Risk and opportunity: what lies ahead for the commercial insurance industry

By Manisha Chiman, Business Leader and Head of Liability at SHA Risk Specialists

Talks of an impending global recession, an unstable political climate, severe floods in KwaZulu-Natal as well as concerns around employee wellbeing in an evolving post-pandemic employment landscape, have become some of the major catalysts for change within the local commercial insurance sector. Arguably, the greatest of these factors is the ongoing energy crisis, which poses a substantial risk to conducting “business as usual”. Within this context, clear, transparent communication will become increasingly vital in building long-lasting and impactful insurer-client relationships.

Communication as the key to helping businesses manage energy-related risks

In terms of the impact of loadshedding to the claims landscape, grid failure exclusions are a hot topic amongst many local insurers and their client base. As a specialist insurer, we are not immune to these realities. While insurers cannot act as a complete buffer against the negative effects of the energy crisis on business, we have renewed our focus on initiating and facilitating robust conversations with our clients that address their major pain points.

Therefore, in tandem with this new level of risk, is a new opportunity to hone our focus on risk engineering. Helping our clients to identify and manage sector-specific risks by employing effective risk mitigation strategies, minimising losses, improving safety and therefore reducing claims. In a sense, the role of the insurer is being brought much “closer to home” by the need for insurers and their brokers to act as business support advisers, over and above their role as service providers.

Collaboration as the way forward

Geopolitical tensions arising from the ongoing Russia-Ukraine conflict, rapid technological development and the impact of climate change have culminated in a turbulent macroeconomic outlook. It is within this complex and expanding risk landscape that clients, insurers and brokers alike need to lean on and nurture a “tripartite” relationship in providing businesses with the support they need to grow and thrive.

Brokers have a unique, insightful and more detailed perspective on their client’s portfolios, whereas the outlook of insurers is significantly broader. In serving the needs of clients, therefore, brokers who have a thorough understanding of their clients’ needs will be well positioned to share valuable insights with insurers, who can in turn drive and advocate for policy changes and product innovations where necessary.

Overall, increasing complexity requires a greater level of clarity in terms of policy wordings, special terms and conditions and the ease of communication between client and insurer. This is where digital transformation provides the greatest opportunity to improve client-insurer relations and make the sector more accessible, but also more tailored to the needs of specific sectors.

Technology as an enabler

Powered by technological innovations like artificial intelligence (AI), insurers and brokers now have new, more efficient ways of capturing and analysing client data, as well as important information on the unique risks that face particular industries. This in turn translates into a specialised level of expertise and a one-on-one approach to client service that was previously impossible.

A key example of this would be SHA’s Pocket Underwriter, which is a digital solution that empowers brokers to create customised solutions specific to the needs of their SME customers, giving them an edge in reaching new markets while driving innovation in their product range. This innovative approach allows for increased adoption of more seamless and efficient ways to reach potential customers, ultimately providing a one-stop hub for special liability offerings such as Cyber; Professional Indemnity; General Public Liability and Directors and Officers insurance offerings. As such, automation has (and will continue to) help insurers “demystify” the landscape of commercial insurance, making it easier for clients to understand and mitigate the risks that apply to their specific sectors.

Given that many small businesses owners do not have much spare time on their hands, using digital tools like AI, to bring a greater level of efficiency to the underwriting, claims and client relations process will allow clients and insurers to spend their time on risk mitigation more meaningfully and with better long-term results. Future-proof insurers will need agility as a hallmark due to the COVID-19 pandemic, which forced them to quickly adapt their offerings.

Sustainability and South Africa’s unique socioeconomic challenges

There is a global call for a greater focus on supporting sustainable business and a more informed perspective that takes into account the unique socioeconomic status of South Africa. As an economy that is heavily reliant on coal, the shift to renewable energy needs to strike a delicate balance between the needs of the planet and its people on a global scale, as well as the capabilities of local companies and the employees whose livelihoods they support.

At SHA, much work is being done behind the scenes to understand how businesses within specific sectors, such as mining, can become part of the just energy transition in a way that is socially and economically viable and impactful. Global and national sustainability objectives are a major influencing factor in the development and progress of the underwriting process. While we support the growth of businesses in the renewable energy sector, we remain cognisant that within this climate of growing opportunities, lie new risks for which we need to be prepared as we help our clients position their businesses within the industries of the future.