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The Actuary The magazine of the Institute & Faculty of Actuaries

Almost half of large claims disputed by UK insurers

UK insurers dispute nearly half of all large commercial claims, with many businesses thought to have a poor understanding of the conditions and limitations of their policies.

Many businesses could have inadequate cyber coverage ©iStock
Many businesses could have inadequate cyber coverage ©iStock

Research from governance experts Mactavish shows that 45% of large claims are disputed and take an average of three years to resolve, with settlements typically just 60% of initial estimates.

This comes amid a strict regulatory backdrop for UK businesses, which have to comply with the Insurance Act 2015, and an update to the corporate governance code made earlier this year.

Mactavish said there is a growing danger that board members and senior directors are not aware of all the threats they face, increasing the chances that shareholders could take legal action.

“Generally speaking there is low board engagement in insurance, which is out of line with their focus on other capital instruments,” Mactavish CEO, Bruce Hepburn, said.

“All chief financial officers, for example would know about their banking covenant conditions but very few would have knowledge about the limitations of their insurance cover.”

This lack of knowledge around the limitations of insurance policies is reflected in research from Willis Towers Watson (WLTW), which found that many businesses could have inadequate cyber coverage.

After surveying 100 insurance and reinsurance companies, it was found that cyber-related losses under policies where cyber risk isn’t specifically included, or 'silent cyber', were a “far greater risk than ever before”.

The IT, utilities and telecom sector was cited as having the greatest exposure to silent cyber, with two-fifths of respondents predicting cyber attacks to account for at least ten in every hundred non-cyber covered losses in the next year.

WLTW global head of cyber risk solutions, Anthony Dagostino, said: “The 2017 WannaCry and NotPetya attacks highlighted this risk and potential damage across all business areas – causing significant concern around silent cyber.

“This increased risk perception has highlighted the need for specific cyber coverage, but competitive market conditions are limiting the scope for coverage or pricing adjustments to be made in other lines of business." 

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