This is a taster of an article published in the second edition of EXPOSURE magazine. Click here and download your full copy now.
Many in (re)insurance recognize that the industry is at a tipping point. Rapid technological change, disruption through new, more efficient forms of capital, and an evolving risk landscape are challenging industry incumbents like never before. EXPOSURE magazine reported that inevitably the winners will be those who find ways to harmonize analytics, technology, industry innovation, and modeling.
“Disruptive innovation” is increasingly obvious in areas such as personal lines insurance, with disintermediation, the rise of aggregator websites and the Internet of Things (IoT). In the commercial insurance and reinsurance space, disruptive technological change has been less obvious, but behind the scenes the industry is undergoing some fundamental changes.
The tipping point, the “Uber” moment has yet to arrive in reinsurance, according to Michael Steel, global head of solutions at RMS. “The change we’re seeing in the industry is constant. We’re seeing disruption throughout the entire insurance journey. It’s not the case that the industry is suffering from a short-term correction and then the market will go back to the way it has done business previously. The industry is under huge competitive pressures and the change we’re seeing is permanent and it will be continuous over time.”
While it is impossible to predict exactly how the industry will evolve going forward, it is evident that tomorrow’s leading (re)insurance companies will share certain attributes. This includes a strong appetite to harness data and invest in new technology and analytics capabilities, the drive to differentiate and design new products and services, and the ability to collaborate. According to Eric Yau, general manager of software at RMS, the goal of an analytic-driven organization is to leverage the right technologies to bring data, workflow and business analytics together to continuously drive more informed, timely and collaborative decision making across the enterprise.
“New technologies play a key role and while there are many choices with the rise of insurtech firms, history shows us that success is achieved only when the proper due diligence is done to really understand and assess how these technologies enable the longer-term business strategy, goals and objectives.” says Yau. Yau also believes that one of the most important ingredients to success is the ability to effectively blend the right team of technologists, data scientists and domain experts who can work together to understand and deliver upon these key objectives.
Looking for Success in this New World
Which factors will help companies stand out and compete in the future? EXPOSURE asked industry experts for their views on the attributes that winning companies will share:
The Race for Millennial Talent: The most successful companies will look to attract and retain the best talent, says Rupert Swallow, co-founder and CEO of Capsicum Re, with succession planning that puts a strong emphasis on bringing Millennials up through the ranks. “There is a huge difference between the way Millennials look at the workplace and live their lives, versus industry professionals born in the 1960s or 1970s — the two generations are completely different,” says Swallow. “ Those guys [Millennials] would no sooner write a check to pay for something than fly to the moon.”
Collaboration is the Key: There are numerous examples of tie-ups between (re)insurance industry incumbents and tech firms, to leverage technology – or insurtech – expertise, to get closer to the original risk. One example of a strategic collaboration is MGA Attune, set up last year by AIG, Hamilton Insurance Group, and affiliates of Two Sigma Investments. Through the partnership, AIG gained access to Two Sigma’s vast technology and data-science capabilities to grow its market share in the U.S. small to mid-sized commercial insurance space.
Blockchain: Blockchain offers huge potential to reduce some of the significant administrative burdens in the industry, thinks Kurt Karl, chief economist at Swiss Re. “Blockchain for the reinsurance space is an efficiency tool. And if we all get more efficient, you are able to increase insurability because your prices come down, and you can have more affordable reinsurance and therefore more affordable insurance. So I think we all win if it’s a cost saving for the industry.”
“The challenge for the industry is to remain relevant to our customers,” says RMS’ Michael Steel. “Those that fail to adapt will get left behind. To succeed you’re going to need greater information about the underlying risk, the ability to package the risk in a different way, to select the appropriate risks, differentiate more, and construct better portfolios.”
For the full article and more insight for the insurance industry, click here and download your full copy of EXPOSURE magazine now.
Watch Video: Eric Yau – Managing Risk is an Interconnected Process
Eric Yau, general manager, software business unit at RMS, said those managing risk should keep in mind that risk selection is part of an overall process that affects capacity and portfolio strategy. Yau spoke with A.M. BestTV at the Exceedance 2017 conference.
For more information on RMS(one)®, a big data and analytics platform built from the ground-up for the insurance industry, and solutions such as Risk Modeler and Exposure Manager, please click here.