Monday, 20 February 2012
German insurers need to work harder to follow customers abroad: risk managers and brokers
Industrial customers and brokers are highly critical of the limited international reach of German insurers, it emerged during a liability insurance trade conference in Hamburg in late January.
“Germany had exports worth billions of euros last year,” Reinhardt Riehl, Head of Liability at broker Südvers, told 200 participants at the Euroforum meeting. “I have always failed to understand why the German insurance industry has not followed the trend to internationalisation that its customers actively engaged in and has not become the vanguard of international insurance solutions,” he said.
Instead, German insurers allowed Swiss companies to take over the business. As a consequence in the 1980s Südvers began to broker US business with Swiss insurer Winterthur, which was then acquired by Bermuda-based XL.
This was at a time when German-based insurers found it difficult to write international business, said Mr Riehl. “A country like Germany which exports a lot, needs an insurance industry which reflects that fact,” he said.
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And, insurers should not restrict their international capacity to DAX or MDAX companies but should also make it available to medium-sized enterprises in Germany, added the broker.
Silke Hellwinkel agreed. She is in charge of insurance at the medium-sized company ProMinent Dosiertechnik which specialises in systems for chemical fluids handling. The company is located in Heidelberg and has sales and service offices in 56 countries around the world. Approximately 85% of the company’s turnover of €275m in 2011 was earned outside Germany.
“We need a strong partner in liability insurance which has its own offices worldwide, and which supports not just our parent company but also our foreign affiliates both in their daily business as well as in claims handling,” Ms Hellwinkel explained.
German insurers often have a bad reputation in this respect. “Many German insurers which are experienced and perform well in Germany perform relatively poorly abroad,” she said.
In particular, there was a lot of room for improvement as regards communication between German insurers and their foreign-based affiliates. “They often work alongside each other without cooperating as much as they should when it comes to decision-making,” Ms Hellwinkel continued. German insurers should also learn to communicate better with their foreign affiliates, she said.
As an example, Ms Hellwinkel related how at the end of last year ProMinent has to initiate a recall action in the US and Canada.
A production error had led to faulty pressure valves which were not acid-resistant and which would thus have led to the leakage of chemicals.
“In cases like that we need on-site support,” she said. “However, it is necessary to confer with our headquarters in Germany.” In the product recall case an expert from the insurer appeared suddenly on the scene in Canada without any previous consultation with ProMinent. “That was not ideal,” said Ms Hellwinkel.
The risk manager said that she prefers to work with large insurers. “We now have our cover with a big insurer and our previous insurer was also a large one,” she said. “I prefer to have cover with large insurers which are financially stable and which have a good international presence.”
The cooperation with insurers that have their own subsidiaries in foreign countries sometimes works out better. “But there are also networks which perform quite well,” Ms Hellwinkel said.
Michael Schneider, Head of Liability Insurance with Basler Versicherungen, suggested however that size is not the only criteria. “Large vessels move slowly,” he said. “If they want to turn around, they have to start turning the helm 30km before the turn. A small speedboat can navigate faster.”
Small insurers can show that they have advantages compared to large companies when it comes to service and dependability, added Mr Schneider. Basler Versicherungen is owned by Switzerland-based Bâloise.
Ms Hellwinkel said companies should use a broker when it comes to international programmes. “In the past we also did direct business with insurers, but we are working with brokers now,” she said. “The risk of shouldering everything alone had become too high in the meantime.”
Ms Hellwinkel said that insurers also tried to foist unfavourable terms and conditions on ProMinent. “Some insurers work with liability durations which are too short. These are things that should not happen,” she said. “This is the reason why we need a broker who has the time and capacity to read all the different clauses and ask for changes if necessary.”
Ms Hellwinkel is quite happy with the price level in liability insurance. “Of course we prefer to pay less, but we do not try to force premiums down,“ she said.
Prices in liability insurance have reached rock bottom, said Mr Riehl of Südvers. “The prices companies are paying for their cover are sometimes grotesque,” he said.
A medium-sized company can currently secure a product liability policy with all imaginable add-ons for €12,000. “This is crazy,” said Mr Riehl. However, on the other hand, clients are ready to buy more cover. “The average insured sum is increasing dramatically because companies get capacity at a low price,” he said.
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