Tapping into the strategic value of insurance

The “so what?” - what are the risks of getting insurance wrong?

The risks of not investing sufficiently in key insurance processes, the insurance function and the programme itself are vast and are often under-appreciated, at least until something goes wrong. These include:

• Not being able to secure the desired coverage, resulting in significant exposures being self-insured and therefore impacting on day-to-day running costs and the balance sheet
• Significant practical ramifications of not being able to operate and/or provide key services in the absence of suitable insurance
• Being (sometimes unexpectedly) uninsured at the time of a major incident, potentially causing severe distress, disruption and/or even bankruptcy
• Associated reputational risks of not securing cover and/or being able to provide services
• Slower business recovery after an incident

Insurance is often not understood

Insurance is a specialist and complex subject, where strong technical skills are required to navigate the insurance market successfully. Whilst brokers and insurers provide valuable input, it is crucial that councils and other organisations invest in internal insurance understanding and resources. Organisations should be careful not to over-rely on key external parties.

There is a wide range of approaches taken by Local Authority Treasurers, S151s and Directors of Finance in relation to the importance with which insurance is held. Some recognise its value and the benefits that can be accessed, but too many don’t give it the scrutiny, attention and value it warrants.

The risk & insurance function in local government should play a core role in the resilience of the Council. The team should be visible, proactive and well-networked with key stakeholders, with core insurance decisions reflecting the wider risk appetite and risk profile of the organisation. The right types and levels of high quality insurance are required, rather than “any” and/or “the cheapest” insurance.

The strategic value of insurance

In reality, the potential to extract value from the insurance process is significant. Some clear examples include:

• Enabling growth – Insurance can act as an enabler and a transformation tool, providing the stability and bedrock to allow organisations to take risks, innovate, grow and provide consistent and high quality services.
• Data-driven decision making - Claims data within the insurance process can provide clear trend information, potentially acting as a driver to improve risk behaviours in the wider organisation. The insurance renewal process can also act as a catalyst for improving the quality of risk data and information across the organisation (due to key risk information being requested by insurers).
• Risk prevention & protection – Insurance mitigates and transfers some of the major risks of doing business, playing a core role in business resilience. It protects key assets and IP fundamental to an organisation and its operations. Insurance renewal processes can shine a light on areas of key exposure across the organisation, allowing remedial actions to be put in place.
• Access to SMEs and services – Insurance third parties (e.g. brokers, insurers and loss adjusters) can provide access to a range of vital supplementary services. These include risk engineers, exposure quantification tools/experts, complex claims management, a range of services for construction projects, and key incident response and crisis management resources in relation to cyber risk. Risk management bursaries are often also included in policies, but are often under-utilised.

Case study – the benefits of “becoming a better risk”

Following some recent challenges in the working relationship, Zurich Municipal and Bristol City Council took this as an opportunity to reset the relationship and embrace a new strategic partnership. Zurich Municipal allocated the council a strategic account manager with a significant amount of time to support the Council on this process. The Strategic Account Manager also set out clear expectations and milestones as to what was needed in order to maintain the provision of insurance for the Council. At the core of this was a bigger focus on managing risk and insurance, enhanced leadership engagement on key areas, and improved data quality and sharing of information.

To support and accelerate this improvement, Bristol City Council ensured that its corporate leadership team prioritised discussions on the insurance arrangements, which have become a regular agenda item within leadership sessions. In addition to this, the Council proactively sought specialist and practical support on its insurance process, in particular in the build-up to an important renewal process. The Council sought support from the PwC Insurance Strategy team on a part-time secondment basis for an initial period of 5 weeks. Three PwC insurance specialists (two former brokers and an insurance actuary) slotted into the Council's Risk & Insurance team, providing much-valued expertise and task management skills. This built on PwC’s existing relationships with the Council and was driven in part by its presence in the Bristol and West & Wales region.

With the public sector insurance market battling with well-understood capacity challenges, ensuring Bristol City Council's relationship with Zurich Municipal was positive and collaborative was paramount. For Bristol City Council - as with any other Council or Unitary Authority - a potential scenario where its main insurer withdrew from providing key covers risked significant practical and reputational challenges, with no guarantee of alternative cover being able to be sourced in the current market. A Council's ability to provide basic services in such a scenario can be at risk.

In similar fashion to many in the Local Government sector, the Council was faced with the complex issue of remediating high-rise EPS/LPS-cladded buildings. Not being able to secure property insurance cover can severely inhibit the progress of key remedial works as necessitated by the Building Safety Act 2022.

With PwC supporting Bristol City Council, what began as an initial 5-week project evolved into a 5-month secondment, during which time the PwC team worked shoulder-to-shoulder with the Council and Zurich Municipal to overhaul key processes, rebuild trust and ultimately help to secure a positive long-term relationship for the Council with its main insurer. The result: a stronger insurer relationship, and a clear path to reinstating insurance cover for key high-rise cladded buildings.

