The effectiveness of evergreen policies in other markets strengthens the argument for introducing them into the construction market, according to a report published by the CII.
The report examines the pros and cons of evergreen policies – where the period runs in perpetuity until either of the parties (the insured or the insurer) gives 12 months’ notice to renegotiate or cancel the policy – and explores the benefits for the construction market, which many insurance experts believe is beginning to harden.
According to the report, this type of policy would have the following benefits for insurers if introduced to the construction market:
1) More control – Rate and wording changes can be discussed at a time that suits insurers, once all loss details have been established, rather than being pigeonholed into a window prior to renewal of an annual policy.
2) Improved client relations– More time can be spent on servicing the clients instead of only connecting once a year to collect their premium. Insurers will be able to add a risk management proposition, while reducing the administrative costs associated with the annual renewal process.
3) Hedge mechanism – By securing long-term income, insurers will gain some protection against any drops in market premium levels due to the market cycle.
4) Better retention rates – Shift of insurers’ approach from looking to win new business to servicing large accounts on long-term evergreen policies.
To read the paper, visit: www.cii.co.uk/98677