The Journal February - March 2019

thejournal.cii.co.uk February – March 2019

Loyalty bonus Is dual pricing on the way out?

Future shocks WEF reveals the extent of emerging threats

A bridge too far?

The risks posed by ageing infrastructure

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FORWARD THINKING

While Brexit continues to concern CII members, our latest economic survey reveals optimism around skills and technology

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FEBRUARY - MARCH 2019

C O N T E N TS NEWS 5 President’s letter Jonathan Clark on the benefits of sharing knowledge

30-31 Flooding How science can help insurers deal with flood risk

6 -11 News UK and international news from the CII

32-33 Terrorism The changing remit of Pool Re to meet an evolving terrorist threat

12-13 Regional news News from the local institutes

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25 Regulatory radar The latest legislation updates from the UK and Europe

FEATURES 14-17 CII economic outlook and skills survey An in-depth look at the results of our latest industrywide member survey 18-21 Hot Topic – Infrastructure Examining the safety and environmental risks of massive structures 22-24 World Economic Forum How the profession can tackle the issues raised in the WEF’s latest Global Risks Report

34-35 Fraud Examining the global rise in social engineering fraud 38-39 Diversity international A new report on corporate culture in India 40-41 Legal The impact of data breaches post-GDPR now the first penalties have been issued

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STUDY ROOM

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44-46 Dark web Delving into the deep internet where data can be at risk 47 Q&A The big 10 questions to test your knowledge 49 A-Z A high-level look at nat cat technology

26-28 Customer loyalty What steps can be taken to give loyal customers a fairer deal on premiums?

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50 CII blog New blogger Alex Dooler on climbing the professional ladder

CONTACT US

The Chartered Insurance Institute 21 Lombard Street, London, EC3V 9AH Tel: (020) 8989 8464 Fax: (020) 8530 3052 Chief executive: Sian Fisher

The Journal is the official magazine of the Chartered Insurance Institute (CII).

Views expressed by contributors or advertisers are not necessarily those of the CII or the editorial team. The CII will accept no responsibility for any loss occasioned to any person acting or refraining from action as a result of the material included in this publication.

The Journal is online at www.cii.co.uk/ journal (members and subscribers only) Should you wish to send your views, please email: michelle.worvell@cii.co.uk

Editor: Michelle Worvell (020) 7417 4763 michelle.worvell@cii.co.uk Deputy editor: Luke Holloway (020) 7417 4778 luke.holloway@cii.co.uk For sales and advertising please contact andy.penny@redactive.co.uk ISSN 0957 4883 © 2016 Chartered Insurance Institute.

Average total net circulation more than 82,000 Cover Image: Istock

Publisher: Redactive Media Group Level 5, 78 Chamber Street London E1 8BL Tel: (020) 7880 6200 Senior designer: Yvey Bailey Picture editors: Claire Echavarry, Charlie Hedges Production: Jane Easterman Printing: GD Web Offset Recycle your magazine’s plastic wrap – check your local LDPE facilities to find out how

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PROJECT POLICIES

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LET’S GET DIGITAL The CII are improving your digital options for The Journal You can now choose to receive an ‘Email’ version rather than a printed copy of the magazine, which will be sent to you with quick-links to The Journal online site. Here, you can read all your favourite features, news and interviews, as well as download a full digital PDF.

Manage your subscriptions today at cii.co.uk/preferences thejournal.cii.co.uk / The Journal / October - November 2018

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PRESIDENT'S LETTER J O N AT H A N C L A R K

STRONGER TOGETHER CII president Jonathan Clark explains how sharing knowledge and building professionalism are both something we can all contribute towards…

FORMING AN ALLIANCE

A

s I write this, I am in Nottingham, with the Insurance Institute dinner just a short while away. We are clearly in for a very good event, with a mix of celebration of achievement by members and another enjoyable social evening. I was pleased to see that, as in Glasgow, we have several claims professionals on the top table. I think Glasgow must hold a record in that half the top table were claims professionals, which I can only applaud.

On that subject, I am delighted that in my presidency we have launched the Society of Claims Professionals, in January, and in Sue McCall and Jeremy Trott we have two excellent leaders for this latest society. In a previous letter I wrote about claims and I am always reminded of the oft-expressed view that to be successful as an insurance business you need to do two things well – underwriting and claims. My view is that you also need to manage distribution well; but at its heart, claims is what the product is all about. I look forward to hearing more from the new Society of Claims Professionals in the coming months.

Speaking of professionalism, I had the pleasure of having lunch recently with the CEOs and presidents of our fellow members of The Chartered Body Alliance.

These are: the Chartered Banker Institute and the Chartered Institute for Securities and Investment.

While the discussion was wide ranging, two themes struck me in particular – how to best support members throughout their careers; and what defines a professional today.

For the first, the need for continued learning was very much at the heart of the discussions. For the CII, local institute programmes throughout the UK form a backbone of this demand. All that can then be supported by our expanding online resource of the knowledge base, podcasts and other material.

Ultimately, we all have to set our own agendas for our continuing professional development (CPD) but an ever-increasing resource is there for us all to tap into.

Second, the question of what defines a professional and can be said to be a mix of competence, knowledge and ethical behaviours. Or as an alternative – competence, integrity and care for customers.

My focus has been towards how we treat our customers as being a key dimension; customers are what a profession should be there to serve.

In my view as a professional, we should all strive for high levels of customer satisfaction. Keeping our knowledge and therefore expertise up to date is therefore vital.

We can also share our knowledge with others whether by mentoring, peer reviewing or maybe offering to help with a local institute lecture.

So let me suggest that we all look at how we can share our knowledge and build professionalism for us all, by working together. ●

MY FOCUS HAS BEEN TOWARDS HOW WE TREAT OUR CUSTOMERS AS BEING A KEY DIMENSION; CUSTOMERS ARE WHAT A PROFESSION SHOULD BE THERE TO SERVE

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Jonathan Clark, president, CII

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NEWS

FROM THE CII TWITTERATI »

@ cra i g4nwa rks Great to get the opportunity to talk with the fantastic @CIIGroup #CIINewGen today. 300,000 people employed in the insurance industry, with 200,000 of those outside London. Contributes £12bn in tax revenue alone. From people I met today, industry in good hands for the future!

@ j on _ p _ te rr y @CIIGroup has been leading the way for transparency in the insurance sector, voluntarily disclosing its #GenderPayGap for the first time last year and now its #ethnicity pay gap.

@ n c b l an c ha rd This is an absolute must read: Insuring Women’s Futures – new research and action plan launched bit.ly/2T7ROBp via @CIIGroup #women #health #money #WednesdayWisdom

SOCIETIES

CII LAUNCHES NEW SOCIETY FOR CLAIMS PROFESSIONALS The CII has launched a dedicated professional body for people who work in claims insurance, with a view to improving consumer confidence in the sector.

The Society of Claims Professionals (SoCP) aims to raise the level of knowledge and technical competence in the sector – and in turn, bolster public trust.

The new society will function as a forum for the advancement of new ideas, career development, and professional qualifications.

In doing so, it will play a leading role in how the profession addresses some of the challenges ahead, including digitalisation and

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how to use data effectively.

The society aims to encourage a diverse and inclusive membership, with everyone working in the claims sector eligible to join its only professional body, irrespective of whether they hold an existing qualification from the CII or elsewhere.

Following the launch of the Society of Insurance Brokers, the new SoCP will be joined later this year by a further society serving the needs of professionals in the underwriting sector.

For more information, visit: www.socp.org.uk

BROKING

The UK Financial Conduct Authority (FCA) has published the final report of its wholesale insurance brokers market study, which was launched in November 2017 to assess how competition was working in the sector.

Overall, the FCA has not found evidence of significant levels of harm that merit the introduction of intrusive remedies. This report is, therefore, not an interim report but a final report.

The London insurance market is one of the largest global centres for placing and underwriting largescale, complex commercial and specialty risk. In 2017, it controlled approximately £60bn in gross written premium and serves as a hub for large commercial and specialty risk underwriters, attracting clients from the UK and all over the world.

The FCA will work with firms to address the concerns found in the report and will continue to monitor the market as part of its normal supervision function, to assess developments arising from the impact of EU withdrawal, possible further consolidation in the industry and as a consequence of any changes in business models.

To read the full report, visit: bit.ly/2BgZZT8

ISTOCK

FCA PUBLISHES FINAL REPORT ON WHOLESALE INSURANCE BROKERS

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NEWS @ Lexis InsureUK Ready, claim, aspire! How new data sources can contribute to enhanced claims management: Jay Borkakoti of #LexisNexis comments in the latest @CIIGroup @ClaimsSociety journal (p6-7) #Insurance #Claims

@Ac a de myW i s e r Congratulations to all 13 of our learners today who passed 13/13 IF1 module (@Apprenticeships) and Cert CII exams today!!! 100% pass rate. @BrightsideInsur @BrightsideGrp @CIIGroup @coversuregroup

@AskAdamOwen Heading to London to help judge the @CIIGroup Public Trust Awards. There are some very deserving nominees, so it is going to be a tough day

#CIIGroup Twitter

16,199 Followers and counting...

Q U A L I F I CAT I O N S

CII NEW GEN GROUP VISIT TO PARLIAMENT The CII New Generation Group took part in their parliamentary reception in February. The visit to Westminster is part of the CII’s flagship talent programme, which showcases 40 rising stars from across claims, underwriting, broking and the London Market, and was followed by a panel discussion with MP Craig Tracey, Seth Williams of the ABI and Lawrence Finkle of the CII. The panel discussed current live issues for the insurance sector including data collection, putting the customer first and the changing perceptions of the industry, as well as giving advice to the young

professionals on engaging with government.

Craig Tracey, member of parliament for North Warwickshire, chair of the Insurance & Financial Services APPG and ex-insurance broker of 20 years, took questions from the group on the future of the insurance profession as it continues to adapt and evolve to the pace of change.

The New Gen programme also includes an interactive session with the UK Financial Conduct Authority; training on subjects such as strategic thinking and dealing with the media; and leading a project or initiative that could make a difference to the insurance profession and contribute to building public trust.

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Lawrence Finkle and Craig Tracey

Q U A L I F I CAT I O N S

PROFESSIONAL EXAMS CAN NOW BE TAKEN AT HOME The CII is launching a new initiative to allow professionals to take exams from any location with a secure internet connection, even from the comfort of their own home.

Those studying with the CII will now be able to take exams remotely, saving candidates the time and trouble of travelling to an exam centre. Candidates will be able to sit exams from any location, providing they have access to a live camera, microphone and a quiet, secure environment. With these conditions in place, each candidate will be connected to a live invigilator who, supported by AI-based behaviour analysis technology, will ensure a fair and effective process.

The service is available across six non-UK units: ● AWP Award in Investment Planning ● AWB Award in Bancassurance ● AWF Award in Financial Planning ● W01 Award in General Insurance ● W04 Award in Customer Service in Insurance ● WH1 Award in General Insurance (Hong Kong only) Remote-invigilation exams can be booked via the CII website and incur a £25 fee in addition to the enrolment fee. For more information, visit: www.cii.co.uk/ri

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NEWS

DIVERSITY

CII ethnicity pay gap

CII VOLUNTARILY PUBLISHES ETHNICITY PAY GAP FIGURES The CII has voluntarily published the ethnicity pay gap of its employees Public disclosure of its ethnicity pay gap is an attempt by the CII to lead the sector by example and encourage dialogue around improving diversity and inclusion. Whether the government chooses to legislate in favour of mandating the ethnicity pay gap or not, as an organisation that falls beneath the government’s minimum size for reporting, the CII would not be required to report its figures.

The ethnicity pay gap data is part of a new CII report containing recommendations for employers on how they can foster a more diverse and inclusive workplace. Reviewing recruitment approaches and introducing mandatory training for managers to raise awareness of unconscious bias in recruiting are included in the recommendations.

Some 70% of CII employees volunteered their ethnicity for the

survey and key takeaways from the results include: The mean hourly pay gap is less than 1% and very narrowly favours white colleagues by 1% in favour – almost a nil pay gap exists; ● The median hourly pay gap is 16% and indicates ethnic colleagues are favoured over white employees by nearly 16%.

The full Ethnicity Pay Gap report can be viewed at: bit.ly/2GEWr0b ●

CHARTERED

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GATESHEAD INSURANCE BROKERAGE AWARDED CHARTERED Felling-based commercial insurance brokerage Talbot Jones Risk Solutions has achieved CII Corporate Chartered status.

The family-run firm, which specialises in supporting the third sector, shares this accolade with just two other northeast insurance brokers. Chartered status reflects the company’s sustained commitment to continuing professional development, high ethical standards and excellent customer focus.

Managing director Richard Talbot-Jones, who serves on the Insurance

L-R: Tom Hall (NED), Richard Talbot-Jones (MD), Clare Talbot-Jones (Director) and Sue Hurst (Office Manager)

Institute of Newcastle upon Tyne’s board and is himself a Chartered insurance broker, said:

“We are absolutely delighted to gain this recognition and to be part of raising the profile of high standards in the profession within the region.”

Business development director, Clare Talbot-Jones, added: “It’s such a great achievement for our town, Gateshead, which is now home to two of the region’s three Chartered Insurance Brokers. The northeast is a fantastic place to start up and develop an exciting business.”

Talbot Jones Risk Solutions launched three years ago and specialises in supporting charities, social enterprises and professions with insurance and risk management advice.

CII PROFESSIONAL FOCUS EVENTS The CII are delighted to announce that the Spring Professional Focus CPD conferences will be launching soon!

These special events will take place in seven locations around the UK in May and June.

Watch this space for venue and booking information, and how you can secure your place.

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NEWS

AWARDS

CII 2019 AWARD NOMINATIONS OPEN Nominations for the CII Awards 2019 are now open to all members who have demonstrated outstanding qualities and achievements within the profession.

Any individual can submit a nomination and members can also nominate themselves. The closing date for nominations is 12 April 2019.

The categories are: ● The Alan Bridgewater Award for Excellence ● Initiative of the Year

Unsung Hero of the Year Emerging Professional of the Year ● Local Institute Council Member of the Year ● Chartered Firm /Member of the Year The awards ceremony will take place at The Principle Hotel, York after the Network Conference on 26 June 2019.

