Insurance should be on your radar

You may have noticed in yesterday’s BUFDG Chair’s Quarterly a brilliant piece by Paul Cusition, Chief Executive, UMAL, who are the HE Sector Insurance Mutual; the piece is reproduced here in full...

For many years, insurance has been an easy and painless purchase for Universities. Prices have been stable, and cover has been wide as the insurance market has been “soft”. With the arrival of COVID-19 that has all changed. Hit by multiple losses and uncertainties over exposure, Large Reinsurers and Commercial Insurers have begun to apply significant pressure on pricing and introduced restrictions in cover.

The recent Marsh Insurance Brokers Quarterly pricing index shows UK pricing for commercial insurance prices rose 22% in the fourth quarter of 2020, the thirteenth consecutive quarter of price increases. This fourth quarter rise in pricing was also the largest year-over-year increase in the Marsh Global Insurance Market Index since its inception in 2012. *

And it’s not just pricing where insurers are changing their underwriting approach. All insurers are applying the brakes on the amount of capacity they deploy and the cover they offer. Long-term agreements and relationships are being broken – and not because of poor claims experience. Emboldened by COVID-19 as a catalyst, we are seeing a return to the post 9/11 underwriting landscape of 2002, when the insurance market imposed substantial price increases and cover restrictions to correct or counter many years of soft market conditions and lax underwriting. There are no immediate signs of this relaxing. How does this manifest itself for UK universities? With prices increasing, insurers no longer need to chase new customers to achieve top line growth. By increasing prices and reducing cover, they end up with more revenue for less exposure, and of course fewer claims.

Some household named insurers are increasing their base rates by 100% in some instances, even for cases with a reasonable or good claims record. The ubiquitous “Long Term Agreements” (LTAs), held out by insurers as fixed deals, are being cancelled by insurers as they seek to apply rate increases.

Aside from rate increases insurers are also restricting cover and reducing the amount of capacity they are deploying. In practical terms this means the policy limit or amount of cover offered. Most notably this is happening on property insurance as insurers seek to reduce limits to reduce their exposure and reduce their reinsurance costs.

So, what should you do? Prepare for your renewal on 1st August 2021 now. Ask your broker or insurer for an early indication of renewal terms and details of any major changes in cover, or indeed if your insurer is going to even offer renewal terms. We’ve seen this in the sector already, and UMAL have provided alternative renewal terms, fixed at 1st August 2021 for three years, for several Universities who have been given some unwelcome advance notice of substantial rate increases from their existing insurer.

Should you find that timescales are short however, remember that UMAL’s Teckal exemption means there is no need to go through an expensive and time-consuming public tender process. As a mutual member organisation, our application process and underwriting are simple, streamlined and straight forward.

*Source: Insights February 2021 - Marsh Global Analytics