What It Means for the Insurance Industry and Policyholders
The insurance industry is undergoing a profound transformation. Climate change, digital disruption, regulatory developments, and social considerations are reshaping how risk is assessed, priced, and managed.
For policyholders, these changes are not theoretical — they directly affect the cost, availability, and reliability of insurance protection.
- Climate Change and Environmental Risk
Climate change is directly affecting both frequency and severity of extreme weather events, as well as bushfires. In regions such as Cyprus, the growing risk of summer bushfires is becoming a critical concern. We have also seen tornadoes, increasing hailstorm events, severe lightning, extreme wind gusts, atmospheric dust, brief but quite heavy storm events, and various other weather scenarios, previously unheard of, or, to date, extremely rare. – Our homes and properties – both outside (e.g. structures, outside furniture and equipment, tanks on roofs etc.) and inside (e.g. fixtures, fittings, piping systems, electrical appliances), are at the mercy of the weather. We can [safely] say that these conditions are these days – our new reality.
Impact on policyholders:
- Rising premiums in high-risk areas
- More restrictive coverage terms
- Greater emphasis on prevention and property resilience
- The Digital Operational Resilience Act (DORA) is strengthening how financial institutions manage cyber risk and operational disruptions.
As insurers digitise, exposure to cyber threats increases. Insurers are taking steps to minimise cyber threats, which would expose their own system to risk, but also endanger their clients’ personal data, in the event of a cyber -induced incident.
Impact on policyholders:
- More secure and efficient services, due to document distribution via paperless communication
- Faster underwriting and claims handling as everything is digitised
- Increased relevance of cyber protection, as policyholders are informed as to the relevance of cyber risk
- However, a more efficient communication and easier access to policy wordings/ documentation, warnings for cyber-security and relevant advice, would in the long-run lead to an increase in premiums.
- Transition Risk and the Low-Carbon Economy
Transitioning to a low-carbon economy introduces financial and regulatory risks for industries and insurers alike.
Impact on policyholders:
- Changes in underwriting for certain sectors – policyholders may notice a difference in approach at renewal
- Reduced support for high-emission activities – insurers may not be willing to continue supporting policyholders whose business involves high-carbon emissions
- Growth of sustainable insurance solutions – insurers might have more of an appetite to insure renewable energy sources, such as solar panels, photovoltaics, windmill parks and other types of energy source producing.
- Sustainability and EU Regulation
Sustainability is now embedded in EU regulations, requiring insurers to integrate ESG (Environmental, Social and Governance) principles. Essentially, Insurers are actively aiming to save paper, therefore they are distributing documentation via email rather than printing and posting, as much as possible.
Impact on policyholders:
- Faster communication, greater transparency, as everything is clearly distributed and available on the policyholder’s email.
- Access to sustainable products – policyholders are also part of the sustainability ESG Regulation, as they do not have to print or hold any papers in their hands, or car – all can be digitally accessed.
- Increased accountability from insurers – they are liable – for anything they send is legally correct and viable, and if there is a mistake in any document distributed digitally they will have to answer for it.
- Motor Liability Reform and Social Fairness
New legislation addressing non-discrimination against elderly drivers reflects a broader move toward fairness. Insurers can no longer merely rely on the age of a person, in order to decide to accept, reject a risk, or impose higher premiums or to not renew a motor policy. They have to create new company policies, so that their prices (premiums) reflect the risk they are undertaking, regardless of the age of the people under their watch, in terms of risk assumption.
Impact on policyholders:
- More equitable pricing models i.e. pricing affects all of the consumers the same way
- Reduced reliance on age-based assumptions
- Greater regulatory oversight and the right of the insured to directly pose a complaint to the Financial Ombudsman
- Increasing premiums because of age has been a norm in the industry for years. Since this is no longer an option, there will be other factors that will affect pricing, and will eventually be in accordance with a company policy, that will strive to keep the same premium income. The result can be nothing else than a general increase in motor premiums.
What Should Policyholders Do?
In this evolving landscape, policyholders must take a more active role:
- Review policies regularly to ensure adequate coverage (check Sum Insured for Buildings and Contents, ensure there is no Under-Insurance) as Climate Change might affect their homes, and they may expect higher compensations from the ones they are actually will be receiving.
