Insurers’ over-regulation concerns still high after Covid claims

PwC report highlights effect of business interruption and other fears in sector

A landmark ruling in the High Court said four pub owners were entitled to compensation from FBD for disruption to their businesses due to Covid-19. Photograph: Nick Bradshaw

A landmark ruling in the High Court said four pub owners were entitled to compensation from FBD for disruption to their businesses due to Covid-19. Photograph: Nick Bradshaw

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Concerns about over-regulation “remain high” in the insurance sector and may be fuelled by an increased focus in the area of business interruption insurance, according to an industry report by PwC.

The area of business interruption insurance has been a bone of contention for insurers following a landmark ruling in the High Court earlier this year that four pub owners were entitled to compensation from FBD for disruption to their businesses due to Covid-19.

The outcome affected claims made by about 1,200 pubs and restaurants, and the row over insurers’ failure to pay out on business interruption cover dominated the latest set of rulings announced by the Financial Services Ombudsman.

In the 2021 Insurance Leaders’ Survey, compiled by PwC and Insurance Ireland, 85 per cent of insurers expressed confidence about business growth for the year ahead, which was up from 71 per cent this time last year.

However, among the top challenges they highlighted were poor investment returns due to low/negative interest rates (65 per cent), as well as concerns about over-regulation.

Regulatory focus

The report said concerns about over-regulation “remain high” at 59 per cent, and “may have been fuelled by regulatory focus in certain areas” including “the payment of dividends and business interruption insurance”.

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The report noted that the Covid-19 crisis is still being felt in certain areas with 39 per cent concerned about reduced premium volumes caused by the economic hit, although the number was down substantially on last year (60 per cent).

Concerns over the availability and retention of key talent hit record levels for nearly half (45 per cent) of Irish insurers, up from 24 per cent last year. Four in 10 said they are changing their workforce strategy for investing in talent and leadership development.

Another 43 per cent said that adjusting to new ways of working is a challenge. Almost seven out of 10 said that a large majority of their workforce plan to continue working remotely once Covid-19 has passed.

Hybrid working (62 per cent) was said to be where the greatest investment would take place. This was followed by changing strategies for diversity and inclusion (46 per cent), talent and leadership development (40 per cent), and productivity through automation (34 per cent).

Cyber threats

Other key business challenges included digital transformation (45 per cent), while concern about cyber threats spiked, up from 15 per cent last year to 45 per cent this year.

The area of cost containment was seen as less of a concern (19 per cent), having dropped from 43 per cent last year.

Reflecting high levels of business confidence, over half (54 per cent) of Irish insurance leaders said they plan on increasing headcounts in the year ahead, of which one in 10 said they are set to increase this greatly.

PwC Ireland insurance leader John O’Leary said: “With plans for the lifting of many of the remaining Covid-19 restrictions in the next two months, we expect to see an insurance sector adapting to a new working environment.

“As an industry, remaining competitive is critical. The survey highlights significant investment in digital transformation and workforce strategies that will bring efficiencies in a world where consumer purchasing habits are rapidly changing.

“Greater leveraging of technologies is an area of real opportunity for the insurance industry and, with significant investment in digital transformation under way, it looks like this will become a reality.”

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