SMEs exposed: The rise and rise of management liability insurance
Management liability insurance is fast becoming a must-have as more SMEs face litigation. We speak to Chris Stallard of Vero and Stuart Davies of Gallagher Australia for their thoughts on changing market perceptions.
Video transcript below:
Donna Sawyer, Insurance Business Online
Donna Sawyer: Management liability insurance is emerging as a business opportunity for brokers with more SMEs facing litigation. Chris Stallard of Vero says insurers are working to change the market perception that this insurance is only relevant to big firms.
Chris Stallard, Vero
Chris Stallard: Management liability has been around for medium sized to kind of corporate clients for about since about 2004. Couple of leaders in the market in Management Liability and D&O, but one thing they failed to do is to raise the awareness of companies of their exposure. So what I mean by that, is that they have tried to impose that people should buy D&O and here’s another version of D&O, whereas at Vero what we have done is said, “this is part of your exposure as a business”.
Stuart Davies, Gallagher Australia
Stuart Davies: Even though as I said there has been a significant growth in the take up of Management Liability, I mean if you look at stats and obviously stats can be a little bit subjective, but it’s still recognised as if you look amongst the private companies that sit within in Australia alone, penetration of this product is probably no more than say 20 to 30% of the potential client base. So obviously there is a lot of clients out there that are still either not aware or maybe aware but don’t believe that they have a necessity to buy it.
Donna Sawyer: Stuart Davies of Gallagher Australia says regulators in particular seem to be a driving force behind a rise in court action against companies.
Stuart Davies: The economic environment has obviously not been fantastic in many industries outside of the resource, so as a result of that we are finding that there is an increase in litigation as much as an increase in claims coming against private companies. And that really the size of the company isn’t necessarily driving whether the claim is more probable or not, it’s more the matter of, if you are a private company - you are conducting a business, that there are a number of stakeholders that you do interact with where potential for claims does originate. We are seeing increasing clams from shareholders, from regulatory bodies, competitors. In particular regulatory bodies are probably one of the more aggressive areas.
Donna Sawyer: As a rule of thumb, it’s vital that insurance brokers understand the exposures of their clients to tailor policies accordingly.
Chris Stallard: The acquisition of this product is where we differentiate ourselves. We believe it’s a fundamental part, so those key components, fire, business interruption liability, management liability, it’s so core that we have taken the extra step of simplifying that acquisition process. So the product you end up with is simple in acquisition, it’s easier to understand and read in the wording, because of the bread of coverage and it’s the combination of that proposition that should elevate us against our insurers.
Stuart Davies: What we’ve tried to do is most certainly I have done a lot of work over the last few years and this is alleviating the concerns that our clients may have around what is the best in class. And the best in class product we have identified, we have also looked to tailor the coverage that sits out there in the market. So rather than just to accept what insurers are describing us, what is their best in class product, we’ve looked at it from the basis of what the risk profile of our client book is and then looked to put a best in class cover in place, which includes some tailored enhancements to the core policies.
Donna Sawyer: This is Donna Sawyer reporting of Insurance Business Online.