Slow market response to emerging risks, says EfmaMay 16 2019 by Andrew Tjaardstra
Most insurers around the world have been slow to respond to emerging risk trends and equip customers for them according to consultancy Capgemini and non-profit industry body’s Efma’s World Insurance Report 2019.
Under 25% of business customers across the world, and less than 15% of personal policyholders, feel they have sufficient coverage to insure against any emerging risks driven by these macro trends. Fewer than 40% of life and health insurers said they have built a pipeline of new products to cover emerging risks comprehensively.
The five macro trends that are creating emerging risks for insurance customers and their businesses are: disruptive environmental patterns, technological advancements, evolving social and demographic trends, new medical and health concerns, and business environment changes.
“Emerging risk trends and rising customer expectations are dramatically changing the landscape for insurance, and providers must be agile in how they respond,” said Anirban Bose, chief executive of financial services at Capgemini. “Those [insurers] that can evolve their products through technology, collaborate with innovators, and think of themselves as partners and preventers to their customers, stand to benefit the most.”
The slow response to emerging threats has created significant coverage gaps. The report estimates that 83% of personal insurance customers have medium or high exposure to cyberattacks and to outliving their savings, yet just 3% and 5% respectively are comprehensively covered against these eventualities.
Among businesses, 81% are exposed to escalating employee healthcare costs against which just 17% are well covered; 87% are at risk of cyberattacks with less than 18% comprehensively insured; and almost 75% are threatened by rising natural catastrophes, for which just 22% are effectively covered.
As the insurance landscape shifts, customers are showing greater readiness for change than their insurance providers. Over half (55%) of customers said they are ready to explore new insurance models, but barely a quarter (26%) of insurers are investing in them. While 37% of customers said they are highly willing to share additional data in return for improved risk control and prevention services, only 27% of insurers have the capability to tap real-time data for risk modelling purposes.
Risk assessment capabilities can be significantly enhanced through deployment of machine learning, artificial intelligence and advanced analytics, and effective collaboration with insurtech providers. Progress in these areas has been mixed: a majority (57%) have leveraged AI, machine learning and advanced analytics, but only 29% have implemented automated risk assessment, and just 20% real-time insight generation from internet-of-things devices.
“This research shows that the future for insurance will be partnership-centric,” said Vincent Bastid, secretary general of Efma — the global market body. “Insurance providers need to collaborate with partners who offer high levels of expertise in areas from AI to advanced analytics. Simultaneously, they must partner more closely with their customers to provide the more responsive, demand-driven service many are seeking.”
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