To enter, download form at: bit.ly/2TdOm8e and email to carly.knights@cii.co.uk ● ●

9 H E R I TA G E

DIGITAL HERITAGE COLLECTIONS ONLINE The CII has launched a public website developed by the knowledge services team to host digitalised material from the Heritage Collections.

There, you can take a 360-degree tour of The Insurance Hall at 20 Aldermanbury, London and view the unique stained-glass windows and the collection of more than 1,500 Fire Marks formerly on display in the staircase.

In addition, 300 of the 800-plus documents

in the library’s insurance policy collection have now been digitalised. The library also holds a collection of about 200 rare books and other publications documenting the history of insurance and the institute, a selection of which are now online.

Members can access the site at: insurancehistory.cii.co.uk using the password: budgie

THE CII HAS NOW LAUNCHED ITS OFFICIAL INSTAGRAM AND FACEBOOK SITES! You can find them here...

facebook.com/CharteredInsuranceInstitute instagram.com/chartered_insurance_institute Follow us now and keep a lookout for lots of new content from around the CII.

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I N T E R N AT I O N A L N E W S

INDIA

CII VISIT TOP UNIVERSITY

Sainesh Dar

(l-r) Dr Jain Mathew, Dr Anil Pinto, Zainab Fidai, Amit Pradham, Sainesh Dar, Dr Fr Thomas C Mathew, Prof Jossy Peter and Prof Biju Toms

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Representatives from CII India recently visited the Christ University in Bangalore, India.

Sainesh Dar, regional corporate development director – south Asia; Zainab Fidai, office manager – international; and Amit Pradhan, corporate development manager – India, all spent time on campus interacting with students, the faculty and teaching staff.

The Christ University is one of the leading higher-education institutions in the country, with around 21,000 students undertaking undergraduate and postgraduate degree

programmes. That includes about 600 foreign exchange students, mainly from Korea, China, Japan, the Middle East and Africa.

The CII team was invited to the campus to get first-hand experience of the facilities, infrastructure and teaching methodology in place. A proposed collaboration will be aimed at introducing CII qualifications into the department of professional studies at the university, where students pursuing their graduate programmes also opt for other professional qualification programmes.

INDIA

CII AT CBI EVENT

Mr and Mrs. Crispin Simon, Mr. Ben Digby and Sainesh Dar with group of select CEOs and industry leaders

Sainesh Dar, of CII India, attended a meeting co-hosted by Confederation of British Industry (CBI) international director Ben Digby and the new British deputy high commissioner to western India and HMG trade commissioner to south Asia, Crispin Simon, at the latter’s residence in Mumbai in January.

A select group of country heads and senior managements representing British businesses and interests in India were invited to network and share their own experiences in the region.

The High Commission, supported by the CBI, individually discussed ways to provide necessary support and also offered help in case of any government opportunity or challenge.

Zainab Fidai

INDIA

NEW CII PARTNERSHIP ANNOUNCED AT RISK EVENT CII India has participated in an event organised by the Risk Management Association of India (RMAI), as a supporting partner. Sainesh Dar and Amit Pradhan attended ‘Risk Management Challenges in New Era – Way Ahead’, meeting key people from the banking and insurance sectors.

During the event, the RMAI announced its partnership with the CII to offer CII qualifications to aspiring professionals in the south Asia region. The RMAI signed up as a distributor partner for the south Asia region and has been promoting and registering candidates for various CII learning.

The event was attended by more than 150 key personnel from various banking and insurance organisations, which provided a great networking opportunity.

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I N T E R N AT I O N A L N E W S

HONG KONG

HONG KONG

CIIHK DELEGATE VISIT

CPD SEMINARS ANNOUNCED

into the London and Lloyd’s insurance market.

The programme is part of the Work and Learn Programme (WLP) initiative from the government of the Hong Kong Special Administrative Region.

Hong Kong insurance professionals who enrolled in the WLP are provided with a combination of technical insurance training from the CII and a practical workshop at Lloyd’s of London, aiming to enhance their technical knowledge and professional competency.

As part of the trip, which also included a visit to the new CII offices in Lombard Street, London, the IIL and representatives from its Young Members Committee also hosted a networking cocktail event for the CIIHK delegates.

The CII and the Insurance Institute of London (IIL) hosted a two-week Immersion Programme in London in January for CII Hong Kong (CIIHK) delegates.

The programme, arranged in partnership with Lloyd’s of London, is designed to provide an in-depth insight

In the first quarter of 2019, CII Hong Kong (CII HK) will host a selection of continuing professional development (CPD) seminars designed to keep insurance professions’ skills and knowledge up to date and, in turn, remain competent to perform their job.

The CPD seminar topics include: aviation and aerospace, risk management, employee compensation and personal injury claims, and practical issues with motor insurance in Hong Kong.

For more details on the CII HK CPD programmes, visit: cii-hk.com/about/ training-courses-and-cpd

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CHINA I N T E R N AT I O N A L

WECHAT FOR CHINA

AMBASSADORS FOR CII The CII has announced a new ambassador to assist the CII’s international team in promoting CII qualifications and professional standards in Thailand.

Prakit Kraikawin, Chartered insurer, has joined the CII as goodwill ambassador in Thailand. Mr Kraikawin has 10 years’ experience in non-life insurance business in Thailand, having worked at reinsurance company Thai Reinsurance PCL, and is now assistant vice-president of the research and statistics department.

He joins current CII ambassador in Mongolia, Budmaa Tsend. Ms Tsend began CII studies in 2013 after a visit to London.

As the CII does not yet have an exam centre in Mongolia, she travelled four hours to

Prakit Kraikawin

Budmaa Tsend

Beijing for each exam, spending three days there on each occasion.

Ms Tsend has now achieved Dip CII and is currently studying for ACII, and has become reinsurance senior manager at Mongol Daatgal, one of the largest insurance companies in the country.

CII Hong Kong (CII HK) has expanded its communications channel by setting up a WeChat account named ‘CIIambassador’.

The CII HK WeChat platform will provide readers with information on CII memberships and qualifications in both English and simplified Chinese. The Institute would like to give special thanks for the ongoing support from CII ambassadors Sean Lin, Gigi Chen and Li WenPeng.

To follow the account in WeChat, simply click ‘Add Contacts’ and search with WeChat ID ‘CIIambassador’ in the ‘official accounts’ option.

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REGIONAL NEWS

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MARCH

INVESTMENT CONFERENCE → 8:30 am – 12:30 pm The Insurance Institute of Chester and North Wales www.cii.co.uk/chester

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THEFT & ALARMS – WHO IS TO BLAME WHEN THEY GO WRONG → Time TBC The Insurance Institute of Stoke on Trent www.cii.co.uk/stoke

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AF7 PENSION TRANSFERS ONEDAY CRASH COURSE → 9:15 am – 5:00 pm The Insurance Society of Edinburgh www.cii.co.uk/edinburgh

IPSWICH

RISK CONFERENCE SUCCESS The Ipswich CII conference in February was once again packed out. More than 120 local members attended the full-day CPD conference covering a range of topics under the theme of ‘Emerging Risks’.

This included an update from CEO of Lloyd’s Inga Beale DBE and sessions on terrorism, the regulatory environment, the Novichok poisoning, drones, cybercrime and workplace wellbeing.

Feedback comments included: “The conference was very well organised and

run, informative, focusing on interesting topical subjects. The speakers were engaging and conveyed their subjects well. I would definitely attend this event again and recommend attendance to colleagues.”

And: “This was the first CII conference that I have attended, and I found it thoroughly enjoyable and informative.

Also, a great way to network with colleagues in the industry. I have already recommended future conferences to colleagues.”

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BELFAST

GUILDFORD

OWN YOUR FUTURE

The Insurance Institute of Guildford has announced its new Young Leaders Development Programme – a 10-month initiative featuring a series of five training sessions designed to improve the leadership skills of young professionals.

Topics will cover effective business relationships, creating

positive outcomes, stakeholder management and presenting with impact.

The programme also offers additional networking and social activities to help young leaders develop complete career confidence.

Members of the Guildford institute who are under 35 and hold a minimum Cert CII or CertPFS qualification are encouraged to apply now.

Places are limited and cost just £200.00 for the entire programme. → For further details and an application form, visit: www.cii.co.uk/guildford

BELFAST AMBASSADOR AWARDS 2018

The Insurance Institute of Northern Ireland president, Brian Caruth, was presented with a Belfast Ambassador Award at the end of 2018.

The award was presented to Mr Caruth for working with the CIIs regional membership team in bringing the annual Network Conference event to Northern Ireland in June 2018, helping to highlight and promote the region.

The Network Conference pulls together representatives from all 56 local institutes to discuss how the local membership proposition can be developed for our members across the UK. → For more info, visit: ww.cii.co.uk/local

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REGIONAL NEWS

13 MARCH

WHAT CAN YOU DO TO PREPARE FOR BREXIT → 12:30 pm – 2:00 pm The Birmingham Insurance Institute www.cii.co.uk/birmingham

21 MARCH

COMMUNICATION SKILLS → 12:30 pm – 2:00 pm The Insurance Institute of Halifax www.cii.co.uk/halifax

25 MARCH

PRODUCT RECALL → 12:30 pm – 1:30 pm The Insurance Institute of Sheffield www.cii.co.uk/sheffield

LIVERPOOL

NEW SOCIAL COMMITTEE The Insurance Institute of Liverpool social committee recently met to plan the year ahead, and there are lots of exciting events in 2019.

Last year, the institute ran the first Insurance Institute of Liverpool Games, which included a pool night, a schoolstyle sports day, breakout rooms and a Christmas jumper quiz night.

Although this will be tough to top, the committee is certainly going to try and promises even bigger and better events and activities this year. → For further information, visit: cii.co.uk/liverpool or follow @InsureLiv on Twitter.

BRISTOL

ROYAL AIR FORCE PILOT SPEAKS AT POWER OF INCLUSION EVENT The Insurance Institute of Bristol welcomed Ayla Holdom to Bristol in February, in the latest event of the CII’s Power of Inclusion roadshow series.

In raising awareness of diversity and inclusion and wellbeing in the workplace, the CII is presenting a number of inspiring stories across the local institute network, giving members a chance to hear firsthand the powerful experiences of its guest speakers.

Attendees listened avidly as Ms Holdom shared her story as a trans woman serving as a military helicopter pilot in the Royal Air Force. She served for 13 years and for seven of those was an extremely proud and commended member of

the RAF Search and Rescue team.

Ms Holdom now flies helicopters for the National Police Air Service.

As a committed supporter of LGBT charity Stonewall and a member of its Trans Advisory Group, Ms Holdom is also an adviser for All About Trans, a social enterprise that primarily works with the UK media on developing their representation of trans people.

She has been listed on the UK’s Rainbow List twice by the Independent on Sunday, received one of Attitude magazine’s inaugural Pride Awards and has a British LGBT Award for Inspirational Role Model. → For more details on future events, visit: www.cii.co.uk/local

Glasgow Institute @IASGCII Over 100 people at the #IASG quiz!

Great to see everyone there Ipswich CII @ipswichcii Our YPG team have been discussing our events for the next year... watch this space #cii #YPG #suffolk #northessex

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Bolton CII @BoltonCII Looking good here @BoltonCII. Final preparations for a fantastic evening. #BoltonCIIDinner19

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CII ECONOMIC OUTLOOK AND SKILLS SURVEY

CHANGING HORIZONS

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aunched amid the ongoing turbulence in Westminster around the Prime Minister’s negotiated EU withdrawal agreement and the uncertainty at the time of writing that still hangs over the UK’s exit from the EU, it is perhaps unsurprising that the latest edition of the CII Economic Outlook Survey reveals that the confidence CII members have in the future of the UK economy has fallen to the lowest levels since the survey was first conducted in 2011 (see Figure 1).

SHUTTERSTOCK

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Lawrence Finkle examines the findings from the latest economic temperature check of CII members

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CII ECONOMIC OUTLOOK AND SKILLS SURVEY

Philip Hammond, UK chancellor

The improvement in economic and business prospects observed in last year’s survey now appear to have been a temporary respite from a more sustained drop in confidence, as the expectations of CII members have fallen considerably below levels seen in 2016 immediately following the referendum, before the formal Article 50 negotiation window had commenced. 68% of respondents now say they believe the UK economy is somewhat or significantly deteriorating. This is above double the proportion from last year. Just

12% of CII members surveyed believe the economy is improving, nearly two thirds less than in the survey conducted 12 months earlier. Just 20% of respondents feel that the economy and business outlook is stable for the year ahead. This is a 17 percentage point reduction from 2017.

It would be difficult to separate entirely this fluctuation in economic sentiment of CII members from the perceived course of the UK’s negotiations to leave the EU. A sudden drop in economic confidence mirrored the uncertainty

FIGURE 1: CII economic and employment prospects indices, 2011-18 CII Economic Prospects Index

40 30

CII Business Prospects Index

20 10

CII Employment Prospects Index

0 -10 -20 -30 -40 2011 2012 2013 2104 2015 2016 2017* 2018

Source: CII Members Survey, CEBR analysis

that surrounded the immediate aftermath of the referendum, and a year later this sentiment had seemingly made a partial recovery as the UK Government’s Brexit narrative had become clearer and as sufficient progress had been made in negotiations to warrant discussions moving onto the terms of the transition period within the deal.

Yet the drop in economic confidence highlighted in this year’s survey results only mirrors that of households across the country, as consumer and business indices also continue to show falling confidence concerning the UK’s economic outlook. The Centre for Economic and Business Research (CEBR), the economists the CII partners to conduct the survey, note that in December 2018, consumer confidence fell to its lowest level since May 2013.

