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Allianz Highlights How Covid-19 Changes Claims Trends, Risk Exposures For Companies, Insurers

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The Covid-19 pandemic is one of the largest economic loss events in history for companies and insurers alike. However, it’s not only the magnitude of the impact which is unprecedented. Claims trends and risk exposures are likely to evolve in both the mid- and long-term as a result of the pandemic. With the reduction in economic activity during lockdown phases, traditional property and liability claims have been subdued, most notably in the aviation and cargo sector, but also in many other industries with fewer accidents at work, on the roads and in public spaces, according to a new report Covid-19 – Changing Claims Patterns from Allianz Global Corporate & Specialty (AGCS).
“The coronavirus outbreak has reduced risk in some areas while, at the same time, changing and heightening it in others. The wider changes in society and industry brought about and accelerated by the pandemic are likely to have a long-term impact on claims patterns and loss trends in the corporate insurance sector,” says AGCS Chief Claims Officer Thomas Sepp in an interview on AGCS’ website. “The growing reliance on technology, shift to remote working, reduction in air travel, expansion of green energy and infrastructure and a rethinking of global supply chains will all shape future loss trends for companies and their insurers.”
Estimates vary, but the insurance industry is currently expected to pay claims related to the pandemic of as much as $110bn in 2020 according to Lloyd’s. AGCS alone has reserved about €488mn (US$571mn) for expected Covid-19 related claims, especially for the cancellation of live events and the disruption of movie or film productions in the entertainment industry.

Surged and subdued
“We have seen claims in some lines of business, such as entertainment insurance, surge during Covid-19, while traditional property and liability claims have been subdued during lockdown periods,” says AGCS Global Head of Claims, Philipp Cremer. “There is still the potential for claims to occur as factories and businesses restart after periods of hibernation, and given the longer development patterns for third-party claims in casualty lines.”

Claims notifications from motor accidents, slips and falls or workplace injuries slowed as more people stayed at home, and with the temporary closure of many shops, airports and businesses during lockdowns across the world. AGCS also noticed a positive impact on US claims settlement from the suspension of courts and trials. Some claimants and plaintiffs have been more open to negotiating settlements out of court rather than opting to wait a long time until their case is scheduled – a trend also highlighted in another recent AGCS publication on liability loss trends. In general, claims activity is likely to pick up again following resumption of economic activity.

The AGCS report identifies the impact of the pandemic on claims trends in different lines of insurance and how they might evolve in future:

Property/Business interruption

Property damage claims were not significantly impacted by Covid-19 as loss drivers such as weather are not correlated. However, as production lines restart and ramp up, this can exacerbate the risk of machinery breakdown and damage and even fire and explosion. “Restarting a factory is a stress test. We have already seen a few claims related to ramp-ups in the past few months – and there may be more to come”, says Raymond Hogendoorn, Global Head of Short-Tail Claims, AGCS. In addition, with fewer people potentially onsite, inspections and maintenance may be delayed or loss incidents such as a fire or escape of water may be noticed too late, increasing the severity of damage.

Covid-19 has caused business closures and disruptions globally – which often may not be covered in the absence of physical damage as trigger of coverage. However, the pandemic has impacted the settlement of standard business interruption (BI) claims in different ways. On one hand, factories in hibernation will not produce large BI claims, as many manufacturers, their customers and suppliers, either shut down or scale back production. When a US automotive supplier was hit by a tornado in spring, the resulting business interruption loss was lower than it would have been during normal operations. Conversely, containment measures during lockdowns can lead to longer and more costly disruptions as access restrictions prevent effective loss mitigation and prolong the reinstatement period, as a fire and explosion at a chemical plant in South Korea demonstrated.

Liability and Directors & Officers (D&O) Insurance

To date, AGCS has only seen a few liability claims which are Covid-19 related. However, liability claims are typically long-tail with a lag in reporting, so general liability and workers’ compensation claims related to Covid-19 may yet materialize. A number of outbreaks of coronavirus have been linked to high-risk environments such as gyms, casinos, care homes, cruise ships or food/meat processing plants.

A wave of insolvencies, as well as event-driven litigation, could be potential sources of D&O claims. To date, only a relatively small number of securities class action lawsuits related to Covid-19 have been filed in the United States, including suits against cruise ship lines that suffered outbreaks. The pandemic could trigger further litigation against companies and their directors and officers, if it is perceived boards failed to prepare adequately for a pandemic or prolonged periods of reduced income.

