Insurers need nimble response to innovative technologiesReprints
SINGAPORE — Technological innovations are rapidly changing business models and risk exposures, and insurers need to adapt quickly to respond to those changes, a panel of experts said.
As individuals and corporations gain far more sophisticated insights into the risks they face, insurers need to change their approach to dealing with those risks and shift their focus away from price and capacity to resiliency and risk management, they said.
New risk monitoring products are changing risk profiles and may make some insurance products obsolete, said Stephen Cross, Dublin-based chairman of Aon Global Risk Consulting, speaking during a session of the Pan-Asia Risk & Insurance Management Association's conference in Singapore on Tuesday. For example, individuals who track their health through wearable devices may feel comfortable with their health risks and only want to buy catastrophic coverage rather than traditional health insurance, he said.
Such trends already exist in the corporate risk management area, said Keith M. Thomas, CEO of global corporate Asia-Pacific for Zurich Insurance Group Ltd. in Hong Kong.
“Very well-risk-managed companies have already done that through the captive vehicle,” he said.
But the technological trends may just shift liabilities, said Marc Breuil, regional president for Asia with Berkshire Hathaway Specialty Insurance in Hong Kong. Driverless cars, for example, may lead to less personal auto insurance being bought, but there is increased liability for the manufacturers of the vehicles when accidents do happen.
In addition to technological changes, insurers need to change the way they view corporate risks in Asia, said Franck Baron, group general manager for risk management and insurance with International SOS Pte. Ltd. in Singapore and chairman of PARIMA.
Asia currently has a price-driven insurance market with little differential in premium for companies with sophisticated risk management, he said.
For example, International SOS over the past three years implemented two risk financing programs for cyber and executive risks, he said.
“We collected all the information to showcase how good we are at managing this kind of risk and exposure. We have been extremely disappointed in the lack of understanding and interest by the insurance market in this information. The only part they were interested in was: 'How much do you want in terms of limits, and how much premium you are willing to pay,'” Mr. Baron said.
Risk managers also want insurers to take a fresh look at policy terms and offer more long-term coverages or policies that do not need to be renewed annually, said Aon's Mr. Cross.
While insurers would be prepared to offer more long-term coverages when they have comprehensive data, that is often not available for risks in Asia, said Zurich's Mr. Thomas.
“The data we get in this part of the world is nowhere near the standard I would see in the U.S. or Europe, so (annual renewals) are also a sense check for underwriters on how well you manage your risk, how much you know about your risk and what systemic controls you have. If you've got that down pat, I think the multiyear, nonannual renewals are great,” he said.
In addition to long-term policies, risk managers are looking for long-term relationships with insurers, Mr. Baron said.
“We should treat insurers the same way we treat banks — it's a critical financial stakeholder, and with a long-term relationship you can share more information about the way that you manage risk, and then you can rely on them for the promise to pay.”