A new report conducted by Allianz has found that companies face rising liability losses around environmental, cyber, product defect and recall risks. While improvements in risk management and safety regulation are leading towards a gradual reduction in everyday incidents, such as slips and falls, accidents and workplace injuries in developed markets, there is increasing potential for larger liability claims to become more expensive, complex and international, demonstrating the pervasive and long-term nature of liability losses.
The AGCS Global Claims Review analyzes over 100,000 corporate liability insurance claims from more than 100 countries, with a total value of €8.85bn (US$9.3bn), paid by AGCS, and other insurers, between 2011 and 2016. Over 80% of losses arise from ten causes.
Top 10 causes of liability loss by total value of claims
- Defective product/work
- Collision/crash
- Human error
- Accidental nature/damage
- Slips/falls/falling objects
- Water/fire/smoke damage
- Environmental damage
- Natural hazards
- Vandalism/terrorism
- Property damage
Highlights
- Allianz analysis of 100,000 claims reveals top causes of liability loss for businesses: defective product/ work quality issues, crashes and human error
- Increasing potential for larger, more complex and international claims resulting from global product recalls, corporate liability and environmental incidents
- Digitalization and growth of “sharing economy” present new loss scenarios
- US remains the world’s largest liability market, but US-style litigation is spreading in Europe and Asia with rising consumer awareness and collective redress possibilities in many countries.
Liability claims trends
Impact of collision/crash and slips/falls/falling objects are the most frequent liability claims for insurers, accounting for almost half (48%) of all claims by number. However, the frequency of these claims has been declining in many major casualty markets, a reflection of improvements in risk management and better safety regulation, as well as a shift away from heavy industry.
Conversely, there is increasing potential for large liability claims to become more expensive, complex and international. Industrial, environmental, product liability and financial lines claims in excess of $1bn1 are more commonplace and are no longer confined to just the US and Europe.
The emissions testing issues in the automotive industry are an example of just how complex liability losses can become, giving rise to multi-jurisdictional regulatory investigations and litigation. While very large liability losses can impact individual companies, they also can trigger systemic risks that can affect many companies within a given sector.
Regulators around the world have become tougher, making corporations and their directors more accountable, while investor activism has been on the rise. At the same time, consumer protection laws have been strengthened in many countries and US-style litigation continues to spread around the globe. There is now greater awareness among consumers of compensation in countries such as China, Singapore and Japan. Meanwhile, liability claims for specialist insurance such as cyber risk and environmental liability are expected to increase in Asia as such coverages become more widely purchased.
Large environmental liability claims, such as pollution, are increasing, particularly from the mining and construction sectors. Such claims can be complex, costly and take a long time to settle. They can be particularly challenging in emerging markets, given cultural differences, language and legal systems that may be different to US and European courts.
Global class actions will become more significant. Although class actions by consumers and investors remain a largely US affair, collective redress is taking on a more international dimension, including in Europe. Liability losses can range from everyday occurrences to the major disaster events which make global headlines. However, they can also incorporate more unusual events.
For example, almost 2% of liability claims analyzed involve animals. Deer are the most dangerous due to collisions with vehicles, while bedbugs are an increasing bugbear for insurers with the number of incidents increasing.
Future influencers
New technology will drive a big shift in liability claims. The rise of autonomous driving will have a number of implications for insurers. Technology is likely to contribute towards a decline in car ownership in favor of motor fleets, car-sharing and driverless taxis. This could see insurers move away from providing millions of single annual motor insurance policies to drivers, instead providing large policies purchased by manufacturers and fleet owners and operators. The shift to product liability will require insurers to develop technical expertise and not rely on historic data and driver profiling for pricing. Meanwhile, new manufacturing techniques such as 3D printing could play a positive role in addressing rising business interruption exposures, but could also make it harder to trace products through the supply chain. The growing “sharing economy” raises new questions for liability. For example, a road traffic accident featuring an autonomous car share vehicle could involve the vehicle manufacturer, software provider and the fleet operator, as well as third parties involved in the accident, again making liability potentially more challenging to apportion.
Find out more by reading Allianz report herebelow:
Source: Allianz
