Swiss Re says Technology is a Major Key to Future Insurance Industry Growth
September 17, 2015
Narrowing the existing protection gap by making more risks insurable through technology will create significant growth potential for the property insurance industry. That’s the word from Swiss Re, the world’s second largest wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. In recent remarks based on its comprehensive research the company said that it expects new technologies to create additional opportunities, stabilize price levels and enable risks to be better understood.
While the current market environment is marked by low interest rates, volatility and the ongoing expansion of alternative capital, new technologies are likely to disrupt the industry and have an impact on all parts of the insurance value chain, from underwriting to product delivery to how consumers will buy insurance in the future.
For instance, smart computing and mobile technologies are gaining trust with consumers and are influencing financial buying decisions. These will increasingly become the trend for buying decisions on insurance as well. Insurers have the chance to utilize technology to bring insurance closer to where people are – and in this way also help to narrow protection gaps in personal insurance lines.
In other insurance areas, technologies such as autonomous cars and their safety elements could make some motor insurance products obsolete over the next 20 to 30 years. In addition, underwriting models are likely to evolve based on big data and smart analytics.
The revolution in cyber technologies has also increased the risks from system malfunctions and cyber-attacks. For insurers there is a much higher likelihood that one event can have an impact across multiple lines of business in an insurer's portfolio. These accumulation risks, together with new risk pools created by technological changes, need to be better understood, Swiss Re said.
"Technology will create new risk pools and at the same time it changes the way we assess existing ones,” said Christian Mumenthaler, CEO of reinsurance at Swiss Re. “We're already working today with our partners and clients to tackle these future challenges and opportunities."
Technology advances and finding new ways to reach the uninsured will also address the problem of widening coverage across unsecured but high-risk assets—arguably the most significant challenge and the biggest growth area for the industry moving forward. Right now, many countries, companies and individuals are still underinsured for key risks from natural disasters and other problems, requiring an industry-wide effort to narrow the protection gap. Economic development and ongoing urbanization in high-risk exposed areas is making this situation even worse.
“The potential for economic losses from natural disasters and other risks are growing each year while the share of insurance is not increasing,” said Michel M. Liès, Swiss Re Group CEO. “Our industry has the capability and unique knowledge to assess and quantify the risks across so many areas of our everyday lives. Let's use this potential and expand the current reach of insurance by working together."
Edited by Peter Bernstein