Change as the driver – Innovation as the answer – Munich Re
Article Synopsis :
’Innovation is not compulsory, but then neither is survival.’ – Graham Horton.
In ”Change as the driver – Innovation as the answer”, Ludger Arnoldussen from Munich Re examines the changing risk landscape faced by reinsurers as a result of technology advancement, rising service expectations and proliferating sales channels.
For example, as driverless cars become a reality, does liability shift from driver to manufacturer? Will motor insurance become product insurance? In the case of an accident, was it caused by software or human error? Where does the software end and the human begin?
The report suggests innovation, the source of the disruption, is also the source of the potential solutions. To this end, Munich Re is working with clients and cooperating with technology vendors and start-ups to create bespoke products and solutions for not only driverless cars, but connected homes, cyber-security, pandemic-risk modelling, and disability insurance underwriting.
Many liability risks have taken on a completely new dimension owing to digitalisation. Wearables, smart homes and Industry 4.0 digitalisation will soon touch every aspect of our lives and interconnectedness offers almost unlimited opportunities for hackers and other cyber criminals. Today, the annual cost of cyber crime and economic espionage to the world economy is estimated at roughly $445bn. Since cyber risks are highly complex, constantly changing and hardly predictable, is comprehensive and sustainable cyber coverage possible? The opportunity here is as large as the threat.
Of note: in MunichRe client surveys, 75% of clients say digitalisation will change the insurance industry dramatically; and 61% of clients say telematics and AV are becoming ‘top-priority’ issues.
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Digital Insurer's CommentsThe digitization of risk, i.e., bits streamed in real-time from devices such as automobiles, challenges the insurance industry to move from retrospective to continuous, real-time rating. The problem is far more technical than actuarial in nature.
In this new world successful insurers won’t be the ones who know it all, but those clear on what they need to know and don’t, and are possessed of the initiative to rush the market in pursuit of the right partnership or acquisition. Worth noting, the better a carrier is at technology on the user side the better they’ll be spotting opportunities in one of the fastest growing forms of coverage: cyber-risk.
In our view, there is no downside to betting big on technology. The only downside is thinking it will somehow go away.
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