Figures published since by the Office for National Statistics reveal that UK economic growth slowed to just 0.2% in the final quarter of 2018 and that annual domestic GDP growth for 2018 was 1.4%, the lowest recorded since 2012. Annual services sector growth was 1.7%, the lowest since 2011. It would be hard to argue that the Brexit impasse is not impacting on levels of economic activity in the UK at the time of writing. →

15

FIGURE 2: Prospects for the UK economy in 2012-18 100% 90% 80%

2%

6%

27% 34%

3%

1% 10%

1% 5%

4% 17% 26%

28%

34%

41%

37%

70%

7%

Somewhat deteriorating

60%

51% 58%

48%

57%

52%

30%

0%

Somewhat improving

29%

51% 25% 20%

20% 10%

Stable

37%

50% 40%

Significantly deteriorating

20% 12% 1%

7% 1%

13% 2%

2%

10%

4%

7%

10% 2%

2011 2012 2013 2104 2015 2016 2017* 2018

Significantly improving Source: CII Members Survey, CEBR analysis

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CII ECONOMIC OUTLOOK AND SKILLS SURVEY

Despite a less optimistic view of the economy, the employment prospects of CII members by comparison are relatively positive, with 31% of members believing their prospects to be more positive than a year ago, while 47% believe their employment prospects to be similar to last year.

Again, this response is consistent with the strong labour market performance in the UK in 2018, when the unemployment rate stood at

increase from last year.

Overall, 50% of survey respondents hold the view that the most significant opportunity for the sector presented

by Brexit is the chance to secure a regulatory regime that is appropriate for the UK, compared to other options such as a chance to benefit from closer bilateral ties with non-EU markets (36%); a chance to introduce more market friendly legislation and reduce taxation (35%); and a chance to implement a migration system that focuses on attracting the skills that are needed in the sector (32%).

When CII members were asked for their views on the UK government’s negotiated withdrawal agreement and accompanying political declaration, which was overwhelmingly rejected by MPs following an initial postponement of the ‘meaningful vote’ in the House of Commons, 51% of respondents said the draft deal would be ‘bad’ or ‘very bad’ for the UK’s insurance and financial planning sector, whereas just 20% said the deal would be ‘good’ or ‘very good’. This is a reflection at the time of the survey of widespread concern across the UK, irrespective of

4.1% in the three months to October, having fallen to 4.0% in summer 2018, its lowest level since 1975. Still, compared to earlier years, the latest survey results appear more subdued.

BREXIT Across all survey respondents, just 11% agree that Brexit is making the UK a better place to do business for their firm. Some 51% disagree with the statement, a 10 percentage point

FIGURE 3:

ACROSS ALL SURVEY RESPONDENTS, JUST 11% AGREE THAT BREXIT IS MAKING THE UK A BETTER PLACE TO DO BUSINESS FOR THEIR FIRM

Overall, do you believe the draft EU withdrawal agreement and proposed future relationship framework between the UK and EU would be good or bad for the UK insurance and financial planning sector?

2% Very good 18% Good

29%

16

Bad Very bad 18%

Don't know

33%

Source: CII Members Survey, CEBR analysis

FIGURE 4: Do you feel that you have the digital skills required for the future of technology in the insurance and financial planning sector?

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

1% 11%

2% 7%

2% 6%

4%

3% 8%

45%

47%

52%

57%

46%

43%

44%

40%

39%

Commercial lines insurance (London)

Yes

Commercial Personal lines lines insurance insurance (excl. London)

Protection & health insurance

44%

Reinsurance

No, but with some training I will achieve the skills needed

3%

53%

44%

Loss adjusting & risk consultancy

8%

2% 11%

53%

44%

39%

43 %

47 %

47 %

44 %

Life & pensions

Financial planning - advice

Financial planning support

Mortgage advice

Banking

6%

7%

47%

47%

11%

8% 8%

Source: CII Members Survey, CEBR analysis

44% 47%

38%

Other

No, and I do not foresee myself retraining to develop technological skills

Don't know

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CII ECONOMIC OUTLOOK AND SKILLS SURVEY

political party or opinion, that the deal negotiated by the Prime Minister is unacceptable, despite a recognition of the opportunities presented by Brexit.

For financial services in particular, there is an anxiety that the draft deal could leave the sector controlled by EU regulation without the ability to contribute to its formation. Ironically, this would hinder the opportunity identified by members as the most important following Brexit – that is, the UK’s ability to implement its own regulations in the sector.

Interestingly, almost three in 10 (29%) respondents did not have an opinion on what the effect of the deal would be, highlighting the lack of clarity of the proposed deal as it relates to insurance and financial services more widely, and which is also perhaps a consequence of the ‘non-binding’ nature of the political declaration on the future relationship between the UK and EU, which at best contains only vague commitments to the type of partnership both parties will “endeavour” to achieve in future discussions.

With Brexit being a main area of concern for firms in the insurance and financial planning sector, just 15% of respondents feel the sector has been either ‘very well’ or ‘well’ represented in negotiations. Meanwhile, 45% feel

the sector has been ‘underrepresented’ or ‘strongly underrepresented’.

LIFE BEYOND BREXIT – SKILLS In an attempt to look at life beyond Brexit, CII members were also asked for their thoughts on skills in the sector.

The majority (55%) of CII members surveyed do not believe they have the correct skills for the future of technology in the insurance and financial planning sector. But encouragingly, this total consists of 47% of respondents who believe this can be rectified through retraining to develop their missing skills. Overall, at least 85% of respondents in each sub-sector felt they either had the digital skills required, or would be able to obtain them with training.

Interestingly, when analysed by hierarchy, nearly double the number of students and trainees and significantly more staff in non-management roles surveyed considered they had the digital skills needed for the future digital transformation of the sector, compared to senior management or executives.

There is some cause for optimism too in that the majority (51%)

FIGURE 5: Skills businesses struggle to find in new potential employees 47%

Experience in the field of work Soft skills (communication skills etc.)

45%

Technical skills

45% 33%

Business competence

27%

The right professional qualifications

22%

Conduct skills (ethical, behavioural etc.)

17%

The right level of education

16%

Leadership and management

10%

Other (please specify)

6%

Aptitude in foreign languages

0% Source: CII Members Survey, CEBR analysis

5%

10% 15% 20% 25% 30% 35% 40% 45% 50%

of CII members surveyed do not believe their job is in danger due to the adoption of AI, automation and similar technological advancements – compared to 29% that do.

Some 57% of respondents agreed that their firm is adapting to the needs of the digital economy, versus just 16% who disagreed. Separately, 71% said their firms were providing sufficient continuing professional development (CPD) and training opportunities in line with this. Members in senior management positions and above were also asked to consider the skills they struggle to find in potential new employees. Figure 5 shows that experience in the field of work is the most highly sought-after skill that businesses struggle to find in potential new employees, while soft skills are joint second with technical skills.

The results also highlight that despite technological advancements, the importance of soft skills and relevant experience will continue to be highly valued in future. Crucially, employees with a combination of both new technical skills and well-rounded soft skills will be essential for future development in the sector.

Compared to previous years, the latest CII survey results show a noteworthy fall in optimism, as illustrated in Figure 1. The share of CII members expecting a significantly deteriorating or somewhat deteriorating economy is the highest since the survey began in 2011. Meanwhile, the share of members expecting the economy to significantly improve is the lowest since 2015 and the joint second lowest on record. Whereas last year showed a more even split in members’ thoughts regarding whether the economy would improve or worsen, this year there is a definite consensus among CII members that the economy is on the decline. ●

17

Lawrence Finkle is public affairs executive at the CII thejournal.cii.co.uk / The Journal / February - March 2019

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HOT TOPIC – INFRASTRUCTURE

LONDON BRIDGE IS FALLING DOWN 18

The collapse of a bridge in Genoa with such catastrophic consequences has reawakened concerns around ageing infrastructure across the world, with the UK being no exception. We take a look at the risks…

YVEY BAILEY

HOT TOPIC

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HOT TOPIC – INFRASTRUCTURE

I

t is a pretty bleak picture: one in nine bridges in the US are reported to be structurally deficient, while in the UK more than 2,000 bridges are not suitable to carry the heaviest vehicles now on the public highway.

In Italy, where a bridge collapsed in Genoa in August last year, the World Economic Forum warns some 300 bridges are at risk of collapse. →

19

THE WORLD ECONOMIC FORUM [IN 2016] RANKED THE QUALITY OF BRITAIN’S INFRASTRUCTURE 24TH IN THE WORLD, DOWN FROM 19TH IN 2006 Source: Financial Times

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HOT TOPIC – INFRASTRUCTURE

According to a new report from Willis Towers Watson: “Asset deterioration is increasing due to heavier vehicles, higher traffic volumes and faster speeds; trends which are global in nature.

“The result is that bridges designed more than 40 years ago are now coping with very different demands – known as unforeseen use – and [that is] one of the main causes of bridge failure.”

Make a short trip around any major city and the bridges, roads, railways and tunnels undergoing maintenance and repairs bear witness to infrastructure assets being pushed to their limits.

According to the Willis Towers Watson report: “In the last 50 years, the permitted weight of goods vehicles on UK roads has increased to 44 tonnes.

Asset deterioration increases with heavier vehicles, increased traffic volumes and higher speeds; trends

20

which we observe globally.

“Similarly, assets that were built to comply with less stringent safety standards than we expect today continue to play a fundamental role in our daily lives. Bringing those assets up to date carries inherent risks – both during maintenance and upgrade works and also during the remaining life of the asset.”

UK RISKS Late last year, the UK’s National Infrastructure Commission also produced a report highlighting the many risks that exist across the UK. It also warns that, too often, the delivery of the UK’s major infrastructure projects has been slow and uncertain. It says: • Airport expansion in the southeast is the best known, but not the only, example;

WHERE IS YOUR ASSET ON THE BATHTUB CURVE? Useful Life

Decreasing risk of failure

Constant failure rate

Wear Out Increasing risk of failure

Risk of failure

Higher

Early Life

Lower

Time Cause of failures early in the life of an asset are dominated by defects in design or construction and errors in commissioning.

Good project governance and timely ‘Bringing into Use’ mitigate the risk here.

Source: Willis Towers Watson

Failure during the ‘useful life’ phase is essentially random. Good controls include inspection and maintenance. It’s important to constantly check that the asset is being used in the way in which it was designed.

Risk of failure towards the end of asset life increases.

This phase is likely to be dominated by increased inspection and maintenance. Degraded performance or limitations on use may be necessary.

• The Mersey Gateway Bridge, which opened in October 2017, was first proposed in 1994; • Crossrail, due to open in 2019, was originally proposed in 1974.

“Consequently,” it notes, “much of the country’s infrastructure has not kept pace with population growth, demand and advances in technology. The UK must stop running to stand still.”

At the end of January, the House of Lords EU financial affairs subcommittee echoed findings by the National Infrastructure Commission, of the need for a new financial institution for infrastructure investment.

Providing further evidence of the scale of the problem, the National Infrastructure Assessment recommended that cities should be given long-term infrastructure budgets and the opportunity to develop bigger projects where required, to support their plans to boost job opportunities and deliver homes. To deliver this, local leaders in cities need an extra £43bn of investment by 2040.

However, Joanne Foley, director of global infrastructure at Willis Towers Watson, says: “It’s not just wear and tear that affects the suitability of older infrastructure assets for modern demands.

“Changing needs place stresses on infrastructure that may not have been considered when they were first designed and built. We help and encourage clients to fully understand their asset portfolio and implement practical plans to safely manage their economic assets now and in the future.”

She suggests: “By regularly reassessing the risk profile of their assets, infrastructure companies can fully understand and safely manage their economic assets now, and in the future, through a combination of risk mitigation and risk transfer.”

POLLUTION RISK Although the collapse of the Genoa road bridge highlighted the very real risk to human life, there are other

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HOT TOPIC – INFRASTRUCTURE

risks that follow a catastrophic event – not least of which is pollution.

As governments increasingly look to penalise those involved with polluting the air, waterways or the ground, those involved in building these major infrastructures have to look both back at past issues and forward in the way they plan the next construction.

AIG’s environmental impairment liability (EIL) claims intelligence report cites a rise in fire-related environmental damage claims and losses relating to improper construction and demolition (C&D) waste management practices.

It lists construction in the top three industries for notified EIL events.

It further warns: “More claims are arising as a result of substandard management practices in the handling of construction and demolition waste.

“The trends reflected in EIL claims in the past 12 months once again demonstrate that insureds’ environmental exposures are far from static. They are set against an evolving risk landscape and increasing regulatory pressure across Europe to carry out inspections and make the polluter pay.”

The report warns that construction showed an almost doubling of loss incidents from 5% in 2016 to 9% in 2017 and suggests the biggest issue

for this sector at present is inadequate waste management processes. Losses associated with waste management activities (across all industry segments) accounted for 11% of AIG’s 2017 notifications.

WORLDWIDE INVESTMENT IN INFRASTRUCTURE IS EXPECTED TO BE $79TRN BY 2040. HOWEVER, THE ACTUAL GLOBAL INVESTMENT NEED IS CLOSER TO $97TRN. TO CLOSE THIS $18TRN GAP, AVERAGE ANNUAL GLOBAL INFRASTRUCTURE INVESTMENT WOULD NEED TO INCREASE BY APPROXIMATELY 23% PER YEAR World Economic Forum C&D waste is the largest waste stream in the EU by volume. “Proper management of this waste can have major benefits in terms of sustainability, as well as offering a boost to the construction and recycling industry,” the report states.

“However, its mismanagement can have severe negative consequences

for the environment and any property developers, main contractors and subcontractors held liable.”

Under Europe’s waste and environmental laws, primary responsibility rests with the waste producer and the entities that exert economic control over the activities.

“C&D waste requires testing, proper classification and management before it leaves a development site,” says Dawn Slevin, environmental strategist, international, AIG. “Waste classification is a big exposure for clients,” she continues. “Even if a subcontractor has responsibility for it and their contract states this, the waste producer is ultimately responsible: the site owner often relies on their construction design team.”

An increase in C&D waste management claims could be down to several factors. One is the recovery of the European construction markets, with the sector emerging from recession after several years of restructuring.

And with more construction activity taking place and increased pressure on contractors, the potential for claims resulting from inadequate C&D waste management practices is heightened. ●

21

THE FUTURE The risks do not remain with the past. Future risks will also need to be factored in. According to research from Allianz Global Corporate & Specialty (AGCS), cyber risks and the impact of new technologies will have an increasing influence on the corporate loss landscape in years to come.