- Understand climate exposure and take preventive measures – e.g. make sure they have their insulations in place, their pipes open to absorb rainwater, check watertanks and other apparatuses that may be prone to damage in the event of extreme or unexpected weather events.
- Stay alert to cyber risks and consider protection options – check the emails they get – if they get a message from Royal Crown Insurance, for example, that includes a link for them to pay their premium or do something else – call and make sure it is not a scam. Generally, watch and learn – scams are always around. We don’t do that, but hackers do.
- Keep informed about regulatory changes – if a policyholder hears something involving insurance, which they feel affect them then –
- Ask questions and seek advice – call your agent or the Head Offices, someone can guide you navigating this changing environment in terms of current covers and what might need recalibration or adjustment.
- Focus on long-term protection, not just price. Price (premium) sounds good when low – until there is a claim. Until the Insured has had some damage and has had to file a claim, they may not know what went wrong, until they are not satisfied with their compensation amounts. An Insured should be vigilant. Take out insurance for the covers they need, and for the amounts they need cover. And paying that premium is an investment for long-term protection.
- For Motor Third Party Liability Insurance, the industry hears that the new legislation will be subject to Regulations that will be put into force by the new Parliament – in due course. In the meantime, be prepared for some mayhem all round.
Conclusion
Insurance is no longer a static product — it is a dynamic service shaped by global, technological, and regulatory change.
Policyholders who stay informed and work with trusted advisors will be best positioned to navigate uncertainty and secure meaningful protection for the future.
5 Things Every Policyholder Should Watch Today
1.Don’t Let Your Policy Go Outdated. At RCI we automatically renew your Property Policy, but other companies may not. Remember your expiry date, and make sure you have active insurance for your home or other property.
2. Review your coverage regularly. Check your Sums! Are they adequate for the value of your structures and contents? Don’t be caught off guard, when the Insurance company claims you’re underinsured.
- SUM INSURED FOR BUILDINGS – Rebuilding and repair costs have multiplied in cost, due to inflation and other factors. Ideally, a Policyholder should have their home appraised- if they have the same Sum Insured for some time, it is very likely to be outdated and low – meaning, in the event of any damage, compensation shall be proportionately reduced. Do not make yourself in for a surprise, be proactive.
- SUM INSURED FOR CONTENTS – If you have bought new furniture, or electrical equipment or any item(s) that are not in line with the Sum Insured for your Contents, under-insurance shall apply in the event of loss or damage and compensation shall be proportionately reduced. Be prudent. Aso, read the restrictions on valuable or expensive items in your Contents Cover. You would not want your claim for loss of damage to an item you honour, to be rejected because it was not declared and insured correctly. Take care of your own, as we do of you!
3. Know Your Climate Risk – look at your location, what is it prone for in terms or risk? Bush fire? Storms? Wind? Everything now is more extreme, as an insured, or a consumer, you should know how Climate Change would affect you the most. Weather updates, Maps, just the news will give you an idea of what might be coming up in your area- take steps to mitigate any damage – especially to property outside – due to extreme weather phenomena. Insurance companies do not generally pay out claims for anything outside when the (common nowadays, but still unpredictable) wet/ weather peril occurs. YOUR actions are key to a valid claim and the compensation that will actually reinstate you for your loss or damage. Keep your property safe and well-maintained, to the best of your ability, and we will do the rest.
4. Take Cyber Threats Seriously – check emails, messages and other types of communication, if something doesn’t feel right, then it probably isn’t. Nobody would be asking of you to give out banking details. Phishing and scam emails are now a daily threat. Even though no insurance policy, at this point, will cover financial loss to a person having been scammed this way – we advise you to be alert always. The hackers are brilliant and evil. Take care!
5. Choose Value Over Price. The cheapest option may not protect you when it matters. Actually it will NOT protect you when it matters. If a quotation is cheaper than another, ask why. Look at terms and conditions, and, more significantly, exceptions. Choose the Policy covers suitable for your specific needs. There are no generic covers, except for those required by the law (Motor Third Party and Employers Liability – but you can still choose extra with just a little extra for those too). Seek out the actual benefits of what you are buying. Think about scenarios, and read your Policy – or ask your agent or the company- would I be covered in such a case? True Protection is not a cheap product.
- In fact, Insurance is not a product at all! It is a service, it is a mutual relationship of respect and good faith and it gives back. If you value it – it values back. What it is worth, it is worth it.