Aviation

The aviation industry has seen few claims directly related to the pandemic to date. In a small number of liability notifications, passengers have sued airlines for cancellations or disruptions. Slip and fall accidents at airports – traditionally one of the most frequent causes of aviation claims – have declined with the massive reduction in global air traffic, which fell by a record 94% year-on-year in April 2020.

“Although a large proportion of the world’s airline fleet have been grounded loss exposures do not just disappear. Instead they change and can create new risk accumulations,” says Joerg Ahrens, Global Head of Long-Tail Claims at AGCS. For example, grounded aircraft might be exposed to damage from hurricanes, tornados or hailstorms. The risk of shunting or ground incidents also increases and can result in costly claims.

Long-term claims trends
Covid-19 is accelerating many trends such as a growing reliance on technology and rising awareness of the vulnerabilities of complex global supply chains. Going forward, many businesses are expected to review and de-risk their supply chains and build in more resilience. This could involve some reshoring of critical production areas because of disruption caused by the pandemic. Such a move would likely impact frequency of claims and the costs of any future business interruptions.
Meanwhile, the growth of home working means that companies may have lower property assets and fewer employees on site in future, but there would be corresponding changes in workers` compensation and cyber risks. During the pandemic cyber risk exposures have heightened, with reports of the number of ransomware and business email compromise attacks increasing. To date, AGCS has only seen a small number of cyber claims which are Covid-19 related however.

Digital claims handling
Covid-19 has also reinforced the need for digitalization of claims handling. Remote claims inspections and assessments for tornados, floods or major industry accidents are now possible through satellite, drone or image capture technology and tools such as MirrorMe. “Just a few years ago, claims processes were mostly manual and paper-based and many people could not have imagined handling claims remotely,” says Cremer. “Now technology plays a key role. AGCS’ cloud-based claims platform has passed the test of the coronavirus with our digital claims processes proving resilient throughout the lockdown. This, together with a strongly collaborative approach from our clients and brokers, has enabled our claims teams to handle a surge in claims and deliver expert service without disruption while working remotely.”

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Abiodun Succeeds Balogun As Lasaco Assurance CEO

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The Board of Directors of Lasaco Assurance Plc has announced the appointment of Mr. Razzaq Abiodun as the Managing Director/Chief Executive Officer, to superintendent over the affairs of the insurance company in an acting capacity.

He succeeds Mr. Segun Balogun, the immediate past Managing Director of the organisation, who retired from the Board effective from May 29, 2021.

The underwriting firm disclosed this in a notification signed by its secretary/legal adviser, Gertrude Olutekunbi and sent to the Nigeria Exchange Group Plc.

Mr. Razzaq Abiodun has over 30 years’ experience in the insurance industry with technical expertise in claims, reinsurance, underwriting and marketing.

The new MD is not new to Lasaco Assurance, as he joined the company in 2017 as Executive Director Technical and later became Deputy Managing Director Technical.

He earlier worked for a host of leading insurance companies like the defunct City Union Insurance, Metropolitian Trust Insurance (now Consolidated Hallmark), WAPIC Insurance Plc, among others.

Abiodun is an alumnus of the Lagos State University and the Ghana Institute of Professional Studies (GIMPA), where he obtained a MBA and LLB respectively.

He is an Associate of the Chartered Insurance Institute of United Kingdom. In 2012, he was awarded the Fellowship of the Chartered Insurance Institute of Ghana.

Recalled that Mr. Segun Balogun, the immediate past MD of LASACO Assurance Plc, is also a financial industry expert with over three decades of experience.

Prior to his appointment as MD of LASACO, he was the CEO of FBN General Insurance Limited. He was also the former MD/CEO of WAPIC Insurance Plc for 13 years.

Balogun is an alumnus of the prestigious University of Lagos and is a Fellow of the Chartered Insurance Institute of Nigeria. He is an Associate of the Chartered Insurance Institute of the United Kingdom.

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NAICOM Targets Protection Of Policyholders, Improved Confidence In Insurance Sector

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Commissioner for Insurance, Sunday Thomas (4th left) and other top management staff of the National Insurance Commission at the seminar.

By Sola Alabadan

The National Insurance Commission (NAICOM) has put structures in place to ensure that the insurance policyholders are adequately protected and facilitate improved confidence in the Nigerian insurance sector.

This formed part of NAICOM’s strategic plan for 2021-2023, which was unveiled at the just concluded 2021 NAICOM seminar for insurance journalists in Lagos.