“The report highlights the increasingly high values at risk for businesses and their insurers alike,” says Philipp Cremer, global head of claims, AGCS. “In today’s interconnected and globalised business environment, financial losses are increasing due to geographical concentration of values – often in risk-exposed areas – and from the knock-on effects of global supply chains and networks.

“Looking to the future, new technologies bring business benefits but also risks and claims. However, they also provide an opportunity to prevent and mitigate losses and improve the claims settlement process for our customers.”

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WORLD ECONOMIC FORUM

FIRST RESPONDERS The latest edition of the WEF’s Global Risks Report makes for sobering reading, so what can the risk transfer industry do to tackle these threats?

22

GETTY

S

uch is the relentlessness of negative headlines in today’s media, it would be easy to view the world as a dangerous, depressing and complex place.

On the other hand, as we now live in an age when the veracity of the information we consume is increasingly challenged, it can also be tempting to dismiss the doomsayers and convince ourselves that it is not as disastrous as it first looks.

However, when 1,000 of the world’s top academics, business leaders and policymakers agree that the world is facing some extreme, pressing and in some cases inevitable disasters, it probably makes sense to pay attention.

Delivering the views of that rarefied group of people is exactly what the latest edition of the World Economic Forum’s (WEF) Global Risks Report does, and it makes for sobering reading.

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WORLD ECONOMIC FORUM

WITH ENVIRONMENTAL, CYBER AND MENTAL HEALTH RISKS MUCH MORE IN THE COMFORT ZONE OF THE INSURANCE PROFESSION THAN ANY OTHER, INSURANCE IS BETTER PLACED TO BECOME PART OF A REAL SOLUTION

GROWING THREATS At a high level, the report tells us that environmental risks are the most pressing – and not for the first time either. This is the third year in a row that weather-related risks have come to the fore.

Hot on the heels of those environmental threats are the risks posed by cyberattacks, in terms of theft of data and money as well as cyberattacks resulting in disruption of operations and infrastructure.

Perhaps there will be no surprise at these results within the insurance profession, as a key part of its role is to help clients with exactly these kinds of risks. But what is being done about it? And perhaps more importantly, what can be?

Aengus Collins, head of global risks and the geopolitical agenda at the WEF, is the person whose job it is to spend all day thinking about these risks, and he does have hope that something meaningful can and will be done.

“We are a very positive actionoriented organisation – we have teams working on most, if not all, of these issues and we always try to bring the public and private sectors together to tackle them,” says Mr Collins.

He believes that the world’s decision-makers are starting to shift towards action. “My hunch is that people’s awareness is shifting from long term to short term,” he says.

The challenge is to jump from awareness to action and it’s interesting that for the last three years, the top three risks by likelihood were extreme weather events.”

However, the prognosis is not positive. Quoting figures from the Intergovernmental Panel on Climate Change, the report states that the rate of sea levels rising is increasing rapidly and an increase in global temperatures of two degrees will cause sea levels to increase by between 30cm and 93cm by 2100. To put that in context, between 1901 and 2010, sea levels increased by 18.5cm.

23

TOP 5 GLOBAL RISKS IN TERMS OF LIKELIHOOD

1

2

3

4

5

Extreme weather events

Failure of climatechange mitigation and adaptation

Natural disasters

Data fraud or theft

Cyber-attacks

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WORLD ECONOMIC FORUM

INSURANCE SECTOR RESPONSE

800m

PEOPLE LIVE IN MORE THAN 570 COASTAL CITIES VULNERABLE TO A SEA-LEVEL RISE OF 0.5 METRES BY 2050 24

700m PEOPLE WORLDWIDE ARE AFFECTED BY MENTAL HEALTH PROBLEMS

So what can or should the insurance profession be doing about all this? The threats are so macro, where would your average insurance business start?

Eugenie Molyneux, chief risk officer of commercial insurance at Zurich Insurance Group, says the report should act as a guide for companies to start assessing their own risk landscape. In a way, it should act as an aid as to where they should be looking for trouble.

“If this report articulates the risks the world faces,” she says, “it gives us a sense of the support our customers require in terms of prevention or recovery. The report makes it very clear that prevention still remains more economically effective than recovery.”

She says we should be in no doubt that this is the world of risk that customers face and, as such, the insurance industry must be aware of them and be thinking about how to manage them on the customer’s behalf.

And those risks are not purely structural or economic in their nature.

An intriguing addition to this year’s report is the ‘Heads and Hearts’ section, which looks at the impact these political and economic dynamics have upon the wellbeing of individuals and society as a whole.

The report notes that ours is an “increasingly anxious, unhappy and lonely world”, and continues: “Anger is increasing and empathy appears to be in decline.” To underline the point, the report points to statistics from the World Health Organisation, which suggest that depression and anxiety disorders increased by 54% and 42% respectively between 1990 and 2013.

Why does this matter? Put simply, all of the issues and risks highlighted by this report are interconnected and

mutually influencing. None of them exist in isolation and the mental health of individuals and societies are acting as a strong influencer on – and are a result of – the key threats highlighted by the report.

As Mr Collins says: ‘There is an assumption that if we look after the structural and economic stuff, everything will be OK. But we need to look at all of these issues in the round and how they interact with each other.

“What is driving the multiple societal changes that are underway?

There is a huge temptation to find a simple explanation that will make everything fit together, and normality will return. But nostalgia isn’t really an option here.”

And although these issues are not something that the insurance industry on its own can seek to tackle, it is an industry that facilitates. It facilitates the movement and operation of much of the economy and society and can, in turn, contribute to the solution to these looming risks.

Of course, nobody can wave a magic wand and solve the world’s current and future problems but as Ms Molyneux says: “It’s not about tacking one threat [from the report] – it’s about tackling all of them a little bit.”

With environmental, cyber and mental health risks much more in the comfort zone of the insurance profession than any other, insurance is better placed to become part of a real solution.

For anyone in the profession, this report should be compulsory reading – not only will it signpost the threats to your own organisation, it can help the wider industry understand just where the existential threats to their customers really lie.

To read the full report, visit: bit.ly/2DdP4Kc ●

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R E G U L ATO RY R A D A R

AI TO TACKLE FRAUD AND ASSE FLOOD DAMAGE ASSESS

1

CMA TACKLES LOYALTY PENALTY CHARGES

The Competition and Markets Authority (CMA) has A project led by the Department investigated concerns raised by Citizens Advice in a for Business Business, Energy & Industrial ‘super-complaint’, that companies penalise existing Strate to develop Strategy customers by charging them higher prices than those breakthrough artificial who are new. intelligence (AI) The CMA has looked at the five markets highlighted technology for the anti-fraud sector, is one of a by the super-complaint – including household number of new projects set to receive funding to insurance – and found that vulnerable people, enable the UK insurance, accountancy and legal including the elderly and those on a low income, may services industry to transform how they operate. be more at risk of paying the loyalty penalty.

The AI software will combine AI and voiceWith reference to home insurance, the recognition technology to detect and interpret regulator points to evidence suggesting that many emotion and linguistics to assess the credibility of longstanding customers are paying much more insurance claims. Insurance fraud cost the UK £3bn than newer customers, with businesses repeatedly in 2017, equating to £10,400 per fraudulent claim, increasing prices year on year. It welcomes the and costing consumers an extra £50 per policy.

Financial Conduct Authority’s (FCA) current The project is one of 40 backed by general insurance market study (which can £13m in government be viewed at bit.ly/2QSGzvK) and investment to support recommends that it: ● Investigates insurance pricing collaborative industry The CII takes a look at what’s practices and consider pricing and research projects, new on the policy and public interventions that limit successive prices to develop the next rises (‘price walking’). generation of affairs front this month ● Explore how intermediaries professional services. can continue to benefit the For more home insurance market (for information, visit: example where ‘semi-smart’ bit.ly/2UZKGEE solutions can improve the existing infrastructure of price comparison websites).

For further details of the CMA’s super-complaint investigation, visit: bit.ly/2GxtXoN

2

WHAT’S ON THE RADAR?

TREASURY SELECT COMMITTEE POST-BREXIT INQUIRY

3

4

The Treasury Select Committee has launched an inquiry into the government’s financial services priorities when it negotiates the UK’s future trading relationship with the EU and third countries post-Brexit.

Additionally, the committee will consider whether the current regulatory barriers in the UK that apply to trade with third countries should remain, and how the UK’s financial services sector can take advantage of the UK’s new trading environment.

The webpage can be viewed at: bit.ly/2SIYuXk

25

FCA SPEECH ON DIVERSITY Chris Woolard, executive director of strategy and competition at the FCA, has delivered a speech on diversity in financial services, in which he drew attention to how the debate has moved on to build a consensus around the commercial imperative of diversity for firms, rather than it being just a ‘nice to have’.

FCA statistics demonstrate that the percentage of women in senior management below board level has increased by only 1.5% during the past 10 years. Mr Woolard continued to say that the regulator can deduce much about a firm’s culture by how it approaches diversity and inclusion.

The regulator’s final message to firms is clear: non-financial misconduct is misconduct, plain and simple.

The full speech can be viewed at: bit.ly/2EFR8MF

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C U S T O M E R L O Y A LT Y

WHAT PRICE LOYALTY? Following the super-complaint by Citizens Advice last September, Sam Barrett examines whether the writing is on the wall for dual pricing

26

L

ooking after loyal customers is good business practice, with everything from free coffees to Airmiles and hotel upgrades offered as rewards.

But, following the super-complaint

by Citizens Advice last September, five markets, including household insurance, are in the spotlight for the way they treat their loyal customers.

Rather than rewards, loyal home insurance customers can find themselves on the end of uncompetitive deals and excessive pricing. To illustrate this, research by the Financial Conduct Authority (FCA) in 2015 found that customers

who had renewed their home insurance with the same company over five years paid on average 70% more than new customers.

Unsurprisingly, it is something that aggravates insurance customers too. The perceived lack of loyalty from their insurer was the number one issue for consumers when the CII launched its Public Trust Index last July, with a 13% gap between their expectations and how they felt insurers performed.

LOYALTY IN NUMBERS £4bn – annual loyalty penalty across the five markets (cash savings, mortgages, household insurance, mobile phone contracts and broadband) (CMA) 70% – the additional premium paid by a home insurance customer who has been with the same firm for five years compared with a new customer (FCA) 82% – of consumers believe that charging existing customers more than new is unfair (Aviva) £37m – loyalty tax paid by the 26% of homeowners who automatically renew their buildings and contents insurance (MoneySuperMarket)

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C U S T O M E R L O Y A LT Y

LEVELLING THE PLAYING NG FIELD The Competition and Markets ark ketss Authority (CMA) has now published its response to the Citizens Advice supercomplaint, with the FCA welcoming the CMA’s review and agreeing that harmful practices should be tackled robustly. The industry is now also taking steps to avoid the regulator having to take action.

Back in May 2018, the Association of British Insurers and the British Insurance Brokers’ Association (BIBA) published a set of guiding principles and action points to address the issues.

These apply to key personal lines

insurances including home, motor and travel and require members to take steps such as reviewing pricing for customers who have been with them for longer than five years and highlighting a first-year discount in new business letters.

Graeme Trudgill, executive director of BIBA, says it will help to demonstrate the industry’s good intentions. “The insurance industry wants to take the lead on this and show that it looks after its longstanding customers,” he explains. “The FCA’s requirement to show the previous year’s premium on renewal letters is already helping to highlight large increases and start discussions.”

As well as adopting the principles, individual insurers are also looking at ways they can regain consumer confidence. As an example, in December, Aviva launched a subscription-style insurance, wit w with iith a guarantee that existing customers mer ers rs wi w will ill lll be offered the same or a betterr pric p price ric i e ice than new customers at renewal. wal. l

REGULATOR ACTION While these moves should send nd n do out ut the ut th he right signals to the regulator, iitt iiss c clear lea e r that the writing is on the wall ffor or dua or du d dual u ua al pricing. A variety of options could ould ou ld d tak take ke its place.

Following the lead of the energy ner ergy er e gy y regulator, pricing caps could be e considered. Although these wou would ou uld d ensure that longstanding customers to om mer ers er do not pay more than they should, ou uld ld ld, Mr Hart is not a fan. “In the energy nergy ne rgy rgy g

sector it’s led to providers increasing their prices to close to the cap. This has killed competition,” he says.

Another way forward may be through the use of price optimisation models. These pull in different datasets to determine a more personalised price for the policyholder.

While it seems a sensible step, Duncan Minty, a Chartered Insurance Practitioner and founder of Ethics and Insurance, says that insurers could find themselves jumping from the frying pan into the fire. “Concerns about the way insurers use data has led to many US state insurance regulators banning price optimisation in personal lines,” he explains. “Insurers will be pushed hard to show that pricing is fair and non-discriminatory.”

GREATER TRANSPARENCY Instead, he believes that more transparency around pricing is a likely outcome of the FCA’s work. “I don’t believe the FCA will look to impose price regulation as the consequences have not always been good,” says Mr Minty. “Instead, I expect it will require insurers to demonstrate they have the right management systems and controls in place to support fair pricing.”

Whether change is brought about by the industry or the regulator, treating both new and existing customers fairly is a must. Acting responsibly will benefit the insurance industry’s reputation and help to win consumer trust. →

277

CONSUMERR APPETITE FOR POTENTIAL FCA REMEDIES Remedy

Good Idea?

Bad idea?

Economic Loss

Ban low rates r for new customers

47%

25%

49.9

Ban higher highe rates for renewals

78%

8%

46.8

Ban autom automatic renewals

62%

19%

36.4

Have a we week or day every year for switching insurers

27%

35%

29.9

Make insurers insu send texts to remind customers

52%

14%

29.2

(Inflated USD Billions)

Source: Cons Consumer Intelligence GETT TTY GETTY

BAD HABITS Ironically, as well as penalising loyal customers, cutting premiums to attract new business is not particularly healthy for insurers either. Constantly chasing new business to replace those customers shopping around at first renewal, has been labelled by data analytics company Consumer Intelligence as the industry’s crack cocaine.

