and perhaps more importantly, the records kept by the broker. Brokers are reminded to keep detailed records of all communications in this regard. As we reported in the last edition, the law places a very high bar on brokers. The high-profile case of ABN Amro Bank NV v Royal & Sun Alliance Insurance Plc and others serves as a stark reminder of the onerous duties a Court will place on brokers.
What to look out for in 2023
Inflation and the cost-of-living crisis has driven customers to shop around for more competitive deals and reconsider essential expenditure. The threat of a recession may lead to commercial and personal customers seeking to reduce cover or allowing a policy to expire in order to save money, which could in turn result in underinsurance and uninsurance. As with all economic downturns, Insurers are likely to take more points against cover and brokers are likely to be in the firing line. Brokers need to be particularly vigilant about their own E&O, ensuring that everything has been well documented, particularly if a customer decides to choose a cheaper but less protective option.
The drive for a more sustainable planet will continue into 2023, meaning that there will be an acceleration for climate risk mitigation. This will result in more innovation, from new products, services and premium incentives to risk management. We anticipate that this may create opportunities for brokers as the demand for sustainable products increases.