Driverless cars one of many disruptive forces reshaping risk in Asia
Technological advances including the advent of driverless cars are among several developments that will see reinsurers face a period of disruption over the next few years—bringing both challenges and opportunities, Roland Eckl, chief executive of Asia-Pacific at Munich Re, told SIRC Today.
Eckl said this is one of a number of developments, all with the potential to reshape the reinsurance market in Asia-Pacific, which Munich Re is watching closely.
“Asia-Pacific is one of the most important growth markets of the future,” Eckl said. “We see a number of important changes happening in the region, including regulatory changes in China, Malaysia and India, where an insurance bill has finally passed parliament.” As a result of this last event Munich Re has decided to apply for a branch licence in India.
He added: “Of course it’s not a secret that the Indian market is challenging in terms of rates but nevertheless I believe that Munich Re has the ability to differentiate ourselves from some or many of our peers, particularly because we bring to the table expertise and know-how.”
Eckl acknowledges that Asia is not an easy market to operate in but he said constant innovation and deep expertise represent ways in which reinsurers can differentiate themselves.
“We expect disruptive changes in some of the markets, particularly on the technology side. Munich Re is investing heavily here and we now have innovation hubs in many regions of the world,” he said.
Eckl added that Munich Re now has a team in Silicon Valley, California, which examines start-up companies and the latest trends, particularly around technology, which could have the potential to lead to so-called automated underwriting.
“This has a lot to do with analytics and big data,” he said. “If we can help our clients arrange their unstructured data and translate it into structured data, we can start to develop products together and this is invaluable.
“Insurance demands on the motor side are significantly changing, thanks to technology such as autonomous driver interfaces. They are just a few of the areas where we believe we can make a difference in the future. Things such as capacity, brand, rating—those simply aren’t the main differentiators anymore.”
Eckl said that Munich Re believes the needs of the insurance market will change rapidly in the next few years, partly as a result of new technology. Insurers with large motor portfolios in particular could be hit but the advent of driverless cars or smart homes is an opportunity.
“If you go to some of the markets here in Asia, up to 50 percent of their portfolios consists of motor insurance business,” he said. “Some of the companies are starting to realise, particularly in the more well-developed markets such as Japan, that if autonomous or semi-autonomous driving comes in then their portfolios might shrink. The insurance needs will change.
“There still has to be a liability cover for the person who is injured in a crash—but is the driver liable or the machine? Andwhat is the liability of the manufacturer? So you’re talking about a totally different liability question in the future.”
Eckl stressed that it was not a question of if such a change would arrive, but when. He added that Japan has identified self-driving cars as being a key element of the 2020 Olympics.
“I am afraid to say that we will see disruptive changes over the next few years and I think that we as an industry need to get prepared for these changes and work on solutions, not just for our ceding clients but also for our end customers.
“I don’t see it as a threat, I see it as a real opportunity, at least for a player like us, who is able to really service this kind of trend. But I also have to say that we need to change our mindset from being a traditional capacity provider that’s now investing heavily into innovation but really trying to anticipate what those changes are going to be, as well as what our clients are going to be willing to invest into and buy.”