While the practice is bad news for longstanding customers, it is also ssomething som o om meth ething ething eth n th tthat hat at benefi ben en nefi efits fitss m man many an ny consumers, on nsum su er ers rss, as Nei Ne Neil e l Hart H Hart, ar , art client ntt se n sservices ervi vice ces c es director orr at a Con Consum Consumer sum umerr um Intelligence, en nce e, e explains: xpl p ain ains: i s:: “Our research rch rc ch aalso lso found that although houg ug gh 50% 50% 0% of insurance customers om me mer ers tthink hiink hi hin dual pricing is exploitative tiv tive ive aand iv nd hu nd h hur hurts u urrts ts vulnerable groups, 39% % rreco recognise ecog eco gn gni nise n e that they could benefit fro from ro rom om iitt by by shopping around. It’s a cha challe challenge halle llen nge ge ge for the industry and regulator gu ula lator tto o to to strike a balance between n pro pr protecting ro ote ttecti ting ing ng vulnerable customers and nd no nd n not ot penalising those that shop hop op aro ar around.” roun und u n .” ”

thejournal.cii.co.uk / The Journal / February - March 2019

26-28_Loyalty Du_February-March 2019_Cll The Journal 27

22/02/2019 11:39

C U S T O M E R L O Y A LT Y

HOW DO YOU REWARD LOYALTY? 28

F

ollowing the recent renewed focus on customer loyalty and possible future changes to regulation around dual pricing, The Journal is asking readers to let us know what they think about the situation and what they personally feel are the most effective ways of keeping loyal customers happy and the cost of premiums fair.

Maybe you could consider the following questions...

• Do you feel dual pricing could, or should, be banned?

• Do you feel conflicted between knowing how you buy insurance as an individual but also being part of an industry that needs to make a profit?

• Are there other ways to reward loyalty and attract new business? Do you have any forward-thinking ideas that could help the insurance sector make positive changes around customer loyalty?

If you wish to get in touch, please email our editorial team at luke.holloway@cii.co.uk

GETTY

We’re happy to receive named responses or keep your answers anonymous if requested. ●

thejournal.cii.co.uk / The Journal / February - March 2019

26-28_Loyalty Du_February-March 2019_Cll The Journal 28

22/02/2019 11:40

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CII.02.2019.029.indd 29

20/02/2019 11:59

FLOODING

T

30

he risk of flood is prevalent worldwide, causing almost $550bn of global economic damage in the past decade. The insurance industry plays a critical role in working with governments, businesses and families to build resilient communities.

As always, knowledge is power.

So let’s start by looking at the main types of flooding: Riverine (fluvial) flooding is the most recognised type of flooding, following an increased discharge and/or water level. Spatially, riverine flooding can occur both locally and across entire continental basins – such as in Thailand in 2011, which remains the number one economic and insured flood loss in history.

Rainfall (pluvial, flash) flooding is caused by intensive rainfall and is usually a short duration, which makes it difficult to predict and strongly limits its mitigation. Pluvial flooding in 2009 killed more than 120 people in a normally arid area of Saudi Arabia.

Storm surge is the most common type of coastal flooding, caused by a combination of low air pressure, water level uplift due to shear wind, high tide and oscillating waves. Examples include the 1953 Netherlands event, which killed 1,836 people, and the Hurricane Sandy storm surge, which impacted New York in 2012.

Tsunami is a major threat to people living on the coast, with the overwhelming majority resulting from seabed displacement caused by earthquakes or submarine landslides.

Recent tsunamis include the Boxing Day Tsunami of 26 December 2004 in the Indian Ocean and the Tohoku Tsunami from Japan in 2011.

So why is understanding this important? Insurers can use flood hazard knowledge to choose the correct tools to evaluate the risk and understand the nuances of the model outputs. Each flood type should be independently reviewed when setting or reviewing primary or reinsurance contract wordings.

FLOOD FREQUENCY A flood’s return period, or frequency, represents the likelihood of an event reaching or exceeding such a threshold within a certain period of time, with frequency being the return period’s inverse value.

Understanding this is important as many misunderstandings have occurred during discussions between re/insurance experts and hydrologists, and there needs to be consensus.

SURVEYS SHOW ONLY A MINORITY OF PEOPLE KNOW IF THEIR INSURANCE COVERS THIS PERIL AND IF SO, WHAT SPECIFIC TYPE There is a surprising fact: everyone knows what flooding means, but surveys have shown that only a minority of people know if their insurance covers this peril and if so, what specific type.

This situation results from the range of contract wordings developed in various geographies over the years.

These often limit protection to specific and rare types of flood losses, such as sewage backup policies in Canada or extremely low limits in Austria that rarely cover the costs for a basic clean-up.

This has led to a large difference in flood insurance penetration in various countries or even individual regions.

For example, in Germany, Bremen has only 19% penetration, but Baden Wuerttemberg reaches 94%.

Based on recent serious flood events in Europe (2002, 2005, 2013); the US (2005, 2012, 2017, 2018); Australia; Japan and Thailand (2011); and Canada (2013), families, communities and companies are increasingly demanding a holistic weather risk insurance protection.

CLIMATE CHANGE The insurance profession, as a key risk transfer mechanism, can partially manage the negative effects of climate

change by offering products to increase insurance penetration and build appetite, while using data and analytics to better understand the risk.

Studies have shown that the increase of flood frequency and intensity could be likely in regions such as southeast Asia, India and eastern Africa. Increased risk of flash flooding associated with summer storm rainfall has been seen across North America and Europe. Rising sea levels also pose a significant threat for low-lying regions. For example, Jakarta, with its soil subsidence, is fighting to complete a large construction project to protect the city.

Flood insurance can locally become less available or affordable, particularly in the most exposed regions. The fact that the largest protection gap now exists in regions most prone to severe future impacts signifies an important challenge for various stakeholders, including local governments.

SOME FINAL TAKEAWAYS… ● Always remember that flood, as an extreme natural phenomenon, will have modelling limitations, but understanding these will unlock more meaningful insights. ● There is a plethora of solutions for effective flood loss modelling and quantification and companies that invest in their understanding of each product’s strengths and limitations will benefit from a strategic advantage. ● Even if there is no flood product for your territory, models can be efficiently developed and tailored to individual needs, to take a more scientific approach to understanding and mitigating against this risk. ● There is an ongoing trend in the insurance industry to offer a broader, more holistic coverage for homeowners and businesses – but it does not have to bring additional risk if it is efficiently quantified via modern analytical solutions. ● Flood maps and models have many more uses than often described: keep an open mind and discover a host of new opportunities. ●

thejournal.cii.co.uk / The Journal / February - March 2019

30-31_Flooding_February-March 2019_Cll The Journal 30

22/02/2019 07:23

FLOODING

UNDERSTANDING THE

UNDERWATER RISK

How can a scientist’s perspective on flood help the insurance industry? Dr Petr Punčochář, from Aon’s Impact Forecasting team, has been clarifying some common flood misconceptions between scientists and insurance professionals…

ECONOMIC LOSS - TOP 10 FLOOD EVENTS

GETTY

Month/ Year

Region

Location

Economic Loss (Inflated USD Billions)

INSURED LOSS - TOP 10 FLOOD EVENTS Month/ Year

Region

Location

Economic Loss (Inflated USD Billions)

Jul 2011

APAC

Thailand

49.9

Jul 2011

APAC

Thailand

Jul 1998

APAC

China

46.8

Jun 2007

EMEA

United Kingdom

7.2

Jun 1993

United States

United States

36.4

Aug 2002

EMEA

Central Europe

4.5

Jun 1953

APAC

Japan

29.9

May 2016

EMEA

Central Europe

4.1

Jul 2016

APAC

China

29.2

May 2013

EMEA

Central Europe

3.8

17.2

Jul 2010

APAC

China

28.7

Aug 2016

United States

Southeast, Midwest, Plains

3.6

Aug 2002

EMEA

Central Europe

27.7

Jun 2008 United States

Midwest, Mississippi Valley

2.9

Aug 1995

APAC

North Korea

24.6

Dec 2011

APAC

Australia

2.8

May 2013

EMEA

Central Europe

23.7

Aug 2005

EMEA

Central / Eastern Europe

2.4

Jul 1931

APAC

China

23.2

Jun 1993

United States

Midwest, Mississippi Valley

2.2

Source: Impact Forecasting

31

Source: Impact Forecasting

thejournal.cii.co.uk / The Journal / February - March 2019

30-31_Flooding_February-March 2019_Cll The Journal 31

22/02/2019 07:23

TERRORISM

POOLING POWER As the UK’s terrorism threat evolves, so does its government-backed last line of cover, Pool Re. Martin Friel talks to CEO Julian Enoizi about its changing remit

32

thejournal.cii.co.uk / The Journal / February - March 2019

32-33_Terrorism_February-March 2019_Cll The Journal 32

22/02/2019 07:24

TERRORISM

GETTY

P

ool Re was created in reaction to a series of terrorist attacks on mainland Britain perpetrated in the early 1990s. The attacks essentially targeted the economy of the country, an aim pursued by detonating bombs in the heart of London’s financial district.

The cost and frequency of these attacks gave insurers and reinsurers cold feet – they simply could not absorb the actual and potential cost and lacked the ability to accurately predict what future losses might be.

So, Pool Re became a necessity that since its inception in 1993, has been involved in covering losses of about £600m in terrorist- related claims.

But Pool Re was designed for dangers that existed more than 25 years ago, which were quite different from the threats the UK faces today.

What is particularly striking about these current threats – and of particular relevance to Pool Re – is the form they are taking. The spectacular and costly attacks that made Pool Re a necessity have been replaced by attacks that have direct human cost as their main objective, rather than structural damage.

This mutation of the terror threat facing the UK is laid out very clearly in Pool Re’s latest Terrorism Threat & Mitigation Report, issued late last year, which focuses on the key terrorist events and developments in 2018, with analysis from leading counterterrorism experts.

Pool Re also published new quantitative research into more than 4,300 global terrorist attacks since 2014, as well as outlining plans for forthcoming non-damage business interruption cover.

The main report takes a deep dive into the nature of terror threats

today, both in the UK and globally.

While naturally taking a keen interest in current threats, it also looks at the emerging risks and seeks to understand where the next mutations will occur and what they will take.

The report outlines that between 2014 and 2018, 54% of attacks globally are estimated to have resulted in property damage. But it also states that attacks in Europe, North America, East Asia and the South Pacific were less likely to result in property damage than those in less developed regions.

£600m WORTH OF TERRORISTRELATED CLAIMS LOSSES COVERED BY POOL RE SINCE 1993 CHANGING REQUIREMENTS So, for an organisation that was set up to help absorb the cost of largescale attacks, what does this mean for Pool Re? “The risk of a black swan event has not gone away and Pool Re’s existence is still required,” says its CEO, Julian Enoizi. “We are here to protect the economy in the event of a large-scale attack.”

Mr Enoizi describes the organisation’s purpose today as creating and maintaining an ecosystem within which the risks can be truly understood by “producing threat analysis, raising awareness, conducting proxy modelling for frequency, modelling for severity and modelling for reflective price”.

The purpose of Pool Re is not to simply act as a blunt tool to absorb cost. It is a training ground for these emerging risks, a ‘safe place’ where they can be modelled and properly

understood before they are gradually reabsorbed by the commercial market.

The recent reintroduction to the market of terrorism contingency cover is a working example of that approach. “This is a risk that the market is now able to assume itself.

Enough time has elapsed; they have learned how to underwrite it and they are now comfortable with it,” says Mr Enoizi.

REMAINING RELEVANT Although just one aspect of the terror cover available, it is a confident step in the right direction. But as Pool Re seeks to return more risk to the open market in line with its confidence to absorb it, does this predict a whittling away of Pool Re’s remit?

Mr Enoizi does not see it that way. He likens the organisation’s relationship with the market to the stabilisers on a bike and, as an example, points to the recent additions of cyber cover and non-damage business interruption to its remit.

“I would view Pool Re’s involvement in these areas as an incubation of a risk that the market will eventually take on itself. To do that we have to model those scenarios – to complete the picture – and while we are doing all that the threat is mutating again,” he says.

He points to the Salisbury poisoning incident and the drones that caused such disruption recently at Gatwick airport as examples of how the threat may evolve in the future.

“They weren’t terror attacks, but had they been, the losses would have been substantial,” he says.

Therefore, it is by acting as the industry’s risk incubator, modelling and understanding the risks in a controlled environment until such point that the industry can take them back with confidence, that Pool Re will ensure its relevance and significance remains.

Mr Enoizi is clear that while terror threats remain, Pool Re will have a key role to play in ensuring that UK plc continues to thrive under its protection, regardless of what form terrorism may take. ●

33

thejournal.cii.co.uk / The Journal / February - March 2019

32-33_Terrorism_February-March 2019_Cll The Journal 33

22/02/2019 07:24

SOCIAL ENGINEERING FRAUD

R

ecent years have seen the emergence of social engineering fraud as one of the fastest-growing threats in the commercial crime sphere. It is a complex fraud that sees fraudsters use a variety of techniques to deceive and manipulate victims into voluntarily giving out confidential information or transferring funds.

Social engineering fraud is on the increase, with Accenture’s 2017 Cost of Cyber Crime report highlighting that almost 70% of companies have been hit. Companies of all sizes have been targeted, with the costs running into the billions.

“All the clients we speak to have had some form or another of social engineering event and generally they manage to capture it,” says Eleni Petros, commercial crime practice leader at Marsh. “Every client I speak to has had some kind of phishing attack, some have had multiple, some even daily. Phishing is a scattergun approach and they are seeing what they can get.

Some of it targets a specific person in a company; it is about building a relationship for a period of time.”

The fraudsters use methods including sending phishing emails purporting to be from vendors, clients or customers, or directing a transfer of funds or a change of invoice details. They often piece together information from various sources to appear convincing and trustworthy while perpetrating the fraud. The often-complex nature of these schemes frequently makes it difficult to identify the fraud before it is too late.

“It plays on exploiting people’s trust. People are susceptible to fraud through things like email, social media and mobile apps,” says Julia Graham, deputy CEO and technical director at Airmic. “People are now getting smarter and cleverer at exploiting the levels of trust that people bestow and [are] using [the internet], particularly social media, to con people into giving out passwords [and] giving money and

34

[they are] particularly preying on the people that are most vulnerable.

