Mira KIRIDZIC-BUGLER: Generally speaking, the insurance industry is evolving very slowly. However, we've been witnessing very fast development in terms of digitalisation. Some insurers have demonstrated high agility and pushed through digitalisation projects that typically would take 2-3 years. Business growth via direct channels combined with a strong decrease of sales via agents and brokers - especially during the lockdown - accelerated the processes. Of course, there is still a way to go but the crises clearly disrupted the slower-to-change insurer. Others implemented only ad-hoc measures with a strong focus on remote working and virtual collaboration.
In terms of the insurance industry responding to the crises, we saw some new Covid-19 related products, that I would call controlled experiments. Our industry is still looking for adequate solution and from Swiss Re point of view pandemic exposures are not insurable given the accumulation issue and lack of diversification.
M. K-B.: Clearly digitalisation will remain an important topic for the years to come and with this increasing importance of a cyber risk. The other big question is how quickly our economies will recover. Is the K-shaped recovery for our industry the most realistic one - the large well capitalised companies' will have quick recovery where the smaller once with thin Solvency margins will be hit much harder? In addition, changing economic conditions like low interest rates require improvement on technical combined ratio. So, yes, there are few challenges the industry is currently facing but on the positive side, every challenge brings some new opportunities.
M. K-B.: Swiss Re has variety of Solutions addressing the protection gap. My favorite one is digital solutions enabling easier access to insurance, i.e. parametric products that go hand in hand with machine learning / AI, but also big data and new technologies. The Protection gap requires a comprehensive and integrated risk management framework, spanning different sectors and also government. We build partnerships to also help with risk prevention, risk identification and quantification.
Maybe to add one prominent risk especially given the Covid-19 circumstances and many people working from home, cyber is clearly one of the topics we are trying to address and deliver a solution to.
M. K-B.: Yes. It is obvious that so-called secondary perils, drought being one of them, show significant increase in terms of frequency. Looking at the 2017 worldwide figures, when aggregate natural disaster insurance claims were the highest ever in a single year, more than half were due to secondary perils and in 2018 even 60%. Zooming into the EMEA region that is particularly affected by them and already in the first half of 2020 we see that the half of all catastrophic losses are secondary perils. Particularly for the CEE region, we expect to see more severe hail events, heavy precipitation, draught events and more heat waves. Extending the picture to Mediterranean region, the Experts talk about so-called Medicanes, hurricane like storm events. So clearly, the risk profile is changing from primary to secondary perils, especially to above mentioned once. Given the unique features such as being highly localized, modelling secondary peril risks can be difficult, compared to peak peril losses where the industry has tended to focus.
M. K-B.: Economic strength of the countries plays a role, but awareness and even more trust are essential here. Talking to the consumers we often here the comment "even if I would have an insurance the claims won't be paid". The Insurance industry has a kind of bad reputation and I think that parametric product combined with simplicity can enormously help here. The simpler the product the higher the chance to sell it and regain the trust of the customer. Customer's journey need to become a positive experience in order to change the attitude toward buying insurance.
Another element is cooperation between insurance industry and governments - if governments are stepping in for major events this does not help the insurance industry, but it does not help the governments either. The only possible way is cooperation if we want to improve.
M. K-B.: I truly believe that this is the way to go to regain customer's trust and increase insurance penetration [SEE QUESTION ABOVE]. As Covid-19 circumstances have taught us, all re/insurance companies need to become more digital. Parametric products means automatically becoming more digital which is the perfect combination.
One of the main discussion points is the scenario of having a loss without policy being triggered by the definition of the parameter or other way around. However, technology has improved significantly over the last years and the gap is relatively small. So, I am confident that in the near future this can be completely resolved.
We see more and more Regulators approving the concept of parametric products which is of utmost importance for successful implementation.
M. K-B.: The pandemic and specially the uncertainty around the possibility of human face to face interaction demonstrated the relevance of digital solutions. Tech providing options for virtualized exchange, cooperation and consulting is a key enabler. It supports social well-being and ensures business contingency. InsurTech and Digitalization are here to stay - however there is still room for improvement. Digital solutions must add real value to customers and need to be more than just replacing formerly analogue processes.
The InsurTechs were certainly the trigger for more innovation in our industry.
M. K-B.: From the pure risk landscape point of view, we see secondary perils becoming predominant and at the same time new technologies like autonomous driving, where the insurance will follow the developments (i.e. MTPL cover will be replaced by Products Liability).
On the other hand, there are alternative players like Tesla, Amazon offering insurance, changing in buying behavior (digital smartphone natives) and customer expectations (digital, tailor made, on demand). Service aspect becomes increasingly important - and here I am coming back to customer's journey experience which is the key for the (re)insurance world of tomorrow.
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