U.K. commercial insurers could be hit with a raft of new claims in the coming years due to businesses taking on much more risk as a result of the operational changes they have been forced to take because of the recession, according to a study of more than 250 companies Wednesday.
Risks taken by U.K. companies have risen sharply due to the recession as companies struggle to survive, according to the research by specialist research firm Mactavish, in collaboration with the insurance practice at PricewaterhouseCoopers and by analysts at Citi.
“The net impact [of the recession] has clearly been to increase the level of underlying risk,” Mactavish’s Chief Executive Bruce Hepburn told reporters Wednesday. “These companies didn’t have a choice as they’re not, at this stage, focused on risk.”
The report found that businesses in sectors such as manufacturing, construction and retail are taking on more risks to cuts costs, say by introducing more low-cost outsourcing to the Far East to their supply chains.
However, the report’s findings show that insurance brokers and insurers aren’t fully aware of the changes made by those they insure, suggesting that policies are being underpriced and insurers could face claims in the next two to three years that they’re not fully prepared for.
The research found that 65% of companies don’t review how their risk is explained to insurers as part of their insurance contract–leaving some insurers unaware of operational changes that could affect the policy.
Achim Bauer, a partner at PricewaterhouseCoopers, said insurers need to rethink how they assess risk to reduce potential claims and strengthen their market position.
