This piece is by René Schoenauer, Director of EMEA Product Marketing at Guidewire, and it looks at various cyber and weather risks for the year ahead.
Spotlight on climate risk in 2024
2023 saw a number of extreme weather events, with record-high temperatures and wildfires in Europe, typhoons and heavy rainfall in Asia, and forest fires and hurricanes in North America. Going into 2024, climate risk will become the top, and potentially one of the most dangerous, risks of all to insure.
As climate-related risks are harder to insure, we have already seen some insurers opting to pull away from this risk altogether. However, in Europe, insurance customers want the security of knowing that they will be protected. These climate-related weather risks are more complex and unpredictable, so in 2024 we hope to see some progress on how parametric insurance models could be used to support increased climate resilience. However, it is important to note that parametric insurance should not be used to replace traditional insurance models, rather it should be used to complement traditional insurance programmes by filling in the protection gaps.
Generative AI (GenAI) means more cyber risk
2023 was the year of experimentation with GenAI, but it will unlikely be deployed into mainstream workflows due to caution about this technology amongst insurers. Having said that, there are some potential use cases for this technology for insurers, namely, to provide support and help for claims handlers on complex insurance cases. In 2024, we expect to see more insurers partnering with insurtechs to develop GenAI-led services for specific use cases, rather than widely implementing this technology into all of their operations.
On the other side of the coin, for the insurance market, the enthusiasm for GenAI could mean more cyber risk, as hackers misuse the technology to scam consumers and some organisations use of GenAI causes inadvertent problems with non-compliant use of personal data or the launch of AI-powered services that are biased. Insurers have an opportunity to help organisations develop a wider, more resilient risk management strategy and governance model to address the range of risks GenAI brings, such as privacy and data security threats, bias, and regulatory concerns.
Insurance is getting more personal and proactive
We are living in an age of uncertainty, but it does not have to drive insurers and customers apart. Our latest customer attitudes research showed that 80 percent of 18 to 24-year-olds and 74 percent of 25 to 34-year-olds said they would want access to proactive risk alerts that prevent damages, an increase of more than 10 percent across the two age groups year-on-year.
There is a desire to come closer together to weather the storm with proactive and personalised offerings. Insurance is a data-driven industry with access to large sets of customer data, including behavioural data from IoT devices, and both insurers and customers should be making better use of this. There is potential for a multi-dimensional approach to assessing and evaluating risks and policy pricing. Not only does this create more efficient claims processes, but it also optimises pricing strategies and enhances customer experiences.
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