The reputational hit insurance companies are taking from how they are dealing with coronavirus claims is the industry's biggest risk for this year, according to Aviva PLC's top executive.
Speaking at S&P Global's annual European Insurance Conference, Aviva CEO Amanda Blanc said she was "very sad" to see how insurers might emerge from the COVID-19 crisis given the "really negative publicity" they sustained from ongoing disputes with policyholders over business interruption claims. This comes on top of the fact that the industry already had image issues prior to the pandemic.
"I'm not sure that we have really helped ourselves this year," Blanc said.
Six insurers are appealing some elements of a U.K. High Court verdict in the Supreme Court as part of a test case aimed at resolving coronavirus business interruption disputes. The Supreme Court hearings began Nov. 16 and concluded Nov. 19. Aviva is not involved in the test case.
The industry's reputation would take "some time" to rebuild, Blanc said. Some companies are already perceived negatively simply because they sell a product the buyer hopes they will never need, and the policyholder's sole contact with an insurer is typically to either make a claim or pay a premium, she added.
A further reputation issue for the industry has been the U.K. Financial Conduct Authority's review of general insurance pricing, which culminated in the regulator effectively banning insurers from charging new customers cheaper prices than renewing policyholders and raising rates for those that renewed. The new rules are expected to be published in 2021. Christopher Woolard, then the regulator's interim CEO, said insurers' prior actions to tackle the so-called dual pricing issue without regulatory intervention did not go far enough.
Blanc said "everybody knew" that the pricing disparity "was an issue for a really long period of time" and there was "no real action" from the industry.
"I think we have put the mirror up to our face and ask ourselves, why didn't we deal with that?" she said. Having the regulator step in rather than insurers fixing the problem "is not a good place to be," Blanc added.
Tackling climate change
Another big risk for the insurance industry is climate change. Noting the increase in frequency and severity of natural catastrophes, Blanc said "it is going to become more difficult to offer cover if something doesn't happen," to tackle climate change. In a world where global temperatures are 4 degrees higher than pre-industrial levels, "the insurance model doesn't operate at all," Blanc said. "So we have to actually do something about this."
Blanc noted that there is "a huge momentum" in environmental, social and governance issues when it comes to investing. She said ESG funds on Aviva's direct platform have doubled since March and added that there is a "real opportunity" to "do something meaningful" with Aviva's influence and the amount of money it has to invest.