Some of the key tangible outcomes of this specialist support included:

• Team refresh - Two new specialist external hires, including a newly created Finance Business Partner role overseeing insurance
• Process overhaul - Creation of a comprehensive, formalised insurance process manual, implementing best practice and to be used across the Council, as well as improving data availability and quality. This gave increased confidence to the insurer that risks and the programme were well managed
• Claims data exercise - A full review of 15+ years of insurance claims data and remediation of the database, with the identification of a significant reduction in the claims provision held by the Council, and highlighting trends to allow the Council to intervene earlier to fix
• Governance clarity - Implementation of senior stakeholder reporting mechanisms for insurance and claims, including a tailored claims dashboard reporting suite and a detailed WIP list of the team's key live tasks
• Strengthened visibility and relationships - The risk & insurance team raised its profile within the Council significantly, and established stronger internal and external relationships with senior leaders and stakeholders
• Historic claims reform - Overhaul of legacy claims handling (including industrial disease) and the development and implementation of an SLA between the Risk & Insurance and Legal Services teams defining best practice process and splits of responsibilities
• Insurance strategy - A structure being established for the Council's insurance strategy, including the balance sought between risk transfer and risk retention to reflect risk appetite.

A pivotal moment of the work involved a key meeting between senior stakeholders from the Council, Zurich Municipal and PwC. The fact that the Council's representatives included the CEO, Leader of the Council and S151 Officer demonstrated the importance with which the Council now holds insurance. There was praise from all quarters of the investment the Council had made to prioritise the above areas and the significant improvement in the quality of risk information and discussions. The role of Zurich Municipal in the process was also crucial – by providing clear and practical requests over the period of the work, and by working closely with its insured, Zurich Municipal played a core role in supporting and facilitating the improvement needed. Zurich Municipal provided an excellent example of what a true “partnership” with a main insurer can and should look like.

In summary, Bristol City Council became a "better risk" in the eyes of its main insurer through two key areas:

• Investing in strengthening its relationship with its main insurer
• Investing in the Risk & Insurance function and key processes for insurance and claims. This was achieved through improving governance and leadership engagement on insurance matters (including with the CEO and Executive Directors), and through seeking specialist support on areas where the Council did not have the expertise or the capacity to drive key tasks forward.

These proactive investments had the added benefit of establishing a stronger link between insurance and risk within the Council. Insurance became a much clearer and well-considered component of the wider risk management and risk financing approaches.

When combined with working closely alongside Zurich Municipal, this means the Council now has improved its chances of securing high-quality, tailored and cost-effective insurance coverage at the next renewal. Insurance is now providing a solid backstop in supporting the Council to deliver its new Corporate Strategy.

What now?

The PwC team phased full control back to the new Risk & Insurance hires, including the new Risk & Insurance Finance Business Partner, Huw Jones.

Key highlights

The importance of insurance and the impact of the work which Bristol City Council, Zurich Municipal and PwC performed together was praised in comments from the Council's Head of Financial Improvement, Stuart Booth:

“I was asked to step in to lead the Renewals process at a time when the Council had multiple insurance challenges. It was clear from Day one that there was a need to enhance the technical capabilities of the team and to rebuild the trust and confidence of our main insurer, Zurich Municipal. Working with and alongside PwC and Zurich Municipal helped me recognise and fully appreciate the specialist and technical nature of insurance, and the importance of building effective relationships with key stakeholders. As a previous S151 officer, the insurance function tended to be less visible than other parts of finance unless there was an issue. I would strongly encourage all Council’s to get a better understanding and knowledge of their insurance function and in particular to ensure it becomes a proactive resource that is an integral part of strategic and operational decision-making, rather than an after-thought.”

The Executive Director Resources (S151 Officer) at Bristol City Council, Andy Rothery, added:

"Through close working with Zurich, supported by PwC, our insurance team have improved the way they work, both internally and across council directorates. As a result of this work, at a leadership level, we have strengthened our corporate grip on both risk management and insurance.”

The Strategic Account Manager at Zurich Municipal, Sally Rose, commented:

“This collaboration marks the beginning of Bristol City Council’s journey to harness the true strategic value of insurance. Through close partnership with PwC and Zurich Municipal, the Council has initiated the process of building stronger relationships, enhancing procedures, and investing in specialist expertise. These steps lay a foundation for protecting vital services, enabling future growth, and strengthening resilience for years to come.”

The incoming Risk & Insurance – Finance Business Partner, Huw Jones, also said:

“It is clear that within BCC, stakeholders have acknowledged and embraced the need to work closely with our insurers, Zurich Municipal. The result being that this has fostered a close working relationship which will provide benefits for both BCC and insurers.”

One of the lead PwC secondees, Martin Murphy, also commented:

“This work was a clear reminder of how crucial it is for insurers and insureds to work together collaboratively. Ensuring that the insurer truly understands what makes the organisation tick and building trust in the quality of communications and data led to the Council deriving significant value from insurance and the relationships it involves.”