“There is a proliferation of people being encouraged to disclose sensitive information for unauthorised access to either their postal data or their money. It looks perfectly legitimate and reasonable. It is preying on people who are vulnerable by looking credible.

They are getting incredibly slick at doing this, particularly when they steal

the personalities of legitimate people and hide behind them like a shadow.

It is psychological manipulation and it is nasty.”

VENDOR FRAUD One big area of exposure is fake vendor and supplier fraud. Companies that have large amounts of vendors and suppliers that they deal with are particularly vulnerable to this.

ANTI-SOCIAL BEHAVIOUR

ISTOCK

With social engineering fraud on the rise, Tim Evershed examines the options for combatting the threat

thejournal.cii.co.uk / The Journal / February - March 2019

34-35_Social Engineering_February-March 2019_Cll The Journal 34

22/02/2019 07:25

SOCIAL ENGINEERING FRAUD

THERE IS A PROLIFERATION OF PEOPLE BEING ENCOURAGED TO DISCLOSE SENSITIVE INFORMATION FOR UNAUTHORISED ACCESS TO EITHER THEIR POSTAL DATA OR THEIR MONEY. IT LOOKS PERFECTLY LEGITIMATE AND REASONABLE

performance reviews. Others are now sending their own fake phishing emails to staff to test their responses.

“The weakest link [in] most organisations’ information is people, so you’ve got to be relevant and up to date. You constantly have to refresh what you’re doing or people will get a bit ambivalent,” says Ms Graham.

“Psychologically reinforce the message until it becomes second nature to people,” she adds. “Telling people it is ok to challenge is the other big message. Be brave, be courageous, nobody will think you’re silly if you challenge. We will think you’re silly if you don’t.”

RISK TRANSFER OPTIONS

“A typical social engineering fraud is vendor fraud, where a fraudster rings up an accounts department and says: ‘Can you change our details on your system?’” says Ms Petros.

“The unsuspecting employee inputs a different account number and sort code and then the next time a genuine invoice comes in they pay it into the wrong bank account – the fraudster’s bank account.”

It is imperative that companies use effective defence strategies to combat

social engineering fraud. Robust security, policies and procedures in both IT and accounting are critical and will include appropriate access controls, multi-level authentication and verification processes.

Employee fraud awareness training should include e-learning courses and online learning. It will also require constant updates, reminders and re-testing. Some companies will use soundbites and noticeboards for this, while others will incorporate it into

Despite employing robust systems and controls, companies can still find themselves hit by a social engineering attack, particularly as fraudsters are often extremely successful in circumventing internal procedures by demonstrating a sophisticated knowledge of them.

Commercial crime insurance can protect a company, however most policies provide coverage on a traditional ‘named-perils’ basis.

The consequence is that as fraudsters evolve their techniques coverage becomes outdated, with new types of fraud in danger of falling through potential gaps in cover.

In response, some insurers are using commercial crime as an opportunity to differentiate themselves with broad-based coverage that triggers when loss is suffered by an organisation as a result of any fraudulent, criminal or dishonest act.

“They do not contain any standard social engineering exclusions or conditions sometimes seen in other policies, and can provide full-limit cover for a social engineering loss,” says Ms Petros. “This can give organisations peace of mind that they have the broadest coverage available in the event that they suffer a loss resulting from a social engineering attack.”●

35

thejournal.cii.co.uk / The Journal / February - March 2019

34-35_Social Engineering_February-March 2019_Cll The Journal 35

22/02/2019 07:25

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CII.02.2019.036-37.indd 37

21/02/2019 14:15

DIVERSITY

A MESSAGE TO INDIA Bimtech and Raheja QBE have collaborated on a diversity study in India – Praveen Gupta reviews the findings, which show a lot remains to be done…

THE LOW LEVEL OF AWARENESS ABOUT LIABILITY INSURANCE WAS A DISAPPOINTMENT. FOR ME, IT IS SUCH A ‘GIVEN’ THAT ONE EVALUATES RISKS AND THIS SHOULD BE INCLUDED, THAT I SUPPOSE THE BEST WAY TO EVALUATE THIS PART OF THE STUDY IS THE OPPORTUNITIES TO EDUCATE THAT IT REPRESENTS!

38

GETTY

Carissa Hickling, report expert

thejournal.cii.co.uk / The Journal / February - March 2019

38-39_India Governa_February-March 2019_Cll The Journal 38

22/02/2019 11:21

DIVERSITY

SURVEY STATS

T

he CII has worked hard in recent years to collaborate with a wide variety of leading insurance professionals, businesses, policy and third-sector organisations on issues relating to women’s risks.

The CII’s Insuring Women’s Futures programme aims to evolve the insurance and personal finance profession’s approach to women and risk, with work stretching across the UK. But what is the situation elsewhere in the world?

In India, a joint project by Insurance Business Management, Bimtech and Raheja QBE General Insurance Company aimed to analyse the risks faced by women leaders across the entire spectrum of businesses in India’s National Capital Region (NCR). An attempt was made to understand views on gender inequality and its prevalence in various aspects of risk management including risk transfer.

THE FINDINGS The survey turned out to be unique in many ways. Despite anonymity, very few women leaders in the NCR who were approached were forthcoming, which was surprising, given the high number of those interviewed that affirmed the extent of discrimination.

Of the 650 corporate leaders reached out to – of a mix of listed, unlisted firms and startups, just 86 were interviewed.

If one were to view the results with optimism, the findings do show some light at the end of the tunnel in the form of self-employment and entrepreneurship. They also suggest that new-age businesses with sustained affirmative action could create a level playing field.

WHERE IS INDIA LAGGING? Just 3% of boards are headed by women (as chairperson) and women directors now account for 7% of executive directorships in the NIFTY 500. This is comparable to European markets, where 4% of chairpersons and 7% of executive directors are women. But where India falls behind

679 202 REACH

RESPONDED

is independent representation – only 16% of independent directors in India are women, compared to 34% in the STOXX Europe 600 Index.

Only 21% of NIFTY 500 boards have two or more women, compared to more than 80% in some other markets. On average, India has 1.2 female directors on boards, which is significantly less than its European and US peers. Even on committee memberships, women directors are underrepresented in India.

WHAT DID THE SURVEY COVER? Areas covered by the survey included gender discrimination, trust deficit, sexual abuse, lack of reliability, noncooperation, isolation and wage gap.

Also highlighted was the poor understanding of liability and cyber insurance solutions as a means of risk transfer. ● Risk mitigation through insurance: The interviewees were asked about insurance and its role in risk mitigation. ● Insurance awareness: Awareness about the various insurance solutions available in the market.

Some 84 interviewees were aware of insurance and major lines of insurance business – life insurance, health insurance and property insurance in particular. ● Insurance awareness related to business: Awareness about the various insurance solutions that protect the interest of an enterprise against the risks faced. Some 74 interviewees had partial knowledge or awareness of insurance solutions related to their respective businesses. ● Awareness of liability insurance: Awareness about the various liability insurance offerings that help in protecting the interest of the enterprise. Some 79 interviewees had no clue about liability insurance

91

42

PARTICIPATED IN THE SURVEY

AVERAGE AGE

and its significance in risk mitigation. ● Awareness of cyber insurance: Some 81 interviewees did not know about cyber insurance and its increasing significance in businesses including technology. ● Awareness of reputational risks: Awareness about reputational risks to both the organisation and individual, and its concerned repercussions. Some 71 interviewees were not sure whether they were fully aware of reputational risks or not, and the extent to which they could damage their business.

39

SO WHAT NEXT? A significant amount of work still needs to be done to improve corporate culture to make it really conducive for women to work and increase the overall number of women in the sector. The business press has been abuzz with the merits of how useful directors and officers (D&O) insurance is in the world of #MeToo; however, D&O cover is neither a means of prevention nor cure for this malaise – it should be the last line of defense.

A judicious risk management programme should be put in place to first address what corporates, as employers, can do by themselves and also to address the deficiencies in understanding of risk management practices and risk transfer mechanisms. There also needs to be a shift by carriers from the existing product-centric transactional relationship, to a value-proposition approach.

To read the full report, visit: bit.ly/2TXOrtZ ● Praveen Gupta FCII, Chartered insurer, is managing director & CEO of Raheja QBE General Insurance

thejournal.cii.co.uk / The Journal / February - March 2019

38-39_India Governa_February-March 2019_Cll The Journal 39

22/02/2019 11:22

LEGAL

DATA BREACHES AND Several recent events have highlighted the pressing nature of data security. The GDPR, with its threat of hefty fines, has served to focus the minds of corporate entities on this crucial issue

40

W

hen one thinks of a data breach, one typically thinks of an anonymous third-party hacker; a rogue-state operative, or a lone wolf, stealing data to hold a company to ransom, to sell it on the dark web, or to disrupt an industry. Companies and their insurers are investing significant time and money to protect against these external threats. But what happens when a threat comes from within?

A BREACH FROM WITHIN Matthew Williams, senior associate, and Alexandra Jones, associate, both at Mayer Brown, highlight one such example: “Following an internal disciplinary proceeding, Mr Skelton, a senior IT internal auditor at Morrisons supermarket, developed a grudge against his employer. In November 2013, Mr Skelton had access to the payroll data of 100,000 employees, which he copied onto a personal USB stick and posted online from his home computer, seeking to frame a colleague.”

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LEGAL

VICARIOUS LIABILITY COVER CONCERNS

Once it was established that Mr Skelton was the perpetrator, he was arrested, charged, convicted of fraud and sentenced to eight years’ imprisonment. Subsequently, more than 5,000 Morrisons employees impacted by the scandal brought proceedings against Morrisons; both direct causes of action and, in the alternative, a claim that Morrisons was vicariously liable for Mr Skelton’s wrongful acts.

The Mayer Brown lawyers note: “At first instance, Langstaff J rejected the argument that Morrisons bore any primary liability. However, he held that ‘the wrongful conduct of the internal auditor [Mr Skelton] was so closely connected with acts which he had been authorised to do that it could fairly and properly be regarded as done while he was acting in the ordinary course of his employment, so as to give rise to vicarious liability’.

“Morrisons appealed, but it was dismissed by the Court of Appeal in October 2018. The court held that Mr Skelton’s actions fell ‘within the field of activities assigned to him

by Morrisons’ and agreed with Langstaff J that there was a ‘seamless and continuous sequence’ or ‘unbroken chain of events’ to support a finding of Morrisons’ vicarious liability.”

The lawyers said the Court of Appeal’s comments in relation to Morrisons’ submissions that a finding of vicarious liability would place an unreasonable burden on Morrisons and other innocent employers in similar cases in the future, will be of interest to insurers.

The judges noted: “The solution is to insure against such catastrophes…

The fact of a defendant being insured is not a reason for imposing liability, but the availability of insurance is a valid answer to the Doomsday or Armageddon arguments put forward… on behalf of Morrisons.”

In the light of the Morrisons decision, which confirms that employers may be vicariously liable for data breaches carried out by their employees, even where an employee’s motive is to damage the employer and the acts are outside of working hours, insurers may be concerned to understand how their insurance policies, including their professional indemnity, crime and cyber liability policies, might respond.

The Mayer Brown pair warn: • Professional indemnity and cyber liability policies may exclude coverage for a claim arising out of intentional misconduct by an employee • It is possible that such claims could be covered under a crime policy, although these tend to cover more readily tangible loss as a result of employee wrongdoing, such as internal theft of cash, as opposed to defence costs and damages resulting from a finding of vicarious liability for the actions of an employee.

“The issue is further complicated by the fact that the claimants in Morrisons are current and former employees. The policies above often contain ‘insured v insured’ exclusions and it would have to be seen whether insurers would seek to exclude a claim for vicarious liability brought by an insured’s employees,” say Mr Williams and Ms Jones.

“A further consequence of the Morrisons decision may be that if employers are more easily held accountable for employee misconduct, insurers are less likely to insure against that risk, or may seek higher premiums to cover such a risk.

“Insurers and insureds must bear these important coverage issues in mind when considering the scope of cover provided to the insureds in the event of data protection breaches by their own employees and, in particular, may want to consider whether such a risk could be incorporated within their cyber liability policy coverage.” ●

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GOOGLE FINED RECORD €50M IN FIRST GDPR TEST

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France’s data protection watchdog fined Alphabet’s Google €50m ($57m) for breaching European Union online privacy rules.

Reuters reported it was the biggest such penalty levied against a US tech giant, after the French regulator said Google lacked transparency and clarity in the way it informs users about its handling of personal data and failed to properly obtain their consent for personalised ads.

“The amount decided, and the publicity of the fine, are justified by the severity of the infringements observed regarding the essential principles of the GDPR: transparency, information and consent,” the regulator CNIL said.

Helen Bourne, partner at Clyde & Co, notes: “It is clear from the CNIL’s decision that claiming to be compliant is not enough and companies need to consider how clear, unambiguous and easily accessible information about data protection is. The CNIL has viewed Google’s data protection from the perspective of the data subject and this is the perspective from which potential risks should be considered.” ● The EU’s General Data Protection Regulation, the biggest shake-up of data privacy laws in more than two decades, came into force in May 2018. It allows users to better control personal data and gives regulators the power to impose fines of up to 4% of global revenue for violations.

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The complete solution to help you conďŹ dently comply with IDD

The Insurance Distribution Directive (IDD) requires insurance distributors to ensure their employees have the appropriate knowledge levels to undertake their role. In addition, all relevant staff will need to complete a minimum of 15 hours of Continuing Professional Development (CPD) per year.

If you are distributing insurance products, or in any way involved in their distribution, you must be IDD compliant.

Find out how Assess can help your organisation become IDD compliant. assess.sales@cii.co.uk +44 (0)20 7417 4422 insuranceassess.cii.co.uk

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CII.02.2019.042.indd 42

20/02/2019 12:05

LEGAL REVIEW

FIRE DAMAGE

WHO IS LIABLE?

Graham Bartlett examines a recent clash of landlord and insurer liability

I

n Palliser Limited v Fate Limited (in liquidation) [2019] EWHC 43 (QB), a fire that started on the ground floor but spread and seriously damaged the upper floors of the building led to the High Court considering whether liability insurers were required to indemnify a landlord against its liability for damage to parts of the building let under long leases.

