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Analysis: The risk of regret

A new report from QBE Insurance, Australia's largest global insurer, reveals that 22% of healthcare companies in Hong Kong have suffered from legal and regulatory compliance issues over the past 12 months. The Risks of Regret report looks at both current and future business challenges and opportunities, and how well-prepared companies are to deal with risks.

“Our research revealed that many companies are more likely to seek business liability and professional indemnity insurance only after something has happened. What this means is that by waiting until after the fact to protect themselves, they are missing out on any compensation for the initial event and in the process potentially putting business stability in jeopardy,” said Mark Walker, CEO of QBE Hong Kong.

The research found that in the past 12 months, the most frequently encountered risks in addition to loss of income due to business interruption were: equipment breakdown; legal and regulatory compliance issues; and staff injured while working.

QBE’s research reveals that the tendency of companies to react afterwards is common across various types of risk. Of the businesses that experienced customer fraud or fraudulent payments via the internet, two-thirds took action afterwards. Meanwhile, 60% of the businesses that had sensitive data stolen via the internet took action afterwards. For those experiencing other liability problems, the post-event reaction was also high: public or third-party liability due to accidents or business negligence (54% took action after); business systems or computers being hacked (46% reacted); and public or third party liability issues (38%).

“Surprisingly, there were a number of respondents in Hong Kong who also said they took no action even after experiencing an incident,” said Walker. For example, a quarter of the companies interviewed acknowledged that they had encountered public or third-party liability due to problems with products or services but had still not made any changes to their risk controls or insurance protection after the incident.

“Quite frankly, it is alarming that companies are not seeking to better protect themselves through business liability and professional indemnity insurance given all the risks and challenges that exist out there,” said Walker. “In an increasingly litigious world, with professional liability moving up on the agenda, Hong Kong‘s companies need to be encouraged to do more to protect themselves and their customers.”

The Risks of Regret report also reveals that nearly all Hong Kong respondents have some form of business insurance, including general accident and employee compensation cover. However, awareness and purchase of business liability insurance protection is far lower. Only 67% of Hong Kong respondents were aware of the business liability cover and less than half had taken out such insurance.

The same research also found that both awareness and usage for public and product liability insurance further decreases at 36% and 21% respectively, while professional indemnity insurance stands at 24% awareness and 13% usage. Figures for director and officer liability insurance were similar at 24% awareness and just 12% usage.

When asked why companies did not own business liability or indemnity insurance, a third said they believe their financial risk is reduced sufficiently because they are limited companies. A third of Hong Kong companies also cited budget issues and almost a quarter said their business is too small.

“It is also somewhat scary to me that 13% of the companies interviewed said that having business liability insurance is something that never actually crossed their mind,” noted Walker.

Respondents were also asked what were the biggest challenges they face currently. Business cost reduction (40%) and customer retention (37%) scored highest, followed by customer acquisition (35%), talent acquisition (34%) and business profitability (34%).

The future potential for risk could further depend on three key trends that Hong Kong respondents view as important to their business in the next 12 months: technological innovation (23%), rising expectations for personalised customer services and products (22%) and a continued business slowdown (20%).

“Our research found that there is a gap between what companies view as acceptable risk and what they think needs to be protected by business liability and professional indemnity insurance,” Walker added. “Given the various challenges from economic to competitive – including the increasing pressure to adapt to new trends – companies need to safeguard their businesses.”

Posted on: 15/06/2017 UTC+08:00


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