Lloyd’s Carnegie-Brown: Product simplification and labelling critical to avoid repeat of BI disputes

Lloyd’s chairman Bruce Carnegie-Brown has called for product simplification and some standardisation of wordings as the industry seeks to avoid a repeat of the business interruption disputes that overshadowed its response to the Covid-19 pandemic.

In an interview with The Insurer TV, Carnegie-Brown said it was important to address differences in understanding between providers and buyers of insurance as to how a policy should perform.

“I think whenever a customer in good faith buys a product and the product doesn’t perform, the industry should be very concerned about how the issue has arisen,” he said.

“Part of the complexity with business interruption is the labelling is very broad. Business interruption sounds very inclusive in what it encompasses, but as most professionals in the industry know, it’s actually an add-on to a property policy.

“So essentially there needs to be property damage before business interruption is triggered, and this has clearly created a difference in understanding between buyers and providers,” Carnegie-Brown explained.

“However”, he added, “Every piece of business that comes into the Lloyd’s market comes in advised by brokers, so it should be the case that the policyholder has access to expert advice on the policies they buy.”

Carnegie-Brown said lessons from the pandemic include the importance of product simplification, some standardisation of wording, the labelling of products as well as the need for education between underwriters, brokers and clients.

“I wouldn’t want the whole crisis to be defined by business interruption for the insurance industry because what we know at Lloyd’s is upward of 16 lines of business are responding to the Covid-19 crisis – we have previously said we expect to pay gross claims in excess of $5bn in 2020,” he said.

Carnegie-Brown said he was hopeful of progress in engagement between the industry and governments in developing public-private partnerships to better manage pandemic risk.

“It’s probably unsurprising the governments in most countries are focused on the urgent needs of the pandemic and don’t have a lot of bandwidth to start exploring some of these ideas,” he said.

“We continue to try to engage. My view is that the government will be able to raise its head above the parapet to some degree in 2021. We will get some engagement on this in the months to come. I’m definitely hopeful, but it will take a little while.”

Addressing climate change

During the interview, Carnegie-Brown said Lloyd’s was working to create minimum standards for the market so that it increasingly has a collective impact on climate change.

He said Lloyd’s was already effectively underwriting climate change risks with the severity and frequency of weather events increasing over time.

“If we are going to be an authoritative voice in the climate change debate we also have to be a responsible participant in helping to reduce the degree of global warming,” he said.

As a result, Carnegie-Brown said the Corporation had aligned Lloyd’s environmental, social and governance commitments with those of the 2015 Paris Agreement within the UN Framework Convention on Climate Change.

“We’ve made some specific commitments that we are engaging with the market on around the most extreme end of climate impact, for example around thermal coal and tar sands,” he said.

Carnegie-Brown said Lloyd’s was also aiming to reduce the Corporation’s own climate change footprint to become net neutral by 2025, as well as supporting customers to move to a net zero carbon impact on both the underwriting and investment side by 2030.

“It is important to play a leadership role but not to create cliff edges – we need to support customers to help them migrate their business models over time,” he said.

During the The Insurer TV’s exclusive beginning-of-the-year interview with Lloyd’s chairman, we discuss the 1.1 renewals, Lloyd’s reforms, the urgent need for a public-private pandemic solution, his determination to drive ESG and the future of the underwriting floor. Click the link below to watch the 16 minute interview…