Fate owned the freehold to the building and occupied the ground floor, on which it ran a restaurant. Palliser owned 999-year leases to the upper three floors, which had been converted

into seven flats and sublet. It was agreed that the fire that occurred on 1 January 2010 was caused

by Fate’s negligence.

The building was insured by Fate and the insurers made a payment for repairs to the upper floors, but delays and issues over the quality of the work meant that Palliser took over and completed the refurbishment itself. Its claim against Fate was for that additional cost to them of completing the work, which was agreed at £225,000. By the time the claim was settled in October 2017, Fate had gone into liquidation so the claim proceeded against Fate’s liability insurers under the Third Parties (Rights against Insurers) Act 2010.

The insurer’s case was that, had it not been in liquidation, it would not have been liable to indemnify Fate because the liability policy only covered liability for damage to property “not belonging to you or in your charge or under your control” and, as freeholder of the whole building, including the upper three floors, those upper floors of the building were property that belonged to Fate.

Palliser’s argument was that the leases gave it exclusive possession and control of the upper floors, and thus those parts of the building could not be regarded as property that belonged to Fate or as being under its charge or control.

Giving judgment for the insurers, the High Court answered this question

of contractual interpretation by deciding what the term would mean to a reasonable person who had all the relevant background knowledge reasonably available to the parties at the time the contract was made.

This reasonable person would have concluded that although the leases on the upper three floors gave Palliser exclusive possession and control, Fate nevertheless continued to own them as freeholder of the whole building and a landlord retains their ownership of a building even if they grant a long lease to a tenant. Although the sum insured for the whole building was inadequate, it was well above the rebuilding cost of the ground floor alone.

Because Palliser’s claim was dismissed, the court did not have to decide whether Fate would have been entitled to rely on the defence established in Mark Rowlands Ltd v Berni Inns Ltd [1986] QB 211 but in reverse.

In Berni Inns, the negligent tenant was not liable for the cost of repairing fire damage because it contributed to the buildings insurance premium under the terms of its lease. Here, the unresolved question was whether the landlord would have been entitled to deny liability to its tenant for fire damage when it had arranged building insurance. In practice, such an issue will rarely arise as the landlord will always want to claim on the insurance policy they have arranged. It will only be in exceptional circumstances, such as where the tenant undertakes the work, that the issue will arise, and will have to be resolved on another day. ●

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Graham Bartlett is a barrister at Trinity Chambers in Newcastle upon Tyne www.trinitychambers.co.uk

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STUDY ROOM: THE DARK WEB

STUDY ROOM

THE DARK SIDE In this extract from a CII Good Practice Guide, James Moorhouse lifts the lid on the dark web

T

he CII Good Practice Guides cover a broad range of topic areas, as part of an effort to expand the knowledge of insurance professionals as well as examining emerging trends, regulation, industry developments and legislation from the UK and Europe. Here, we feature an extract from one of the latest guides.

WHAT IS THE DARK WEB? The internet, as we understand it, is only a small percentage of what is actually ‘out there’. Search engines access what is known as the ‘surface web’. They retrieve their results by indexing pages that contain links allowing themselves to be identified.

However, less than 10% of all the

pages on the internet are indexed by search engines. This means that more than 90% of online data makes up what is known as the ‘deep web’.

The deep web contains everything not indexed but accessible using a direct address or by searching through content. The internet is too large to be indexed comprehensively by search engines, so anything not directly linked can be found here.

Deep web content can be anything from archived pages, to databases or private networks. However, the most infamous part of the deep web is the ‘dark web’.

The dark web is a small part of the deep web (thought to be 0.1%) that is concealed because it does not contain inbound links. To access the dark web, users will need to know an exact address, have access to virtual

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STUDY ROOM: THE DARK WEB

private networks or have specific login details. To maintain privacy, users may access the dark web by using the Tor network (‘the onion router’) via a Tor browser, which encrypts the data.

The dark web can be a useful tool for retaining anonymity for the site concerned as well as for the site user.

Legitimate reasons people may want to protect their identity include accessing uncensored news stories, sites blocked by local governments, journalists storing sensitive data, human rights groups protecting data and whistleblowers concealing their identity.

However, due to the anonymity associated with the dark web, it is largely known for illegal activities such as distributing extreme pornography, the buying and selling of weapons and drugs, terrorism and the hiring of hackers.

a cyberattack may find that not only have their details been stolen but also distributed for sale on an illegal marketplace.

As the dark web is difficult to access, it is not always obvious when a breach has occurred. It could be weeks or months before any stolen data is used or sold. These marketplaces can offer anything from email addresses with passwords that can be used to access personal information on any site with a relevant account, to account details for stealing funds.

As well as providing cover for clients, insurance companies and brokers also store large amounts of data that could be a potential target for hackers. Safeguards need to be used to store and handle this data securely, including responding promptly if there is a breach.

RELEVANCE OF THE DARK WEB

LAW ENFORCEMENT

The reason the dark web should be of interest is that it is also a tool used for the storing and selling of stolen data. Those who have been subject to

In May 2018, law enforcement from 28 countries met at Europol headquarters to discuss how to coordinate tackling crime on the dark web. As the criminal marketplaces found there exist anonymously on a digital platform, there is an urgent need to clamp down on these illegal activities.

The outcome of this was the creation of a dedicated dark web team, which will work together with EU partners and global law enforcement.

Europol outlines the team’s role: “It will deliver a complete, coordinated approach: sharing information; providing operational support and expertise in different crime areas; and the development of tools, tactics and techniques to conduct dark web investigations and identify top threats and targets.

The team also aims to enhance joint technical and investigative actions, organise training and capacitybuilding initiatives, together with →

AS THE DARK WEB IS DIFFICULT TO ACCESS, IT IS NOT ALWAYS OBVIOUS WHEN A BREACH HAS OCCURRED. IT COULD BE WEEKS OR MONTHS BEFORE ANY STOLEN DATA IS USED OR SOLD

45

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STUDY ROOM: THE DARK WEB

prevention and awareness-raising campaigns – a 360-degree strategy against criminality on the dark web.”

The dark web team will take action towards reducing the size of this “underground illegal economy”, however it will still be the insurance industry that will have to pick up the pieces when a breach occurs.

PROTECTING DATA

46

Since the General Data Protection Regulation came into effect in May 2018, the Information Commissioner’s Office requires any suspected breach to be reported within the first 72 hours, detailing the following: ● Information on the nature of the breach; ● The approximate number of individuals concerned; ● Categories lost;

●

●

Details of the likely consequences of the breach; How the breach will be dealt with.

All data subjects affected must also be notified that their data may have been compromised. Any failure to do so could result in a fine of up to 4% of a firm’s global revenue or €20m, whichever is higher.

Now that more of an effort is being made to track down and identify stolen data on the dark web, this needs to be investigated and included as one of the consequences of a breach. Such methods include: data breach detection applications that can alert you within minutes if your data has been hacked, leaked or stolen; or employing a data monitoring service to detect on your behalf.

With the risk of identity theft

DARK MATTER Types of data circulated on the dark web can include ● Fake IDs ● Forged passports ● Stolen account data ● Counterfeit credit cards ● Stolen intellectual property and copyrighted materials ● Leaked corporate data.

Q

increasing, dark web surveillance is vital to scan online for any activity associated with an identity to see if it is being misused. As well as monitoring web pages and networks, other sources of data that will be checked include chatrooms, forums and malware. By being thorough, this should inspire public trust that firms not only know how to respond to a cyberattack, but if the data ends up on the dark web then they also know how to track it down.

WHAT CAN BE DONE? The focus on cyberattacks needs to address what happens to the data after it has been stolen. Most of the time companies focus more on repairing the breach, notifying clients and managing any reputational damage.

The journey of the data post-theft can become more complex and create more issues in the years to come.

Consider the following: ● Identify vulnerable risks ● Maintain good security controls ● Use monitoring software ● Respond to a breach promptly.

Rather than waiting for the worst to happen, security measures like these are good risk management and inspire customer confidence that you are acting in their best interests. The key is to treat data as valuable, even after it has been stolen. ●

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Q&A STUDY ROOM

This set of questions, courtesy of online CII training package Insurance Assess, will test your knowledge of topics.

The answers are at the bottom...

QUESTION 1

QUESTION 4

QUESTION 8

Under the Insurance Distribution Directive (IDD) which of these types of documents is an intermediary now required to provide to a client?

A Insurance product information document b Key features document c Copy of the Insurance Act 2015 d Details of authorisation details

Direct insurers focus mainly on which of these types of insurance?

A Home and private motor insurance b Professional indemnity and directors and officers’ liability insurance C Marine hull and cargo insurance D Public liability and employers' liability insurance

QUESTION 2

QUESTION 5

Would the theft of computer data be covered under a conventional theft policy?

Which of these definitions best describes subrogation?

A When a condition is temporarily suspended b When a misrepresentation has been made by the policyholder c When someone else is responsible for the accident and the insurer can pursue a recovery d When there is more than one policy in force for the same loss and insurers share the cost of the claim

What is the function of the Motor Insurance Database (MID)?

A Police are able to use the database to notify insurers where vehicles are involved in serious accident b Insurers are able to check NCD entitlements on line via MID c It is a central record of claims and insurers can use MID to check the truth of answers on proposal forms d It enables interested parties to check details of a vehicle's insurance arrangements

A No – the theft of data would not meet the criteria whereby forceable and violent entry or exit from the premises would be met b No – theft cover is limited to tangible property only c Yes – this cover is available as an extension to a standard theft policy d Yes – this is a standard element of theft insurance cover

Which of these statements describes a captive insurance company?

A A specialist insurer that deals with a single class of business b An insurer that only deals direct with the public c A subsidiary of a large company, formed to accept some of the parent company's insurance risks d A captive insurer is established as a subsidiary of a large company to accept some of the parent company's insurance and thus reduce the need to buy cover elsewhere

47

What type of risk is critical illness underwriting based on?

A Morbidity risk b Mortality risk c Morality risk d Market risk

QUESTION 10 QUESTION 6

QUESTION 3

QUESTION 9

What are the usual territorial limits in most legal expenses policies?

A UK and, in some cases, EU b Anywhere in the world c England, Scotland and Wales d All EU and EEA countries

Which of these accepts risks on behalf of a syndicate at Lloyd's?

A An underwriter b A managing agent c A Lloyd's broker d The Council

QUESTION 7 In respect of insurance principles insurable interest is which of these?

A An express condition b A warranty c An implied condition d An endorsement

YOUR SCORE » 1–3 POOR 4–6 GOOD

7–8 VERY GOOD 9-10 EXCELLENT

ANSWERS 1A. The IDD will require an insurance product information document (IPID) to be provided to all customers. 2B. Theft cover is limited to tangible property only.

3D. A captive insurer is established as a subsidiary of a large company to accept some of

the parent company's insurance and thus reduce the need to buy cover elsewhere. 4A. Direct insurers focus mainly on the private motor and home insurance sectors.

5C. Subrogation arises when someone else is responsible for the loss and it is possible for the

insurer to pursue a recovery against the responsible person.

6A. Standard covers will only operate in respect of incidents occurring in the UK although more and more insurers are including EU cover in their standard policies.

7C . Insurable interest is an implied

condition in insurance policies and must be present for there to be a valid contract of insurance.

8D. Insurance details of vehicles within the UK are held on the Motor Insurance Database (MID).

9A. The morbidity risk describes the potential that an individual will

suffer from one or more of the illnesses for which a critical illness policy intends to provide cover.

10A. Each syndicate appoints a managing agent, who in turn appoints a Lloyd's underwriter to accept business on its behalf.

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&OR DETAILS ON THE POSITIONS BELOW AND OTHERS

IN 'ENERAL &INANCIAL 3ERVICES )NSURANCE

ACCROSS THE 5+ ,ONDON AND )NTERNATIONALLY PLEASE VISIT

WWW IPSGROUP CO UK s 7ORDINGS $EVELOPMENT /PPORTUNITY

s #OMPLIANCE !SSURANCE !DVISOR

To ÂŁ50,000 + Bonus & BeneďŹ ts – City of London As part of the team at this Lloyd’s Syndicate, you will assist in the drafting of new products and wordings, review existing wordings and working closely with Underwriters. Experience working in a technical role within the London Insurance Market is required, ideally including contract review or drafting in a Wordings, Broker Back up or Claims role.

Contact: Tim.Southworth@ipsgroup.co.uk - London Ref:CII1138364

s 3ENIOR #OMPLIANCE !NALYST To ÂŁ65,000 + Bonus & BeneďŹ ts – City of London This will be a key role in the new Compliance structure of this high proďŹ le Lloyd’s Syndicate and Global Insurer. Working in a generalist Compliance role, you will take ownership for and operate as a Compliance Business Partner. Current experience working in a Compliance role for a UK based Insurance ďŹ rm is required.

Contact: Tim.Southworth@ipsgroup.co.uk - London Ref:CII138321TS

s #OMPLIANCE -ONITORING !DVISORY 'LOBAL GROWING BUSINESS To ÂŁ45,000 + BeneďŹ ts – City of London Develop your career across all aspects of Compliance, supported by an engaging and inclusive manager, working with senior stakeholders of this dynamic business. As well as the monitoring and advisory aspects there is scope to contribute to pro-active projects within this ambitious and fast paced organisation. Ideally 2 years plus compliance experience within the insurance market, you will be looking for a growing organisation in which you can really make your mark!

Contact: Alison.Taylor@ipsgroup.co.uk - London Ref:CII138450AT

s 0ROJECT #ONSULTANT $ELEGATED !UTHORITY #ONDUCT To ÂŁ50,000 + BeneďŹ ts – City of London Exciting opportunity for a pro-active and engaging individual who has developed and delivered a conduct framework, solvency II project, due diligence process, bordereaux management and/or MI DA data solution. You will need the ability to forge client/market relationships and provide leadership and direction on operational projects. This would really suit someone externally facing who thrives on challenges and delivering solutions.

