Insurance 2023 - the year ahead
Recession-related claims will come to FIDO…but they won’t all look the same
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Americas, Asia Pacific, UK & Europe
The nation’s economic challenges will put strain on the sector as under-insurance looks set to rise, claims costs escalate and fraud ticks up
Unfortunately, in line with the national mood, it is difficult to find much cause for optimism when considering the challenges UK property insurers are likely to face heading into 2023.
The number of unoccupied commercial premises will rise as businesses unable to afford rocketing utility bills and increases in costs for goods, materials and labour go bust. Coupled with a lack of funds to implement adequate security and a resurgence in metal thefts, this will see insurers facing an increase in fire claims – and fraud.
The problem of pervasive under-insurance will get worse as increased building materials and labour costs push reinstatement costs higher and higher and sums insured are not adjusted to keep pace. Businesses facing tough trading conditions will look to save money where they can – by reducing business interruption-sums-insured and indemnity periods, for example.
Insurers will at last be able to move on from Covid-19 BI claims as the last major widescale coverage issue – concerning coverage under disease-at-premises clauses – is to be decided by the courts in Spring 2023. The legacy of the Covid-19 BI litigation may be greater product rationalisation and wording discipline as insurers look to regain control of wordings on which they write business, especially through Managing General Agents. Insurers will also be scanning global developments to identify where future threats of high accumulation exposure exist under BI policy extensions. Obvious areas of risk include the threats posed by widespread power outages caused by energy rationing, and loss of internet connectivity because of attacks on data infrastructure, such as undersea cables.
Insurers may start to consider whether their existing War and Terrorism exclusions are fit for purpose in an age where foreign states use private mercenary groups to undertake hybrid warfare and where well-intentioned climate activists cause significant disruption to the transport infrastructure.
Global instability will persist, with the continuing conflict in Ukraine and the legacy of China’s pursuit of a zero-COVID policy, among other factors, causing significant disruption to supply chains; adding a “wild card’ element to BI claims whereby losses can be magnified unpredictably by lengthy delays in sourcing replacement equipment or parts.