IIG Insights – Liability Workshop
On 29th October 2019, the IIG had the pleasure of hosting our esteemed local and international Liability experts in our Swiss Re – Liability Workshop.
Our Mistress of Ceremonies of the day was IIG Education Portfolio Ambassador, Asiya Swaleh.
Asiya welcomed everyone, outlined the programme for the day and proceeded to introduce our first international presenter for the morning, René Oefeli.
Before proceeding René encouraged discussion and interaction with our attendees. He began by outlining the differences between Casualty and Liability Insurance, citing that Casualty is a combination of Motor, Aircraft and Watercraft, Non-life and included Liability.
Liability policies were unpacked, with René’s focus on Products Liability and Product Recall – specifically in the food industry.
Attention was drawn to the differences between Product Liability and Product recall covers, and a journey was taken through the food product chain, and the various points of failure which could result in possible Liability claim.
Rene shared an interesting new trend in the food and beverage industry called Nutraceuticals – this refers to health and nutrition foods and dietary supplements that aim to improve physical and mental performance. These Nutraceuticals fall into the grey area between Food and Pharmaceutical regulations.
The increase of Globalisation posed an added risk to the Products Liability arena. In the current day, food manufacturers can distribute their products internationally, and as such, it becomes increasingly difficult to implement effective product recalls due to contamination of food items.
The technical aspects of Product Recall Insurance were shared by René, as he proceeded to unpack the pre-requisites and underwriting, related to product recall cover. Insights were shared on the Structure of Cover, which highlighted that product recall could be done during the policy term period, within 3-5 years. This is not a critical point for perishable food items.
The pricing of a product recall policy includes factors such as:
- the type of product i.e., food or non-food items,
- the brand and reputation of the product with regards to the loss of profits that could be suffered at a time of claim
- the limits of cover selected, and
- deductibles applied to the cover.
René engaged the class in an interactive case study, where the attendees were able to assess the product recall risk posed in a Johannesburg based Chocolate Factory (hypothetical), and the class was tasked with:
- Deciding whether to provide product recall cover to the company,
- Determining the sum insured and deductibles to be applied
- Estimating an adequate insurance premium for the cover.
Rene’s attention, after lunch, shifted to Product Liability – where punitive damages are payable to plaintiffs, to punish the defendant for gross negligence.
The product liability focused largely on the US market as this economy demonstrated the largest numbers of liability claims.
Rene shared that the highest exposure companies were:
- Large companies, with the ability to pay out large amounts in damages
- Industries high bodily injury exposure
- Medical industry, in relation to malpractice lawsuits
- Employment environments, where there is increasing trends of Employment Practices Liability claims related to e.g., sexual harassment and discrimination
The class explored the possible high exposure products such as:
- Sport articles (bicycles, helmets, tents…)
The underwriting considerations include among others:
- Nature of risk/product and its Bodily Injury potential
- Use of product Consumers
- Past Product recalls
The session ended with an interactive question and answer session.
The second speaker on the day, was Swiss Re’s Zaid Bhana. Zaid is Swiss based, operating from Zurich, and responsible for Treaty Casualty Business in South Africa.
Zaid kicked off the afternoon session with an overview of the Motor Insurance industry, adopting a personable approach and immediately encouraging participation and interaction from the audience.
In his discussion, he unpacked the current and upcoming trends in the Motor
The scary reality is that only one in three vehicles are currently insured on South African roads, leaving great exposure to motorists in the event of third-party claims.
Economic pressures were cited as one of the reasons for decline in vehicle sales, with the compounding effect that vehicle owners had less disposable income to spend on insuring this movable risk – the impact however, of motor vehicle owners choosing not to insure their cars, was unpacked and the repercussion of the decision highlighted.
This led to the much talked about and long overdue need for a Compulsory Motor Insurance solution in South Africa.
At this point, Zaid lent insights into alternate risk solutions – one such solution is Takaful, an Islamic Risk Management offering offered through Swiss Re’s Malaysian office.
The session proceeded with a robust and enthusiastic discussion between Zaid and the audience, which continued until the afternoon around artificial intelligence technology within the Motor Industry. Autonomous events were discussed with thought provoking questions raised around claims handling – ethically, in the event of an autonomous vehicle claim, who is the insured? Who is to blame for the incident, and therefore, who will be liable for the claim? With self-driving capabilities of vehicles, will we see drivers’ licenses becoming obsolete?
Attendees were provided with much food for thought.
Through the next session topic, Zaid proceeded to share insights into Cyber and Medical Liability sharing statistics of the exponentially increasing:
- Numbers of cyber related incidents,
- And losses as a result of data breaches
The shift in the South African Legislative Framework is intended to support a more secure cyber environment introducing increased responsibilities on data holders for responsible storing and handling of data and information, however this will not deter cyber criminals.
The last session topic of the day addressed was Medical Liability, where Zaid shared trends in the Medical industry including evolving medical practices and their impacts on medical liability claims.
The day ended with robust questions and answers session, and ongoing discussions.
The high level of discussions engaged on the day and thought-provoking questions posed to the presenters was a testament to the technical competencies gained by attendees.
The IIG would like to take this opportunity to thank Swiss Re for their ongoing sponsorship and support in the education and development of our IIG members.
Article written by Keshrie Pillay – IIG Education Portfolio