Emerging Challenges for Insurance renewal 2021-2022
As we are approaching the closing of the financial year 2020-2021, it is also a crucial month for the entire Insurance Industry.
Here we will discuss some new emerging challenges for Insurance renewal 2021-2022.
This month brings a lot of responsibilities, deadlines, use of insurance skills and professional acumen for successful negotiation and placement of Insurance business for next insurance term 2021-2022.
Just gave a thought that this renewal exercise is already done by all Insurance professionals for a long, but why this time it is more important and more challenging for all Insurance Professionals?
So the answer is this renewal term 2021-2022 is the first renewal Post COVID-19 renewal.
As COVID-19 is not ended yet, but still we can say, this due to the availability of vaccine. However, its use is still limited but at least we have something to fight with COVID-19.
Unlike last March 2020 when the world is going to close at the same time.
In past, this time the Insurance professionals i.e Insurance intermediaries like Brokers, agents, TPA(third party administrators) was mostly busy with Meetings and presentations to their Clients for their entire year performance. Also targeted for acquiring of new Clients for next renewal period.
On other hand, Corporate side the Risk or Insurance Managers was busy in performance evaluation of their existing Brokers/agents/Insurers or TPAs.
Sorting and selection of new intermediaries for renewal of upcoming insurance term 2021-2022.
Last year, during this time in March 2019 India went 21 days strict lockdown started from 25th March 2019 till 14th April 2019.
The sudden lockdown at this time last year was also threw challenge in front of the entire Insurance industry and Insurance professionals to continue for their upcoming renewal for 2020-2021 with a lot of question about the immediate shutdown of their 24X7 running manufacturing entities.
But as lockdown continues even after the scheduled 21 days, the phase-wise relaxation for Industries to start their normal operation again a challenging task, where IRDAI issues some relaxations by issuing circulars from time to time for protecting the Insurance interest of their policyholders, both Life and non Life.
The advent of COVID-19 also impacted Corporates for renewing their insurance portfolio last year for term 2020-2021.
Pre Covid Insurance Renewal 2020-2021
Due to this non-imagined strict Lockdown, many Corporates renewed only their Critical assets keeping aside their less critical or non-critical assets. This again much impacted Insurer by earning less premium revenue.
This critical and less critical selection was continued over the entire previous insurance term 2021-2022.
Post-Covid Insurance Renewal 2021-2022
So this upcoming Insurance term is very important for all Insurance Professionals i.e Insurer, Insured and Intermediaries for renewing their all assets or to again continuing with Critical assets only as per last year only.
On other hand, Insurers and Intermediaries have their own challenges this year to increase their premium size by insuring their Client’s left less critical assets and also adding up their Client base by acquiring new clients.
Although many countries had developed the COVID vaccine and started its use for the general public. But still, it is far away in the reach of a common man.
So the meetings of Insurers, intermediaries and Corporates are still not taking place as done in past during this time for closing of Insurance renewal business at this time.
But on other hand, we have to accept that these virtual meetings are still not considered as more effective as physical meetings in acquiring any new Clients.
But in the end, we all have to accept that something is better than nothing.
So the use of IT in the form of these virtual meeting still continues for this Insurance period i.e 2021-2022.
COVID has not ended yet, but we can say this renewal is the first post COVID renewal and that’s why it is important for the entire Insurance industry.
Insurers or Intermediaries both have a challenge for increasing their premium base through their existing Clients or from acquiring new Clients, whereas Clients/Corporates have challenged to continue renewal with their same insurance base during the last pre-COVID time, or to increase their Insurance renewal portfolio by adding up their left less or non-critical assets this new Insurance term 2021-2022.
Some points for the upcoming Insurance renewal period 2021-2022
This COVID-19 had taught us many lessons in the selection of assets for Insurance and keeping aside some assets as part of risk retention capacity.
Selection of Sum Insured is also a crucial exercise before the start of each new Insurance period for all Insurance/Risk managers of concern Finance professional.
Some of the points, which I think Corporates should keep in mind while deciding sum insured for next Insurance renewal, which is as below:-
- In the case of Imported Machinery or assets, for which currency conversion was involved.
The present sum insured should also take into consideration the appreciation percentage in currency exchange at present along with other landing charges like customs/duty/CFA fee/taxes and freight.
- In the case of Indigenous Machinery or assets, the Sum Insured should be well enough to cover the present cost of particular assets at desired location with all consider expenses as in the above point.
- In the case of IAR policies, some intermediaries suggest their clients keep MBD part sum insured 85% of the total plant & machinery section under the MD section.
Although it is not prudent to keep SI 15% low for the MBD part due to this, the net premium under IAR policy will vary.
- In IAR policy, the SI for the BI part also depends on the Insured. As if the nature of business is such where the small business interruption can make a significant impact on entire Gross Profit(GP).
Then for this one must be careful in the selection of Sum Insured under BI part and should be well enough for covering the GP as per industry specific by avoiding under insurance situations.
- Sometimes it is also suggested and advised to opt for a Fire policy instead of an IAR policy by an Insurer or Intermediaries by showing higher excess in IAR policies.
So before finalizing Fire or IAR policy the insured should check the nature of claims in size i.e loss amount, not the quantity and then decide to opt for Fire or IAR policy.
It is true that the Fire policy will definitely have less premium in comparison to the IAR policy, but the IAR policy has its own merit too which no Fire policy can cover and compete in terms of coverage.
- In the case of Marine policy also there should be careful selection of Open cover, Single Marine or Sales turnover policy. For this Insured should undertake their Claims size, value and transits require to cover under insurance.
For all this, the Insured should always consult well with their Insurance/Risk Managers, Intermediaries(existing or new) and other Independent Insurance professionals.