Sticks and stones may break my bones, but words will never hurt me…
A phrase from a children’s nursery rhyme may seem somewhat out of place in a corporate blog. However, recent and continuing events have amply demonstrated that words- their presence or absence, meaning and construction- can be just as dangerous in their potential for harm as any physical threat.
We live in a time when the seemingly archaic Latin terms “Fidentia” (Confidence) and “Pactum Meum Dictum” (My Word is My Bond), perhaps sometimes seen as tired tropes, have come to represent a reality in which the fundamental premise of the (re)insurance markets- that all valid claims will be paid promptly and in full- is being challenged by the perception, right or wrong, that this may only be true if the existence and expected parameters of a risk had been anticipated by pricing actuaries and risk managers when designing and offering a particular coverage.
We cannot and would not offer an opinion on the merits of any disputes which have arisen, or may yet arise, in relation to whether the particular wording of a policy mean “X” or “Y”. However, anything that threatens the perception of the integrity of the “promise to pay” quite clearly should be of concern to the industry as a whole. Ultimately, any business (particularly when its performance is inextricably linked with some form of loss) is based upon trust and reputation, so anything which brings that into doubt is potentially damaging.
The Covid-19 pandemic and its consequences have so far upended many hitherto unquestioned assumptions across whole swathes of industry, government, finance and academia; and (re)insurance is now no exception. For example, one can argue that the current economic dislocation resulting from the pandemic is a man-made, “unnatural” disaster. Rather than allowing businesses and markets to function, governments have deliberately (in order to minimize the potential loss of life) caused enormous and rising economic loss, the scale and consequences of which cannot yet properly be measured. Of course, the better-functioning and more solvent ones are trying to mitigate at least some of the damage they are causing, but the complexity of the current situation and the inter-dependencies it reveals mean that setting parameters around all the direct and contingent consequences is extraordinarily difficult.
In such circumstances, the more one can do to introduce at least some element of simplicity and certainty the better. This can be in the nature of the products one offers; how they are delivered; or in their terms and conditions. Such an approach benefits all parties, because it increases understanding and trust, and reduces the scope for future argument over whether or not any contract agreed was fulfilled.
At Awbury, we have always tried to ensure in everything we do that not only does the Insured (and any other parties involved) receive exactly the coverage sought (removing the “basis risk” that plagues off-the-shelf, commoditized offerings), but that, to the full extent possible, there is absolute certainty that the “promise to pay” can and will be honoured without cavil in the event of a valid claim. Ambiguity and misunderstanding serve no purpose to anyone.
The Awbury Team