With a new year comes new challenges. However, by looking at recent developments and current activities, there are clear trajectories on what might take greater prominence in the year ahead.

There are four key areas that insurers and brokers should be aware of that could provide greater insight on underwriting, providing cover or paying out claims.

Climate change

2019 can be considered as a ‘moving year’ for the subject of climate change as it transitioned from a buzz word to a key topic. Climate change-related issues grabbed headlines globally, resulting in many firms prioritising how to address and action their concerns.

The Paris Agreement of 2015 focused on reducing carbon emissions, however these targets will not be met due to contributing factors such as China and India using fossil fuels and President Trump withdrawing the USA from the agreement. As a result, there is a growing need for greater regulation and fixed penalties for firms not meeting targets. Since 2017 there have been over 2,000 pieces of climate-related regulation at government and prudential level, and an increase of climate related litigations and actions.

Now that there are climate-related claims, firms need to take more action in adapting to this type of action. By establishing a position on climate-related issues, firms should declare what they are doing now and be thinking ahead on how to justify their actions for the disclosure-based claims of the future.

Insurers may also be held accountable in the future for insuring ‘dirty firms’ (e.g. industrial pig farmers, cement mixers, oil-based businesses). Pragmatic and fair ways to continue to do business will need to anticipate future concerns. Management Liability and Directors & Officers Liability will also need to acknowledge climate-related issues of this nature.

Cyber

Cyber will continue to grow and frustrate in equal measure. But what are the cyber concerns of the future? With litigation and regulatory developments, there has been an increase in data protection claimants:

• Lloyd v Google [2018] EWHC 2599 was concerned with a jurisdiction gateway (flawed cookie setting) that saw the Court of Appeal awarding damages to Richard Lloyd due to the ‘loss of control’ of his data by Google.
  
  
• Various Claimants v Wm Morrison Supermarkets PLC [2018] EWCA Civ 2239 saw an organisation held liable for the criminal act of an individual employee, Andrew Skelton, who stole and sold personal data.
  
  
• British Airways were fined £183.39m by the Information Commissioner’s Office (ICO) in July 2019 for infringements of the General Data Protection Regulation (GDPR). This was related to an incident where user traffic to the British Airways website was diverted to a fraudulent site. Through this false site, customer details were harvested by attackers. Personal data of approximately 500,000 customers were compromised in this incident, which is believed to have begun in June 2018.

With recent regulatory actions in the UK, the ICO have published their Regulatory Action Policy that aims to clarify the nature of data breaches, determining if they are wilful and active. Therefore, insurers need to examine how up to date their wording is regarding data protection.

Reputational damage

Recent mass torts in the United States could provide insight into triggering similar actions in the UK where the reputation of firms came under scrutiny:

• Opioids: There has been an increase in lawsuits against manufactures, distributors and pharmacies due to the growing state of addiction and dependency to medications. General
  Liability policies are looking at picking up the losses, however there are ongoing coverage disputes between insurers and firms. The outcomes of this could have an effect on the NHS prescription process if it is determined that manufacturers conceal the addictive nature of certain drugs
  
  
• Glyphosate: This chemical used in weed killer saw litigation action that determined a failure to warn of a risk of toxic and dangerous chemicals due to being recognised as a “substantial factor” in causing a man’s cancer. The World Health Organization (WHO) stated this chemical is carcinogenic, resulting in sale restrictions in the US. However, there are currently no restrictions in place in Europe, meaning similar action could follow.
  
  
• Johnson & Johnson: Talcum-powder based products have been contaminated with asbestos, causing ovarian cancer and mesothelioma. The number of suspected victims in the US will encourage further research and the Compensation Act may trigger in the UK.

Money is lost on share prices due to negative publicity, with many firms unprepared on how to react, how to mitigate and how to maintain good PR. Reputational risk could become a part of Management Liability with a greater focus on accountability of senior managers due to the recent Senior Managers and Certification Regime (SM&CR).

Whiplash

New Whiplash Reforms that are set to be introduced in April 2020. The Whiplash Reforms are a package of measures introduced by the government to reform the way low-value personal injury claims arising from road traffic accidents are handled.

According to the Ministry of Justice the reforms will “reduce insurance costs for ordinary motorists by tackling the continuing high number and cost of whiplash claims”.*

The reforms will reduce the financial compensation for injury by setting a fixed amount payable for injuries lasting less than two years. Sue McCall, chair of the Society of Claims Professionals, said, “The headline result of this increase is that those claims valued below the new limits will no longer result in costs recovery. The expectation is that there will be a far greater number of litigants in person. This will bring with it the need for more time spent per case in explanation and communication”. The profession should note that a portal for whiplash claims is being developed and expected to be in place by April 2020.**

These are only a few of the developments that could change the landscape of insurance over the next 12 months. And no doubt there will be more to come along the way. However, by looking at what’s to come, insurers and brokers will be better prepared on anticipating the issues that will affect their customers.