2.2Keeping up withevolving risks

Perpetual evolution of risk may increase the gap between economic risk and insurable risk. Closing the gap is what brokers do for a living.

In Aon's Global Risk Trends Report, the top three risk trends are cyber, skills and the need for innovation in products and facilities. Cyber is an area where insurance brokers have pioneered insurance solutions beyond indemnity, offering a holistic risk management proposition. Businesses failing to innovate to meet customer needs also features, speaking to the vital role of the broker in helping design and place insurance programmes that enable measured risk taking, and encourages growth.
Jane Kielty
Aon CEO and BIBA board member

 

Building more homes and reducing the carbon footprint

Key twinned priorities for Government are safe, affordable housing and achieving net zero by 2050. This has several insurance implications which brokers are keen to help solve.

Achieving Government’s aims of building 1.5m new homes will likely require more timber framed buildings and modular homes using modern methods of construction and sustainable forestry. The market share for UK timber framed housing is currently 23%. The Environmental Audit Committee and Climate Change Committee suggested that the sector should be aiming to get to 40% minimum. For rapid development to happen, insurers need increased confidence in the use of low carbon products, including how they are used, insured in international markets, and known claims data regarding how buildings perform in the event of fire or flood.

The Defra/Ministry of Housing Communities & Local Government Timber in Construction Roadmap (TIC) is an important initiative that will help build that confidence. BIBA is keen to support efforts to transition towards more sustainable and carbon-efficient methods of construction.

1/2To actively contribute to the TIC roadmap.
2/2To work with insurers and warranty providers to support a viable insurance market to exist that allows more use of modern methods of construction, including the design, construction and operational phases.

TIC Roadmap

 

Flood

The frequency and severity of flooding, exacerbated by increasing urbanisation, inadequate drainage and flood defence management plus climate change, demands a shift in approach to housebuilding so that the supply of affordable flood insurance is maintained.

January 2024 analysis by Aviva, reveals 8% of new homes (around 110,000) built in England in the last decade are in a flood zone. The Environment Agency stated that 6.3million properties (homes and businesses) in England are in areas at risk of flooding from river, sea or surface water.9 As UK house building increases in areas at high risk of flooding there needs to be provision for property flood resilience measures in proposed homes and new developments and enforcement through build stages, so these are not overlooked or retrospectively withdrawn.

There has been speculation about whether mortgage lenders will finance new homes which are not designed and built with flood resilience in areas of flood risk. Such properties are also likely to become unattractive to the insurance market. Existing homes currently eligible for Flood Re’s cover may face the same issues when the facility ceases in 2039, well within the lifetime of a 25-year mortgage taken out after 2014. It’s vital these considerations are taken into account before properties are built.

In addition, there is clearly an exposure to flood risk for commercial property. BIBA is concerned about access to insurance, policy excesses where cover is available, and lack of awareness among SMEs about their flood risk.

1/3To support householders seeking access to flood insurance through the Flood Insurance Directory.
2/3To work with Flood Re and insurers to raise awareness of the Build Back Better proposition within home insurance policies.
3/3To engage SMEs with their flood risks and routes to suitable cover.

Flood resilience

Though Government has committed £2.4bn over 2024-25 and 2025-26 to support flood resilience it has acknowledged it is facing significant funding pressures on flood defences that may impact this commitment in the future. It will set its investment plan beyond 2026 in the forthcoming spending review. It is crucial that local flood authorities can deliver suitable flood protection for homes and businesses.

Flood Re’s Build Back Better is an initiative to increase household flood resilience. It offers householders the opportunity to install property flood resilience measures up to the value of £10,000 when undertaking repairs after a flood claim. The Environment Agency states that climate change could see total properties at risk of flooding from rivers, sea or surface water in England increase to 8 million by mid-century – that’s 25% of properties.

1/4For insurers to work towards making Build Back Better offered as standard for all home insurance within the next five years.
2/4For Government to commit to a long-term investment plan that delivers flood preparedness plans for years to come.
3/4For Government to ensure local planning authorities enforce the regulations and Environment Agency guidance around building in flood risk areas.
4/4For Government to implement the recommendation that sustainable drainage systems be mandated in all new housing developments as per Schedule 3 to the Flood and Water Management Act.
New homes should not be built in known flood zones without suitable adaptations, and we support BIBA’s call for action for Government to ensure local planning authorities enforce the regulations around building in flood risk areas. At the same time, we believe a combination of a long-term strategy for flood defence spending by Government and greater use of Build Back Better cover in insurance policies will help make homes more resilient.
Dermot Kehoe
Director of Communications and Transition, Flood Re

 

The Terrorism (Protection of Premises) Bill

This Bill aims to build awareness within the business community and other sectors about the threat of terrorism and what can be done to mitigate the risk. The Bill introduces requirements on those responsible for certain publicly accessible premises and events to implement measures to protect people in the event of terrorist attacks. These would include evacuation procedures and the provision of information.

To publish guidance to help members advise their customers on how to comply with the new law.
For insurers to continue to provide appropriate insurance cover under relevant policies, notably public liability and directors’ and officers’ liability policies.

 

Artificial Intelligence

We are proud to have contributed to BIBA’s forthcoming guide on how AI can help brokers deliver even better service to their customers, freeing up time and resource to focus on their key advisory and risk management roles through more informed decision making.
Neil Galjaard
Managing Director UK, Markel

Artificial Intelligence (AI) will become increasingly important in the arrangement of insurance. Several AI customer contact applications are already being used by some in the screening of new customers to verify their financial history, minimise the risk of fraud and support compliance with the UK sanctions regime. It may also be used to analyse and compare policies offered by insurers so helping brokers meet the demands and needs of a customer. Other insurance applications are being highlighted with increasing frequency.

To promote a new guide for members with case studies showing how AI can help bring efficiencies while continuing to deliver good customer outcomes, alongside compliance, regulation and data protection considerations.

 

Cyber risk

Insurance brokers play a key role in strengthening and supporting businesses’ resilience to cyber-attacks through cyber insurance. Many cyber insurance covers may include essential pre and post breach services – referred to as ‘Cyber Insurance as a Service’. However, only 8% of businesses and 5% of charities have a specific cyber security insurance policy, creating a protection gap. This despite half of businesses (50%) and around a third of charities (32%) report experiencing some form of cyber security breach or attack in the last 12 months.10 Raising awareness of the risks and the need for specific cyber insurance through continued collaboration with Government and the wider insurance industry is a priority for BIBA.

1/4To promote existing guidance, to help more BIBA members to engage with customers to increase the uptake of cyber insurance.
2/4To partner with relevant experts to provide structured sales training tools.
3/4To seek to deepen the cyber insurance conversation when businesses are certified with Cyber Essentials and signpost wider routes to standalone cover.
4/4To promote the ransomware guidance developed by BIBA, ABI and International Underwriting Association (IUA) with the National Cyber Security Centre, which aims to help firms minimise disruption to their business.
CFC is proud to have provided a cyber insurance scheme for BIBA members for over 20 years. Through our partnership we have helped educate brokers and their customers about cyber-risk and the innovative products available to counter this. We look forward to continuing this important work to close the cyber protection gap.
Patrick Brice
Distribution Director CFC Underwriting