Risk Solutions

Roy Wright
Head – Risk Solutions

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Re-examining how risks are underwritten

Over the past two years, short-term insurance events have forced insurers and reinsurers to re-examine how risks are underwritten.

The increase in natural disasters, as well as politically inspired events (think July 2021 riots in Gauteng and KwaZulu Natal), has been the catalyst for this change in the attitude of insurers.

Short-term insurers have become increasingly granular in their view of risk transfer.  The reliance on historical data as well as the improvements in the data available as a result of artificial intelligence (AI) has meant that insurers are now demanding more ‘risk management’ from their clients. 

Quite simply, this means that insurers are requiring all of us to play a greater role in the way that risks are mitigated.  This is true for both domestic and commercial insurance portfolios.

The role of qualified and independent intermediaries has never been more important.  The complexity of underwriting and nuanced endorsements to insurance policies requires an in-depth analysis and conversation between broker and client.  The days of marketing short-term insurance based on price have gone, forever. 

Beware of the insurer who offers to beat any existing policy premium!  If it sounds ‘too good to be true’ examine the fine print and policy exclusions, and you will find the reason.  

Your insurance advisor should always assist you in a comprehensive risk review and a needs analysis to concisely present your unique requirements to insurers.  Your advisor should always caution you of the risk reduction requirements of your insurer. 

Typically, these requirements revolve around security.  This is amplified by the current stance of insurers regarding the increased theft and hijack risk of popular vehicle brands.  In this example, insurers will often only offer terms once the insured can prove that they have installed not one, but two anti-theft devices. 

As short-term underwriting and risk assessment becomes more sophisticated and complex, so too must consumers become more involved and understanding of this important component of their financial planning.  Short-term insurance must not be viewed simply as a compulsory grudge purchase, but as a safety net protecting that which is most valuable to us.