Expertise Live Video: D&O under discussion

The first Expertise Live event of 2013, in association with Zurich, was held in Birmingham where broker experts focused on the directors’ and officers’ (D&O) liability insurance market.

expertise-live-1The roundtable assessed whether regulatory developments were increasing awareness of the product among clients and analysed if the industry has delivered affordable and suitable products to meet changing needs.

The discussion, held under Chatham House rules, also looked at whether brokers supported new entrants to the market or preferred to remain with tried and trusted providers.

Pricing, rates of take-up by SMEs, opportunities for brokers and new risks were also on the agenda as the participants debated D&O in depth.

Regulatory developments
The Expertise Live event began with the participants discussing the regulatory developments which had impacted the D&O market and how demand from clients had changed over the last five years in particular.

“D&O predominantly started as something that was focused on the big public listed companies and those with US exposures,” set out a Zurich attendee. “What we have seen is that D&O is becoming more and more relevant for all companies in all segments and of all sizes.”

Elements that had already raised the profile of the cover in the UK were listed by participants as including the Corporate Manslaughter Act 2010 and health and safety legislation from 2008 along with numerous employment law changes. Government agencies are becoming more interested in prosecuting individuals and companies, according to one attendee, which is also having an impact.

One participant suggested that changing the name of D&O would also help raise the profile in discussion with clients and suggested management liability as a better title.

“We prefer to see it as a management package rather than a D&O cover, you have help lines and a whole raft of things that helps them with their business,” they explained.

D&O take-up
With the low rate of take-up coming under scrutiny an insurer representative focused on the SME sector, highlighting that certain reports put the purchase rate at 20-30% for companies with a turnover of up to £5m.

“It is not an expensive form of cover generally,” admitted one broker. “It gives the customer the support they are looking for when they haven’t got the resources to go elsewhere.”

Again a Zurich representative noted that even when including medium to larger-sized firms with up to 250 employees the rate of purchase only rose to around 35%.

“It comes down to the knowledge of the account execs,” argued one broker and another agreed: “I don’t think it is sold particularly well to be honest.”

All were in agreement that D&O was a product that “should sell itself” but technical understanding and confidence was required. Having the core skills and understanding would lead to new business opportunities, claimed one participant. “It is still surrounded in a mystery and a fog when really it is fairly straightforward,” admitted another attendee. Overall the sentiment was that better claims examples, particularly in insurer literature, would be a positive step in the right direction.

Regional underwriting
Construction, retail and service industries were listed as sectors where clients should be urgently advised of the “immediate need of making sure they have a management liability policy in place that could protect them”. With this in mind, the topic turned to how brokers would like to see the increase being delivered, in particular where it would need to be underwritten from. The message was clear.

“It is easier if it is regional as they have an understanding of the issues regionally and the pricing,” responded one attendee, and another argued: “A London underwriter is biased towards the claims that come out of the London market.” Meanwhile a fellow broker highlighted that the danger for insurers of not having a local presence for D&O business was: “You won’t understand what the other insurers are doing locally either.”

For their part the Zurich attendees agreed it was crucial to be close to the client and their broker. “It is very important for us to understand what you are aiming at and what you want to achieve,” they elucidated.

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