Ep. 38: Winning Insurance with Strong Resilience

Bobbie Ramsden-Knowles: Hello, everyone, and welcome to Emerge Stronger Through Disruption podcast series. I’m Bobbie Ramsden-Knowles, co-leader of PwC's Global Center for Crisis and Resilience, or GCCR for short, and I’m coming to you from our offices in the UK today. So the aim of this podcast series is to explore the challenges facing businesses in this environment of constant crisis and change, and to discuss how successful business leaders can emerge stronger through this disruption. Before we dive into today’s conversation, if you’re enjoying the Emerge Stronger Through Disruption podcast series, please subscribe wherever you get your podcasts and consider leaving a like or a comment.

Hearing from you helps us know that we’re connecting, and it also helps more people discover the show. We really, really appreciate your support. So today, we’re discussing the link between resilience and insurance and the opportunity to directly use your resilience investment to benefit your insurance purchase or renewal.

And joining me to explore this topic [00:01:00] is Martin Murphy, PwC UK Corporate Insurance Strategy Co-leader, and he focuses on helping organizations with all aspects of insurance procurement. Welcome, Martin. 

Martin Murphy: Thanks, Bobbie. I'm really excited to be here. 

Bobbie Ramsden-Knowles: Right, Martin. Now, I love the topic we’re discussing today because actually many organisations I work with aren’t really fully connecting the investment they’ve made at building resilience to how it can benefit them from an insurance perspective, and it’s a huge opportunity.

Would you agree? 

Martin Murphy: Yeah. I couldn’t agree more, Bobbie. I think lots of organizations invest in strong resilience and then kind of stop, and I think by doing that, they’re failing to convert that investment into insurance value, whereas if they did, they could be saving money and further mitigating risk. 

Bobbie Ramsden-Knowles: Well, I’m sure everybody listening really wants to understand how they can actually do that.

Now, how should organizations be thinking about this link between resilience and insurance then? 

Martin Murphy: So I think some resilience [00:02:00] teams work hand-in-hand really closely with their insurance function, and I think they see insurance as a core part of the risk and the resilience jigsaw, but unfortunately, others don't.

So many organizations spend millions on cybersecurity, on operational resilience, on business continuity, on crisis management and risk management. Then they renew their insurance program, probably also spending millions, and they’re wondering why the premiums aren’t moving. And I think there’s context to this that, you know, as well as being a big spend and a big cost item, insurance can be a really important part in that overall operational resilience of an organization.

It can provide that additional stability and security and can represent a bedrock which allows organizations to be taking risks, innovating, growing, and providing consistent and high-quality services. So I think good practice in this space, Bobbie, is to identify and then coherently communicate all recent investments in organizational resilience to your insurance broker and your key insurers.

So really tell that story on [00:03:00] resilience. I think it’s often a really great and a really compelling story, and I think insurers will view each organization as a risk within their risk portfolio. And the better risk you appear relative to competitors and peers, the more likely you are to be able to source insurance coverage for different risks.

That’s three things. So firstly, the best value from a cost perspective. Secondly, tailored to your risk profile. And thirdly, you know, high-quality coverage that pays out in the event of a claim 

Bobbie Ramsden-Knowles: Now that point you said about organizations need to tell the story on resilience, that for me really resonates, particularly given the external environment organizations are operating in right now.

It’s hugely relevant, right? 

Martin Murphy: Yeah. That’s right, Bobby. I think we’re in a what we call a softening insurance market right now, which basically means there’s more competition among insurance companies and therefore better affordability and better accessibility for buyers of insurance. So in a soft market, insurers are more able and more willing to [00:04:00] concede ground, both from a price and a coverage perspective, as long as you’re a good and a well-portrayed risk.

And I think, Bobby, getting this right isn’t necessarily creating new work. It’s more packaging up work that’s already been performed or is already in progress for a different audience, the insurance market. 

Bobbie Ramsden-Knowles: That’s a brilliant, well-made point, Martin. I wonder if we now go back to the opportunity areas that you highlighted.

Could you go a bit deeper on each of those perhaps? 

Martin Murphy: Yeah, sure. So I think there’s, at a high level, three benefits to organizations that bring their resilience strength into those insurance negotiations. The first one’s cost, and this one’s quite simple really. Better and well-articulated risks will attract more insurer competition, and that greater competition will drive better pricing.

So if you can consistently demonstrate strong resilience, it can really reduce premiums. So for example, two organizations may have the same revenue, but one has much stronger resilience evidence and a better story and therefore [00:05:00] secures materially better pricing for similar coverage. The second area is around coverage that’s better tailored to an organization’s risk profile.

So for example, this could be adding coverage for the organization’s key exposures, and that could be wider cyber coverage. It could be cyber policies adapted for the OT or the manufacturing environments. It could mean actually removing unnecessary coverages that provide little value or removing restrictive exclusions or endorsements in policies.

It could mean tailoring policy wording to reflect operational realities better. There’s also an aspect here of scenario-based limit setting where actually strong resilience programs often involve scenario exercises and stress testing, and the outputs of those exercises can be used to inform or even determine insurance limits to identify protection gaps and to help justify investment decisions.

I think another aspect is risk appetite and risk retention strategy. Resilience and risk appetite are closely linked, [00:06:00] and some of the key questions on appetite often include things like what disruption can we absorb, what kind of losses can we tolerate, and what therefore risks should we be transferring.

And when it comes to the insurance program, that can really influence the size of retentions and deductibles in policies. It can influence levels of self-insurance or the use of captives or other risk retention vehicles, as well as the overall program structure. So I think it’s fair to say the strong resilience probably doesn’t just affect price.

It can affect what insurers are actually willing to cover. And the third and final area is the quality of coverage. So I think it’s fair to say not all insurance policies are equal, and they’ll provide different levels of things like claims payment certainty, the strength of the underlying insurer, coverage wording quality, claim service, and incident response support.

So better risks will often be getting broader and higher quality wording, getting better insurance engagement, and also a greater willingness to negotiate in policies. 

Bobbie Ramsden-Knowles: That’s really helpful, Martin. So there’s [00:07:00] clearly strong reasons to bring your resilience investment into insurance discussions. Perhaps you could talk a little bit about what insurers want to see and hear in these discussions.

Martin Murphy: Yeah, of course. So I think it’s best to tailor the way you talk to insurers and the insurance market and to frame it in a conversation and a language they understand. So for example, you know, insurers are in the business of almost buying future risk. They’re comparing organizations against peers. They probably care less about things like policies and frameworks and more about hard evidence, so they want that proof that losses are less likely and less severe.

And I think because of those drivers, they really love seeing information on things like cyber maturity, on crisis response capability, operation resilience testing, business continuity exercises, supply chain mapping, incident and claims performance as well is really key. So basically, insurers love evidence, Bobby, and I think rather than hearing simply, “We have strong resilience,” they wanna see [00:08:00] test results and audit outcomes, hard recovery times, incidents and claims reductions, cyber maturity scores, and then kind of risk engineering reports.

That’s the kind of thing that can move insurance underwriting decisions in a more positive direction. And I think it’s also worth keeping in mind that different insurers will value different things, so it’s best to try to tailor that resilience story to the audience in question. So for example, a property insurer’s likely more interested in engineering, in maintenance, and in fire protection.

A cyber insurer will care more about things like multi-factor authentication, backups, and incident response. And a liability insurer will be more focused on things like governa