Briefing: Have insurers thrown brokers under the bus on BI?


There have always been points of conflict in the insurer and broker relationship but this week that reached a new low as RSA offered up Marsh as a human shield in its battle to avoid payment of business interruption claims for the Covid-19 pandemic.

Brokers serve their clients – they are looking for the best coverage they can get businesses at the best price possible. They are assessing levels of risk and aim to be a partner and a guiding hand. Insurers, on the other hand, answer to their shareholders and, although they are there to make good on the promise to pay out in the time of need, they must do so on terms that mean they turn a profit overall for their pay masters. But the two exist in a symbiotic relationship and for many years there has been a truce, even if its an uneasy one.

Direct Line and Churchill gave brokers a good kicking in the 1980s and 1990s and the issue of broker commissions raises its head every now and then, of course. It is not so long ago that Aviva cancelled all its agency with GRP, amid reports that GRP brokers had been seeking an increase in commission, although both parties denied this was the cause. The outcome either way was a flurry of activity from others seeking a slice of this newly released gross written premium.

This week, however, RSA has taken a step, backed by other insurer players, which might have a lasting impact on its immediate relationship with Marsh and possibly other brokers in the market. In a stance similar to that seen in many a playground the insurer pointed its figure at its partner broker and effectively said ‘he started it’.

While arguing in defence documents in the Financial Conduct Authority’s test case on business interruption that policies were never meant to pay out for global events RSA stated: “In any event, RSA4 was drafted by Marsh/Jelf who acted as agents for the relevant insureds. In such circumstances, the insureds (and not RSA) would fall to be treated as the proferens.”

Although not directly stated in the documents this implies that if business involved in the court case, and maybe also those that aren’t, has any problems with not getting a pay out where it believes it should then it should take it up with its brokers, which should have understood its clients’ needs when placing the policy.

The Marsh policies in question are also known to have been used by insurers Allianz, AIG, Aviva, QBE and Zurich.

And other insurers have echoed this stance. QBE said: “Each of the policyholders of policies with the QBE Wordings acted through an authorised insurance broker intermediary at the time of the placing of the policies with the QBE Wordings whose duty, inter alia, was to advise on the suitability of the insurance being obtained”.

Arch stated: “The Arch Policies were sold only on an online portal which was available only to authorised insurance intermediaries.”

Marsh was quick to respond stating that it and the regulator believed the wording is clear and “the insurer is liable” adding the Resilience wording states “this policy wording is accepted by and adopted as the wording of the insurer”.

But the damage to the market has surely been done.

Steve White, CEO of the British Insurance Brokers’ Association, called the comments “distracting and unhelpful,” and suggested the FCA reply, due on the 3 July will bring the case back to its true focus of “whether the policy wordings in the test case should indemnify businesses for their losses arising from having to take action to mitigate the infection risk of Covid-19 at their premises and/or the emergency lockdown measures which the government introduced in March this year to control the spread of the virus which causes Covid-19.”

Earlier in the year brokers were warned professional indemnity claims could be expected as a result of the coronavirus pandemic but I’m not sure anyone expected insurers to be encouraging insureds to look that way.

Insurers might argue this is down to the lawyers and their legal speak (making friends yet again) but it is done in the insurer’s name and they have the final sign off so that is a weak response.

Earlier this week we published an article looking back at corporate collapse in the insurance market over the last 50 years and in my Editor’s Comment in our July issue I suggested that the sector needs to think more about how leaving policyholders out of pocket looks after previous failures to come together have not reflected well. Now I’m wondering if insurers care what anyone thinks as they thrown brokers under the bus. 

In films the real low point for any villain is when they use another character as a human shield to save themselves. Insurers haven’t been looking good in the public eye for some time but now they have also alienated their colleagues in the insurance market and battles lines could be being drawn on both sides. 

In 2017 Post and WPA conducted research to uncover brokers’ business priorities and found that trust is the cornerstone of insurance and that it was their number one reason for choosing to use an insurer.

With this stance RSA and its supporters, have hit a heavy blow against any trust that might have been its in relationship with Marsh and undoubtedly other brokers will be watching with caution.

And if the GRP/Aviva business where insurers were fighting for a slice of GRP’s £660m in GWP is anything to go by the next year of corporate renewals is going to be a very interesting time for all involved.

Arch, Argenta, Ecclesiastical, Hiscox, MS Amlin, QBE, RSA and Zurich are named as defendants in the FCA’s High Court test case. The FCA, as the claimant, is representing the concerns of policyholders in the legal action, which will be heard before Mr Justice Butcher and Lord Justice Flaux in an eight-day court case beginning 20 July.

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