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Insurance industry needs more transparency on pricing: Marsh USA CEO

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Insurance industry needs more transparency on pricing: Marsh USA CEO

PARK CITY, Utah — The current trend toward commoditizing risk capital without differentiation could pose a threat to economic growth and global prosperity, warned David Bidmead, CEO of Marsh USA.

“I sense that our willingness to pursue the expansion of global trade and our ability to recover from natural and man-made catastrophes have been materially underwritten by (insurance) carriers,” he said during a keynote address at the Risk & Insurance Management Society Inc.'s Western Regional Conference, being held through Wednesday in Park City, Utah.

Mr. Bidmead spoke after lunch on the first day of the conference, the theme of which is “Risk Management Elevated.” The conference includes more than 20 general and break-out sessions focused on moving traditional risk management from a tactical discipline to a more strategic, enterprisewide activity.

“I believe that the carriers face a clear and present danger in the current market dynamics to effectively compete on an attribute other than price in an environment that is increasingly price-conscious,” he said.

“For carriers to compete on a different playing field,” he said, “I believe that you must seek to compete on the basis of differentiated value.”

To this end, Mr. Bidmead said that “the voice of the client needs to be better heard and acted on by carriers.”

That means that risk managers should sit down with underwriters and explain their organizations' risks and what risk mitigation measures are being taken as part of the underwriting and renewal process, Mr. Bidmead said.

In addition, the industry — both insurers and brokers — needs to do a better job of explaining pricing and underwriting decisions, he said.

“No one can deny carriers to generate a reasonable return for the risk capital they deploy,” he said. “We need to work hard to get out of our black bag and demystify the workings of the deal. Increased levels of transparency would surely lead to a better understanding of what it sometimes takes to complete a major transaction. And, in the final analysis, I'd like to believe it would lead to an increased perception of value.”