Innovation is the key to success post COVID-19

By Caroline Hurst - November 10, 2020

In September this year, we spoke to Richard Turner, President of IUMI to get his thoughts on the state of the marine insurance market in 2020.

This year has been tough, regardless of your industry, location and skill set. For many organisations, the global pandemic has forced them to rethink current ways of working and challenge the status quo.

This short video explains why we need to make a change.

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Download your copy of the Beyond Covid: Marine insurance business resilience blueprint here or read on to find out more about what to expect.

In September this year, we spoke to Richard Turner, President of the International Union of Marine Insurance (IUMI) to get his thoughts on the state of the marine insurance market in 2020. Reflecting on the events of this year to date, Richard praised the market in their ability to adapt swiftly to a new business environment without notice. He noted that COVID-19 had accelerated change within the market rather than being a driver of the changes. Key topics of discussion included operational changes, disruption to international trade and the supply chain as well as broader trends impacting the insurance industry as a whole.

Operational impact

Meetings and events seamlessly pivoted online in March and for the first time in history, the IUMI Annual Conference took place virtually welcoming more than 600 delegates. This has been an opportunity for IUMI to engage with a wider audience without the expense associated with a traditional event.

However, Richard comments that one of the biggest changes the market is still grappling with is finding a viable way of successfully replicating face-to-face meetings. The established relationships within the market have been key to keeping the market operating effectively until now. But Richard fears that networks could suffer if COVID-19 were to continue long-term.

Whilst meetings and events have seamlessly pivoted online, in a market founded on human interaction within physical marketplaces for centuries, COVID-19 has left a significant void. There is no doubt that the market will be frustrated with the second wave of lockdown measures we’re beginning to see being implemented in some countries as COVID-19 cases begin to rise again.

Changes to international trade

In April, the World Trade Organisation estimated a 13% YoY reduction in world trade. The WTO updated their estimates in October, forecasting a 9.2% decline for 2020 as a result of strong trade performance mid-year. Marine trade is directly linked to world trade and the sector is likely to feel the effects for some time as estimates for 2021 are also adjusted to reflect the events of 2020 and COVID-19.

The impact of these changes on marine insurance is simple, as Richard outlines: ‘The biggest single product line within marine insurance is cargo. If less cargo is being shipped, the premiums being generated will drop.’ Richard predicts that the biggest impact on the marine insurance sector will be felt in the premium space rather than claims.

Insurance trends

All insurance lines will undoubtedly be impacted by COVID-19. But those lines of business that have been underperforming before 2020 will be feeling enormous pressure to transform their organisation.

Technology has been one areas that has been driving change within insurance across all business lines in recent years. With the emergence of an increasing number of digital insurance organisations, as well as major players investing in data and digitalisation to improve sustainability and reduce costs, we are seeing a new, more dynamic market emerging.

Richard comments: ‘Marine insurance has taken its time to embrace change, part of that is cultural, and part is logistical.’ He goes on to explain; ‘As a business line, marine insurance accounts for 2% of all non-life general insurance lines. Business units may have historically struggled to get the investment they need (and may still be suffering) to update their operations. Some of the larger organisations may be struggling to manage these transformation projects both from a financial and a bandwidth perspective.’

Looking to the future, beyond 2020 and COVID-19, Richard highlights five key areas of focus that he believes will drive success in marine insurance:

  1. Data and digitalisation

Unsurprisingly this is a topic close to our hearts at Concirrus. Richard believes that the tools available within the market today are powerful. Whilst adoption was already underway, COVID-19 has accelerated this trend and if the right tools are used in conjunction with Underwriter expertise, this will create many opportunities for the sector.

  1. Global vs local

Whilst we’ve seen vessel mileage and port visits increase in the second half of 2020, as we enter a second wave of lockdowns across the globe, the future becomes more uncertain and the market will need to monitor real-time changes to trade closely. Richard comments: ‘COVID-19 has exposed frailties in the supply chain and will likely drive changes in demand for marine insurance premiums as a result.’

Those organisations who have sight of real-time changes to trading behaviours will be in the best position to respond effectively to the market.

 

  1. Environmental

This is not a new focus for the industry however, Richard did highlight two areas. The first is the adoption of technology to reduce environmental impact and climate change. New technologies will alter the risks that marine insurers face. And, the second issue is the difficulty in insuring specific operators and industries that do not comply with new regulations. Secondly, there are both issues and opportunities relating to the insurance of certain industry sectors. Coal is a sector which has already become harder for many insurers to justify protecting. Equally, some emerging growth sectors, such as offshore wind farms, will bring opportunities for marine insurers over the coming years.

For a more detailed insight into the top concerns of maritime professionals, Marsh and IUMI recently published the Global Maritime Issues Monitor 2020. The publication called out several topics that remain high on the agenda for the industry. Topics include climate change, decarbonisation of shipping, and new environmental regulations.

 

  1. The new office

As Richard mentioned in the first part of the interview, the market has coped well with a shift to remote working. However, it’s difficult to know how much of the current way of working will stick long-term. Given the enthusiasm from the people in the market to get back to face-to-face interactions as soon as the threat of COVID-19 subsides, could we see the longer-term adoption of a hybrid model, with more employers and employees opting for a mixture of home working and time in the office to collaborate with others?

As Richard points out, even when restrictions are lifted, some commuters are so reliant on public transport that it can make safe travel into the office a challenge. However, in other countries, where the community is more likely to walk or cycle to work, getting into an office has been a lot easier.

 

  1. Education and skills

Finally, Richard called for the industry to consider the changing skillsets needed to ensure that the market remains relevant and successful.

As the marine landscape changes over time, so too must the organisations that support it. To effectively support our clients, we need to ensure that we have the right combination of expertise and we continue to learn from our community.

Richard urged the marine insurance sector to innovate. 2020 has shown us that things don’t always go to plan. The tools exist, however, to help the market monitor changes in real-time and reimagine the products and propositions of the future to ensure that they always meet the needs of the marine market. He concludes by saying that those organisations that strike the right balance between analogue and digital capabilities within their proposition will be the most successful.

 

To read the full article and to access the Beyond Covid: Marine Insurance Business Resilience Blueprint click the link below.

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