Some insights from René Schoenauer, director product marketing, EMEA, Guidewire Software;
Being better prepared for instability
2020, 2021 and 2022 presented society and insurers with an un-ending lesson in how you must be prepared for the unexpected. The pandemic, lockdowns, new working patterns, rising cyber-attacks, the cost-of-living crisis, supply chain crunches, and war in Europe, generated waves of instability that challenged the operational resiliency of insurers.
2023 continues the theme, sadly. After-shocks from risk events have been a regular feature for some time. Consider how the pandemic triggered changes in shopping patterns that then decimated physical retail. Another area of concern is the rise in social risks linked to unemployment, low pay, and political instability.
For insurers who need to cover risks profitably there is a core, not peripheral, need to adapt and react to change quickly and substantially. For me, that is where technology choices become critical. The cloud-based, software as a service model for adapting, automating, and streamlining processes, like claims management, delivers what is needed. More insurers are asking why they should build modern specialist technology capabilities when these can be drawn down from insurance technology partners who understand and own those technology risks.
Becoming a Climate Change Risk Star
Extreme weather and other climate change related events present the biggest risks to insurers in 2023. Lessons learnt from 2023’s floods and firestorms will feed into meaningful changes and insurers will pick up the pace in two areas. Firstly, how they improve their response right at the start. This is about reacting much quicker with much less bureaucracy to roll out support to customers. Secondly, how they remake their services to be about prevention and risk management. Both objectives lean on how smart and adaptable the insurer’s technology platform is. There needs to be a frictionless knitting together of data and applications to be more responsive and prevent the necessity for manual claim adjustments, for example. Being proactive on customers’ risk management drives the need for data analytics to be at the heart of how an insurer understands and helps their customer.
Big Tech Frenemies Now?
In the past year, neo insurers who leverage fintech models seem to have lost their fizz as serious threats to incumbent insurers. You are more likely to find an insurtech cuddling up to, rather than challenging, a major insurer.
The threat of Big Techs like Amazon entering the U.K. market may also become more nuanced this year. The launch of the Amazon Insurance Store underwhelmed many in the industry, but it does offer a new channel. If the terms are good, most general insurers should want to be seamlessly inserted into the buying process for products that consumers might want to protect from loss and damage Expect more insurers to become involved in Amazon Insurance Store over the coming months.
The Amazon Insurance Store is another example of the way insurers can embed themselves in value chains initiated by other brands. As I have argued before, insurers may be concerned about this trend but becoming active, open members of other ecosystems makes eminent sense.
We have got to get cyber insurance right
Insurers constantly ask themselves how they can relevant for the modern world. Offering better cyber insurance coverage is one such way. It has been estimated that cyber risks are underinsured by 90%. Cyber-attacks are increasing by frequency and value and having greater impact on services and functions that range from manufacturing to publishing to delivering healthcare. From some insurers, like Zurich there seems to be a growing opinion that cyber risks could be uninsurable, while others, like Beazley, are launching catastrophe bonds to help to pay for future cyber claims.
In 2023 we can’t just improve capacity. Insurers need to adopt better tools to evaluate and understand these risks and especially how they aggregate and spill over into other areas. Categorising and corralling cyber risks are tough jobs to get right but data analytics, driven by AI, could progress cyber insurance risk management significantly in 2023.
And finally …
Unpredictability is the prevailing theme of our current situation, and in these difficult times insurers can be a reliable and valuable partner to both businesses and consumers. Most insurers have the courage and ambition to step up to today’s challenges and will navigate stormy conditions because of their operational and strategic agility enabled by increased and smarter use of technology.
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