Contact: Alison.Taylor@ipsgroup.co.uk - London Ref:CII138399AT

s 4RAINEE !CCOUNT %XECUTIVE To ÂŁ40,000 + BeneďŹ ts – City of London Our client is a leading specialist insurance group providing insurance, investment and ďŹ nancial support services. Learning from and supporting a team of experienced A/c Exec’s, you will assist with all aspects of day to day client management. Some experience of Lloyd’s would be useful Contact: Colum.Lovett@ipsgroup.co.uk - London R ef:CII1138441CL

s #ATASTROPHE !NALYST To ÂŁ45,000 Base Salary + Bonus & BeneďŹ ts – City of London A Lloyd’s Syndicate are searching for a Catastrophe Analyst. They want a technically strong candidate who has over 1 years of experience working within Catastrophe Models.

Experience of using RMS or AIR is a requirement and a good working knowledge of VBA, SQL and GIS would be advantageous.

Contact: Gary.Ahern@ipsgroup.co.uk - London Ref:CII1138250GA

s (EAD OF 0LANNING #ONTROL ÂŁ120,000 + BeneďŹ ts – City of London Global Insurance business require a qualiďŹ ed business planning specialist to manage the Planning and Control function within the UK business, ensuring timely production, accuracy, analysis and distribution of all ďŹ nancial information. Act as a sounding board and challenge assumptions as part of the planning process.

Contact: Mark.Brady@ipsgroup.co.uk - London Ref:CII138359MB ÂŁ65,000 - ÂŁ70,000 + BeneďŹ ts – City of London Reporting to the Head of Internal Audit, the primary purpose of the role is to provide day to day support to Internal Audit activities, examination and evaluation of the adequacy and effectiveness of the Group’s governance, risk management process, systems of internal control, and the quality of performance in carrying out assigned responsibilities to achieve the organization’s stated goals and objectives.

Contact: Mark.Brady@ipsgroup.co.uk - London Ref:CII137415MB

s 0ROFESSIONAL )NDEMNITY #LAIMS (ANDLER To ÂŁ60,000 + Bonus & BeneďŹ ts – City of London Seeking a Professional Indemnity Claims Adjuster to join a reputable client within the Lloyd’s Insurance Market, working within an ambitious, growing claims team. Seeking experience handling professional indemnity for a UK based Insurer.

Contact: Clare.Aldrich@ipsgroup.co.uk - London Ref:CII138384CA

s 'RADUATE #ONSULTANT ,LOYD S )NSURANCE -ARKET To ÂŁ28,000 + Bonus & BeneďŹ ts – City of London This Consultancy in the Lloyd’s Insurance Market is seeking a graduate who has a strong interest in relationship management, analytics and business development, ideally with experience in Insurance. You will need the conďŹ dence to engage with clients, a natural are for rapport building and strong academics/numerical skills.

Contact: Clare.Aldrich@ipsgroup.co.uk - London Ref:CII138391CA

CII.02.2019.048.indd 48

s #OMMERCIAL .EW "USINESS 0RODUCER To £60,000 + High Commission – City of London A senior appointment within this expanding independent insurance broker for an ambitious UK Commercial Sales and Business Development Executive. You will be responsible for identifying prospective clients, working with the team on new business proposals and winning new clients. A generous commission scheme will supplement your basic salary.

Contact: Christopher.Dickman@ipsgroup.co.uk - London Ref:CII137610CD

s $ELEGATED !SSURANCE #OORDINATOR -ONTH #ONTRACT £35,000 – London A Global Insurer has an immediate requirement for a Delegated Underwriting Coordinator to undertake a mixture of Delegated Underwriting and Audit administration work. You will ideally have a Lloyd’s background, worked within a delegated underwriting or binding authority team and be available at short notice.

Contact: Carl.CrossďŹ eld@ipsgroup.co.uk - London Ref:CII138452CC

s #LIENT -ANAGER -ARINE %NERGY To ÂŁ65,000 + BeneďŹ ts – London Client Manager with a track record in Marine Construction and Offshore Energy to join a well-established team in London where you manage a diverse portfolio of retail and wholesale business, maintain close relationships with key clients (including some travel), contribute to product innovation and much more. Ideally you will have had exposure to both Marine and Energy insurance with strong relationship management skills.

Contact: Richard.Jenkins@ipsgroup.co.uk - London Ref:CII138433DH

s ,IABILITY #LAIMS (ANDLER ÂŁ25,000 – ÂŁ30,000 + BeneďŹ ts – Manchester We are working with a leading insurance provider currently growing their claims team in Manchester. If you have 3 to 5 years of experience handling property or liability claims and are looking to join a growing international business this is a fantastic opportunity.

Contact: Richard.Jenkins@ipsgroup.co.uk - Manchester Ref:CII138262RJ

s 2EAL %STATE #LIENT %XECUTIVE ÂŁ30,000 -ÂŁ35,000 + Bonus – Birmingham Fantastic opportunity for a career hungry Account Handler to join an expanding insurance broker based in Birmingham as a Real Estate & Construction Client Executive. You will attend events, conferences and dinners using a soft sell approach being the “go toâ€? for Real Estate Insurance.

Contact: Mark.Fancourt@ipsgroup.co.uk - Birmingham Ref:CII134355MF

s 0ERSONAL ,INES !CCOUNT (ANDLER Up to ÂŁ18,000 – ÂŁ22,500 + BeneďŹ ts – Reading A fast growing Insurance Broker with branches around the UK is currently looking for an Account Handler to join their busy ofďŹ ce in Reading. You will provide an excellent service to clients and to maintain a good sales performance.

Contact: Blayne.Kelly@ipsgroup.co.uk - Birmingham Ref:CII138307BK

s #LAIMS 2ELATIONSHIP -ANAGER

s )NTERNAL !UDITOR

,ONDON London@ipsgroup.co.uk Tel: 020 7481 8111 3OUTHAMPTON soton@ipsgroup.co.uk Tel: 023 8048 8799

To ÂŁ55,000 + Car Allowance & BeneďŹ ts – Hampshire A chance to join an “in-houseâ€? compliance team of a major international company. A key role in assisting in the design and implementation of the group’s compliance and assurance culture across the business as well as measuring and reporting on its effectiveness, thereby reducing risk and evidencing assurance of compliance in the global enterprise. You will have direct experience and knowledge of compliance assurance in a business as well as demonstrating a speciďŹ c understanding of compliance processes/practices. Preferably degree educated with a relevant professional qualiďŹ cation – ICSA, IRM, ACII, ACCA, CIMA etc.

Contact: James.Dick@ipsgroup.co.uk - London Ref:CII138299JD

"IRMINGHAM birm@ipsgroup.co.uk Tel: 0121 616 6096 "RISTOL bristol@ipsgroup.co.uk Tel: 0117 370 2472

Up to ÂŁ50,000 – ÂŁ60,000 + BeneďŹ ts – Bristol A role has emerged in Bristol with one of Europe’s leading providers of travel Insurance to develop and maintain a network of providers. This role has a very exciting aspect to it as it requires regular travel to Europe and The Middle East with a very generous performance bonus and a highly competitive Salary.

Contact: Blayne.Kelly@ipsgroup.co.uk - Birmingham Ref:CII138121BK

s &IELD "ASED #OMPLIANCE #ONSULTANT Up to ÂŁ50,000 + Company Car or Car Allowance – Midlands / London A leading Network of Insurance Brokers seeks to hire an experienced Compliance Consultant to provide a compliance auditing service across a network of branches covering the Midlands down to London in this ďŹ eld based position.

Contact: Richard.Coleman@ipsgroup.co.uk - Birmingham Ref:CII137842RC

s (EAD OF #OMPLIANCE ÂŁ60,000 + BeneďŹ ts – South Birmingham A leading independent Insurance Broker seeks to hire a Head of Compliance and Risk in this newly created position following expansion and growth of the business. In this key position for the business you will have overall responsiblility for the compliance and risk function reporting directly to the Board. You will have 3 direct reports who you will manage and develop further as well as having direct oversight for the wider business.

Contact: Richard.Coleman@ipsgroup.co.uk - Birmingham Ref:CII137984RC

-ANCHESTER manchester@ipsgroup.co.uk Tel: 0161 233 8222

777 )03'2/50 #/ 5+

,EEDS leeds@ipsgroup.co.uk Tel: 0113 202 1577 3INGAPORE singapore@ipsgroup.co.uk Tel: +65 6223 1023

(ONG +ONG asia@ipsgroup.co.uk Tel: +852 3469 5339 3HANGHAI shanghai@ipsgroup.co.uk Tel: +86 21 2206 2882

20/02/2019 12:06

STUDY ROOM

A-Z OF…

CATASTROPHE IMPACT Derek Thrumble takes an alphabetised look at nat cat analysis for corporate insurance buyers…

I

n the past, access to modelling software that evaluates exposures to major natural catastrophes or terrorism attacks was primarily limited to large re/insurers. Their sizeable portfolios of risk provide premium volumes that are sufficient to support the associated startup costs, ongoing annual licence fees and data subscriptions.

More recently, large corporate insurance buyers have increased their focus on exposure to floods, windstorms, earthquakes, and even wildfires. It has become the norm for brokers and consultants to deploy risk modelling tools that allow them to present their clients’ risk to underwriters in a professional way. These tools: • ‘Cleanse’ schedules of values to bring data submissions into a consistent format, clearly showing values at risk, and risk/ property types; • Geocode data to identify clearly the precise risk locations by latitude KNOWING and longitude; YOUR A-Z • Display schedules graphically A analysis to illustrate any ‘hotspots’ or b big data accumulations of values; c corporate buyers • Show the proximity to areas of D deductibles high hazard; E evaluate • Overlay historical natural catastrophe f floods events or risk-zoning factors (such as g geo-code flood zones). h hotspots Specialist software tools are now i impact available that produce this level of analysis j maJor cost-effectively and in ‘real time’ as part k bespoKe of the insurance renewal process. Many l latitude sources of historical event data can be m modelling obtained to support the analysis. Some n norm are free of charge; others can be obtained o obtained at a relatively low cost. Using this data p portfolios q quakes for larger clients applied to a geocoded r real time schedule of values combined with an s software assumption of the potential damage makes t tools possible the development of a bespoke u underwriters natural catastrophe risk rating. v volumes This combines an assumption of w wildfires the likely frequency of future natural x eXposures catastrophe losses with modelled severity y year impact. The likely recovery from insurance z zoning can be assessed. Only when this has been completed is a broker in position to truly

negotiate with underwriters over premium rates and coverage conditions such as deductibles, sub-limits or annual aggregate limits, and co-insurance clauses. We have carried out more than 50 such analyses during the past year for corporate buyers, using the EigenPrism software tool.

DEEP UNDERSTANDING Analysis with such models also helps brokers to understand the underwriting parameters being applied, for example when a specific risk ‘doesn’t model well’. This may simply be a factor of the locations of the insured assets, or the type of construction or year, or the default ‘damage function’ that is being applied through the underwriter’s catastrophe modelling software.

Such analysis additionally enhances risk managers’ ability to understand the threat from events in real time. For some clients, we have set up a series of alerts that will indicate potential damage and allow them to put emergency plans into place, as well as advise senior management of response actions.

It is important for insurers and brokers to continue to streamline the way in which data is transferred, to avoid duplication in the underwriting process.

Agreeing standard data templates improves accuracy, reduces the time required to quote and lowers costs.

All these factors are attracting much closer attention and scrutiny across the London insurance market.

While ‘big data’ has not yet had a significant impact on corporate insurance buyers, we believe advances in modelling and the availability of data will drive some significant changes during the next few years. Buyers who embrace these new tools will be able to enhance and optimise their insurance and risk transfer programmes, leading to valuable risk insights and tangible cost savings. ●

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Derek Thrumble is managing partner – risk consulting at Alesco

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CII BLOG

ALEX DOOLER

GROWING INFLUENCE In his first blog for The Journal, Alex Dooler explains how even the most junior staff members can make a big difference

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n a boardroom on the top floor of a skyscraper in London, 30 teenagers fill the chairs for what is AIG’s first Insight Day for students from lessprivileged backgrounds. These students were from a community like the one I grew up in – far removed from the towering heights of London’s financial district.

Growing up in that environment, it was hard to envisage a life outside of those confines. The education system can only go so far in inspiring people.

Often, they need to see it to believe it.

A turning point was at the age of 17. I applied to attend an Insight Day at EY – the Big Four accountancy company. Just one month later, I was ready to embark on the painful four-hour door-to-door commute. The lights were bright, the towers tall and I didn’t really understand what it meant to work in finance.

I remember collecting a business card from someone working in corporate tax and was enthralled. That card still sits in my old bedroom window to this day. Although small in nature, the impact was huge. That card made my ambition tangible – I could grasp it, see it and want it.

As I stood before those students at AIG, I felt a sense of pride that I could make an impact. The students were taken aback by the range of careers in insurance – actuarial, underwriting, claims, broking and many more.

From this comes my first takeaway of 2019 – your position on the conventional ladder of power does not influence your ability to make a difference.

As one of the most junior members in my organisation, I had created a memory – a spark – that will live in the minds of at least some of those students, like it did with me. Understand the influence that you can wield within the industrialsized juggernaut that you find yourself in.

Be it a commercial organisation, in the community or in any organisation you align with.

PROFESSIONAL QUALIFICATIONS The clock strikes 17:00 and the muscle fatigue sets in. But as the cylinders of the internal booking systems wind down and Microsoft Outlook jitters to a stop, my second job roars into life – the job of studying for a professional qualification.

Although a tiring and difficult pursuit, I wholeheartedly recommend the practice of taking up a professional qualification.

Professional exams teach you something that, in my case, university didn’t. They teach you the very foundation of your field. Professional qualifications teach you a holistic understanding of the fundamentals of business. That can be through the lens of accountancy, insurance, actuarial or finance – but there is a relevant qualification out there for everybody.

Warren Buffet spends six hours a day learning and reading. In today’s globalised world, knowledge is the single-most important commodity. Acquire it wherever possible. ● Alex Dooler is graduate surety underwriter at AIG

◊ INFLUENCE Your position on the conventional ladder of power does not influence your ability to make a difference.

◊ EDUCATION Professional exams teach you the very foundation of your field.

◊ KNOWLEDGE Knowledge is the single-most important commodity - acquire it wherever possible.

ILLUSTRATION: LUKE WALLER

THREE THINGS TO TAKE AWAY

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PROJECT POLICIES

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