Overark Insight – the Grenfell tragedy

Once the immediate needs of the poor victims of the tragic fire at Grenfell Tower have been provided, attention is likely to turn to the management of risk and the provision of insurance, both within the insurance market but also more widely as the inevitable quest for responsibility becomes the prime focus and as the “was this avoidable?” question is addressed.

Three key areas area will probably need to be addressed and should be areas of keen interest for the Executive teams and Boards of social housing providers:

– is there a strong link between risk and insurance or are these functions managed in silos? Leading organisations will recognise that whilst, by buying insurance, they may have transferred financial impact of incidents to their insurer this does not, in itself reduce the core risk (both frequency and severity) of incidents occurring. Commonly in larger organisations, both in the UK and in fact worldwide, well governed self-insurance structures create the platform and motivation to drive good risk management. In effect this changes the culture from “it’s an insurance job” to “it’s our money” and, across the venture a risk-aware attitude is able to flourish.

– is our BCP and Disaster Planning fit for purpose? Forward planning is absolutely essential to the reputational impact of major events. Over and above the costs of repair or compensations the mobilisation of major event teams is key to getting the right day one actions and communications initiated. Often, reputations are enhanced or damaged by how disasters are managed. Without planning, the chances of launching a coherent plan are greatly diminished. Organisations that have strong BCP and Disaster Recovery Plans have a common thread; they have the maturity to accept that they are not immune to a major event regardless of how well they are running the business. Conversely, corporate failures also tend to have a common theme; “it’ll never happen to us”. Investing in proactive risk management will often provide the right balance of expertise, challenge and methods to ensure that operations and strategies are appropriately stress tested. Increasingly, regulators across every sector will expect evidence that this level of risk management is in place, embedded and has the right profile and is integrated as a strategically important function rather than a “tick box” exercise.

– is our insurance coverage fit for purpose? The tragic event in London should trigger social housing providers to bench-test their policy and investigate whether they have real insurance contract certainty. In effect, do they have the quality of the product and claims service at the “moment of truth”? In reality, major events highlight the fact that the quality and value of the insurance programme is as important as simply the cost that the procurement-lead renewal process might be tempted to focus upon. The benefit of a self-insurance structure is that the policyholder is likely to buy only the appropriate level of insurance and because of its increased financial interest will have more control of the policy terms, conditions and the essential services, including loss management and subrogation, following major events. Such risk-led approaches better enable an integrated and holistic approach to manage and resolve major and complex claim.