GC: Industry must adapt and innovate to fully grasp opportunities
A series of fundamental disruptive forces are driving monumental changes in the global economy at an unprecedented rate. These forces compel the (re)insurance industry to adjust to the new reality and capitalize on the opportunities created, according to Victoria CARTER, Vice Chairman of International Operations at GUY Carpenter.
"Four major disruptive trends - expanding urbanization; technological advances; ageing population; and increasing connectivity are profoundly altering the foundations of the global economy at a rate light years faster than the rate during the industrial revolution," says Ms. CARTER.
"Rapid urbanization is occurring in emerging markets, tilting the global economy on its axis toward territories in the East and South experiencing economic ascendancy," Ms. CARTER continues. "By 2025, almost half of the companies with revenues in excess of USD 1 billion will be headquartered in markets such as Mumbai and Shanghai along with rapidly expanding hubs such as Hsinchu in Northern Taiwan and Santa Catarina State in Brazil."
"We now work and live in a hyper-connected world, from trade and capital, to the movement of people and transfer of data," Ms. CARTER says. "The surge in technology-driven connectivity in particular is spawning a new phase of globalization full of opportunity, but equally exposed to rampant volatility."
These waves of change are growing exponentially and impacting all sectors of society, including sweeping away many of the assumptions, accepted truths and standard practices that have held firm for decades. "The (re)insurance industry, faced with a world that is being radically altered," Ms. CARTER asserts, "must re-evaluate its role and recognize that the traditional business model is not designed to meet the demands of this new environment, even though it may continue to generate revenue."
The (re)insurance sector must also recognize the potential threats this creates to its fundamental role. "The primary insurance product is becoming increasingly commoditized, while digital firms and service providers are beginning to supplant the role of the (re)insurer," Ms. CARTER warns. "New technologies are reducing the need for certain forms of cover and in some cases making them potentially obsolete. All of these factors are combining to diminish the role of the insurer."
To maintain its leadership the industry must acknowledge that fundamental change is required and actively seek out the opportunities these forces create in their wake. "The industry can no longer rely on extrapolating past experience into the near future to define what it delivers now - the pace of change is simply too fast and the level of disruption too great," Ms. CARTER states. "We must innovate, change and adapt, as well as seek opportunities to work in tandem with leaders in other markets, such as "fintech" companies. (Re)insurers need to embrace this period of transformation, boost the potential it creates and redefine their future role and relationships with clients."
(Re)insurers have to move beyond standard insurance parameters into new growth areas both in personal and commercial lines. "We have already witnessed the potential created by cyber," Ms. CARTER highlights, "and that will grow exponentially as the world becomes increasingly dependent on e-commerce and cloud computing. We must seek out opportunities to help reduce the unsustainable public sector debt levels generated by an ageing population, seeking to expand involvement in long-term care. We must look to support (re)insurers by providing the secure platform that serves as a springboard for innovation."
"For every industry transformed by disruptive forces, the net result has been growth," Ms. CARTER concludes. "It is up to the (re)insurance sector to grasp the myriad opportunities this environment creates and drive the industry transformation that needs to take place."