Counter-Terrorism and Border Security Bill

Written evidence submitted British Insurance Brokers’ Association (CTB08)

Dear Member of Parliament,

It is clear that the nature of terrorism faced in the UK has changed in recent years. Previously, the nature of threat was generally from the large explosions or ‘spectacular’ events such as 9/11. Both types of attack quite often involved significant damage to property, as well as loss of life.

As such, the way that insurance responds has needed to change, and we very much welcome this Counter Terrorism and Security Bill. However, as the voice of the British insurance broking industry, BIBA disagrees with the proposed Amendment 27, and its overall purpose to legally require an insurance broker/ provider to offer terrorism cover. We urge Members to vote against this provision. Below we outline the reasons our members disagree with this requirement:

· Not all Insurers are Pool Re members and are not able to offer terrorism cover.

· Many risks are placed electronically without advice. So, for example, if an SME purchases a package policy from an insurance website without advice, it is not possible to make providers advise ‘a specific recommendation’.

· There are other heads of cover that are far more likely to be claimed upon, for example cyber – of which stand-alone cover is not widely taken up. Brokers feel that during the little time they have face to face with a customer, they have a responsibility to focus on more frequent and high impact perils, so making this particular ‘minimal occurrence’ peril compulsory would be incongruent when helping with risk management. Nevertheless brokers do offer it where it is available.

· Insurance brokers feel that compulsion of any sort does little to close the protection gap. The majority of insurance brokers making advised sales tell us they do offer terror cover, the difficulty is the minimum premiums make this an unlikely purchase from the customer or the customers lack of appetite to purchase this cover as they have a limited insurance budget and often choose other covers.

· Many insurers ‘package’ products for SMEs do not include the option for non-damage denial of access business interruption cover, so a broker could not always offer it. This is down to the commercial decision of an insurer. We believe a constructive focus on improving availability in this area would make a significant difference to the numbers of SMEs that purchase terrorism cover.

· There is also the question of the Financial Conduct Authority (FCA) concern over ‘add-ons’ a client may not have chosen to have terrorism cover as they see it as an unnecessary spend, but may feel they have been effectively been opted in against their wishes.

· The FCA principle of good regulation states:  Proportionality – ‘We must ensure that any burden or restriction that we impose on a person, firm or activity is proportionate to the benefits we expect as a result. To judge this, we take into account the costs to firms and consumers’. It is the view of BIBA members that the excessive amount of controls and measures needed to be put in place for a limited exposure do not appear to be proportionate to the frequency of claims/incidents.

The broking community is committed to a greater take up of terrorism cover from SMEs in particular, however BIBA proposes a collaborative approach rather than one of compulsion. BIBA will commit to an increasing role in promoting this cover by implementing this four point commitment:

· Greater promotion to brokers of Pool Re. BIBA has forged stronger links with Pool Re; they spoke at our annual conference and will also be speaking at our Scottish conference. We will do more to assist with Pool Re messages and reach. We have recently put a Pool Re article in our member-wide magazine and we have recently run two webinars with Pool Re on terror cover.

· A new Terrorism Insurance Guide. BIBA is committing to creating a new Terrorism insurance guide (a simple guide for brokers and customers that will highlight the importance of the cover, how it works, what has changed and how it is now more affordable in all regions of the UK).

· Working with Insurers. BIBA will encourage more insurers to include terror cover for non-damage business interruption (BI) denial of access in package policies.

· Working with business bodies. BIBA will commit to promoting the importance of purchasing terrorism cover with bodies representing small businesses.

July 2018


Prepared 4th July 2018