The Commissioner for Insurance, Sunday Thomas, said “The 2021-2023 Strategic Plan has five goals designed to entrench effective and efficient service delivery, ensure safe, sound and stable insurance sector, adequately protect policyholders and public interest, improve trust and confidence in the insurance sector and encourage innovation and promote insurance market development”.

The NAICOM boss informed that since the development of the last strategic plan for the period 2016 – 2020, there have been various events such as the COVID-19 pandemic, the End SARS protests, and the rise in kidnappings, armed banditry, communal tensions and conflicts, which have impacted on the activities and initiatives of the Commission.

These new developments, he stated, have ushered in the new normal, hence shaping how the industry conducts its business going forward and the corresponding regulatory response.

“The major thrust of this has been preparing the workforce for the new work order, protection of policyholders, improving human capital, leveraging on technology and alternative channels of insurance distribution to stimulate productivity.

Thomas stressed that the commission is committed to actualising the goals of the strategic plan, noting that NAICOM would adhere strictly to its principles of good governance and core values aimed at creating an enduring, sustainable and conducive environment for accomplishment of the corporate goals and objectives.

He also said that NAICOM will ensure periodic review and performance monitoring of the plan within its life span, bearing in mind the present COVID-19 pandemic.

The insurance sector, he added, must harness opportunities post pandemic period and beyond by leveraging on technology to provide innovative insurance products, amongst others things.

Speaking at the unveiling, Mr Usman Ibrahim Jankara, Head, Strategy and Special Duties, who delivered a paper titled: ‘NAICOM Corporate Strategic Plan 2021 to 2023: Goals, Objectives and Key Deliverables” emphasised that the strategic plan was hinged on five goals, including entrenching effective and efficient service delivery, ensuring safe, sound and stable insurance sector, adequately protecting the policyholders and public interest, improve trust and confidence in the insurance sector, encourage innovation and promote insurance market development.

He pointed out that these goals will consolidate the 2016 -2020 strategic plan with new milestones required to enable the commission accomplish its mission.

Jankara equally lamented that some of the commission’s 2016 to 2020 strategic plans were not achieved due to the prevailing COVID-19 pandemic, among other factors.

“Our strategic plan has simplified what we will focus on and we are now more convinced that we will do much better this year.

“We want to have a stable insurance industry to compete globally and contribute to the country’s economy.”

He said the plan would also ensure that policyholders’ complaints were handled better and promptly.

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Insurance Operators Plead For Media Support

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The Corporate Affairs Managers’ Committee of the NIA (CAMCONIA) has pleaded with the media organisations to support the growth and sustainability of the insurance industry in Nigeria.

The Chairman of CAMCONIA, Oyinkansola Sobande, made this call at the committee’s bi-monthly meeting held with the Executive Members of the National Association of Insurance and Pension Correspondents (NAIPCO), representing both the print and electronic media in the country.

She stated that “the role of the media as watchdog in the society cannot be undermined especially in matters that is in the interest of the general populace. She added that “the media is very critical to the development and sustenance of the insurance industry, considering the fact that there are a lot of challenges facing the sector which are being addressed by stakeholders and business owners in the sector”.

At a point like this, the media as the objective watchdog has a vital role to play in helping to build and reinvigorate the confidence of the insuring public towards the sector.

She further appealed to the media to rescind on exposing damaging reports discrediting underwriters, pointing out that such acts can adversely affect the industry.
Oyinkansola also mentioned that “businesses, at some point in time, faces one form of challenges or the other and that what some of the players are facing currently, is not peculiar to the insurance industry alone, therefore, journalists are required to support positive projection of the industry. The responsibility of the media in this regard is quite phenomenal and must be carried out with astute professionalism.”

She commended the efforts of all the insurance correspondents in the country, saying their intervention in reporting insurance news and happenings is quite commendable, even as she added that more can still be done in pushing the frontiers of the industry.
In the same vein, the Director General of the Nigerian Insurers Association, Mrs. Yetunde Ilori posited that what the industry need more than ever is acceptability and patronage from all strata of the society; both at the Corporate and Individual level and that can only come with a better understanding of the workings of the insurance business which unfortunately, a lot of Nigerians do not have. The education on insurance can never be enough at this point in time. “We must move away from the level of assumptions to that of informed opinion and ultimately, acceptance”.

She said a lot of promotion and advertisement are ongoing by many insurance companies, both on the Electronic and Print Media, to engender sensitization and awareness of insurance in the country for a robust and holistic enlightenment of the insuring public.

The Chairman of NAIPCO solicited the support of member companies and active involvement of the association while pledging the unflinching support of NAIPCO towards ensuring that the Industry is presented in the best light possible to the general public.

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