Most underwriters frown disdainfully on anything reduced to a numbers game; a pursuit lacking intellect or integrity; hardly worthy of the effort; something a machine should really do. From time to time, however, numbers get them cross, reinsurers especially. Not always numbers that jump out at you screaming for attention, but those that creep along in the wrong direction. The pantomime villain in the media spotlight for a while has been the Australian insurance heavyweight Suncorp. They declared, a little conveniently to some, higher claims figures for the Brisbane floods just days after the market renewed their treaty programme in 2011 and have been at it again this year, adding £270m to their Christchurch Earthquake losses when virtually every other insurer has reported static claims reserves for some time.
Whilst emotions might be running on the high side in the London Market, at the end of this long chain of insurance on the other side of the world, the 28,000 homeowners who suffered earthquake damage in Christchurch are hardly whooping for joy either as a good friend of mine from New Zealand recently confirmed. Of course disasters are sadly a fact of life and recovery can be a slow and difficult process; just look at New Orleans or Haiti, but Christchurch seems to have its own troubling character. There were two quakes some time and distance apart plus many after-shocks so the personal and financial impact was felt by a high proportion of the city’s residents, not confined to a small locality as is often the case. The Canterbury area was clearly a seismic risk but did not have all the danger signs in the public consciousness compared with say Tokyo or San Francisco. As a consequence there remains massive political uncertainty and indecision and many urban planning decisions left unanswered as those that govern Christchurch determine what sort of city they want to rebuild; how, where and when. Many of those that were affected want to get on with their lives but are simply unable to do so and inevitably insurers are easily caught up in the citizen’s backlash.
In the early days and weeks in the aftermath of the Christchurch earthquakes, the wider insurance industry was caught on the back foot. For many observers, international claims adjusting expertise, stretched to capacity, was slow to make an impression. However a degree of market coordination did eventually emerge and since then the communication, and more importantly the flow of funds, between local insurers and their reinsurers has been good by all accounts. The greatest challenge has been for the New Zealand Earthquake Commission (EQC); short of resources and hemmed in commercially by its requirement to settle claims according to statute. However, as recently as last week the EQC Chief Executive Ian Simpson described his reinsurers as “amazingly supportive” settling claims within a few days. That said, in the same week, a cabinet minister Gerry Brownlee used a news conference to criticise insurers for the delays in providing residents financial compensation, so unfortunately it is not all sweetness and light.
Too rarely our industry looks back at its performance on the ground in the wake of natural disasters; how our actions and decisions have impacted customers; surprising given the colossal sums we do in fact pay out. The Christchurch client experience would be a good one for us to measure. We have a lot of unhappy policyholders down there and to the extent that this is due to what we have done or not or whether it is due to external pressures as might be the case, is not clear. If we spent a fraction of the sums paid out in claims on qualitative market research we might learn something useful. However, whilst underwriters might hate the numbers game, it seems refuge in numbers is a course that most actually feels more comfortable following.