The second themed feature for June is Specialty Markets and this is an area where brokers and insurtechs can really set themselves apart from the pack with a unique propisition. Plus niche markets always require in-depth expertise too.
So what are the latest trends?
THE MOBILE WORKFORCE
Guy Kashtan, (pictured) CEO of Rewire has some insights into the needs of expats and migrant workers who need a variety of cover and fintech services;
Today, there are around 270 million working migrants around the world – the population of France, Italy, Germany, and the UK combined. These workers are crucial in the fight against poverty, offering a major source of income for many countries around the world. The Philippines, Nigeria, India, Thailand, and China can attribute 10 to 30 per cent of their GDP to citizens who live and work abroad.
Due to their vital role in reducing poverty, it’s imperative that migrants have access to the right tools, products and skills to make the most of their income. Yet, sadly, this is often not the case. This diverse population tends to be underbanked, while many lack the financial knowledge and awareness needed to take advantage of services that would benefit them and their families.
Here, digital financial solutions, such as mobile-money and e-wallets, have been making a positive impact. Accelerated in recent years by the pandemic and improvements in technology, these solutions not only make remittances faster and less costly but can provide a more convenient and secure way to manage money.
Many migrants may never have considered insurance cover for themselves and their loved ones, because options have been limited. As part of it’s drive for better financial inclusion, Rewire has added insurance to the services it offers to migrants. Customers have free, built-in accident insurance in 18 countries across Europe and the option to buy additional insurance products that give cover for loved ones back home.
PRICING NEW RISKS
As specialised markets evolve, it can be difficult for everyone in the insurance chain to price the risks. A good example is the supply chain disruption that has accelerated after the pandemic, where shortages of microchips, car parts, building materials, foodstuffs and more can all cause huge problems for any business. Then there’s new greener tech infrastructure like say second life battery farms, hydrogen boiler installations or rolling out electric scooters, cargo bikes and all the charging points needed in food and parcel delivery.
Any company will want to insure against on-site accidents, third party injuries, plus things like deadline over-runs and financial penalties in the contract on transformation projects, but how to price those risks when utilising brand new tech in the workplace, and relying on just-in-time supply chains too?
Dan Woods, CEO of Socotra comments:
“Historically, insurers have avoided new risk categories because data didn’t exist for those markets and the risk couldn’t be properly assessed. Today, however, a new wave of specialty insurers are harnessing new data sources to unlock niche markets. Leveraging this data isn’t easy, however, and requires a modern core platform and API-driven ecosystem. With more agile technology than ever before, these insurers are not only gaining a first-mover advantage, but also automating underwriting in an industry known for highly customized policies and paper-based processes. These insurers are demonstrating that a modern core platform is key to staying relevant and competitive in a market that’s changing faster than ever.”
NEW PRODUCT DEVELOPMENT
Neta Rozy, CTO and co-founder of Parametrix sees growth ahead in new Specialty products;
“Technology is helping create new types of insurance coverage. Everyone has experienced technology downtime and knows how devastating it can be when systems go down. From lost revenue to damaged reputation, the impact can easily run into the millions of dollars. The question is, how can this risk be mitigated through insurance? The answer is, using data. Data on the frequency of technology outages, the underlying causes of outages, the cost of outages and so on, enables actuaries to understand the likelihood and cost of a downtime event. The risk is real, but once understood, that risk can be insured.
As more companies move their operations to an AWS, Microsoft Azure or Google Cloud, they expose themselves to third-party technology risk. If the cloud goes down, their core business goes down too. To make this risk insurable, Parametrix created a global monitoring platform that collects data from all the public cloud providers, across their services, around the globe, in every region, down to the millisecond. This data enables actuaries to understand the true risk of outages, and, in turn, enables reinsurers to underwrite that risk with capacity. The result: a new category of insurance, cloud downtime insurance.
This same approach can be replicated across numerous categories of technology like CDNs (content delivery networks) payment platforms, e-commerce systems and crypto.”
CYBER RISK NEEDS TO BE ABOUT PREVENTION
Cyber is a specialty area which is growing, but after some big insurers announced they would stop offering coverage on ransom cover the corporate market has seen a cooling of interest. In short, companies accept that hackers will disrupt their systems and the bigger risks are things like reputational damage, not the Bitcoin ransom.
Kieron Holyome, VP UK&I and Middle East, BlackBerry commented in IE magazine recently;
“The two specialisms of cybersecurity protection and insurance should remain distinctly separate, not only to avoid conflict of interest, but to avoid an artificial foundation where premiums are related to specific provisions for security rather than an informed, actuarial view of risk exposure. An alternative – and, we would argue, better – solution is to tackle the rising risk (and cost) of attack that is driving up premiums, and thereby create a more sustainable market in which insurance providers are able and willing to participate.”
BAE Systems also sees Cyber cover developing into something that is something that goes beyond data loss. Plus crypto currencies offer a new specialty market in some ways. Simon Viney told IE earlier in 2022 that;
“The best way a business can protect itself from this kind of cyber attack is to implement robust crypto-payments controls and cybersecurity protocols and practices. For example, considering crypto payments in the same way they would high value cash payments where the source of the funds may be criminal. The principles of know your customer and understand the source of funds are especially valid for such payments.
In addition, companies need to be extra cautious about which applications and sites they use. Hackers will usually give up if they’re faced with a high level of cybersecurity protection. Frequent testing of software systems and data security and regular risk assessments are crucial. And it’s essential that businesses and individuals are trained to recognise these new and emerging security threats, with a strong focus on phishing simulation.”
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