Internet of Things will create new risks and business for reinsurers
While the increasing deployment of technology and the availability of data are set to reduce the risks for primary insurers, new risks are likely to generate additional business for reinsurers.
The insurance industry is implementing and testing a flurry of technological innovations such as telematics in motor or medical health measuring devices, allowing it to gather more relevant data on their clients. As a result, insurers are likely to make a more precise risk assessment but premium income is expected to decline as insurers adapt their products accordingly.
Telematics-based motor insurance, for example, has allowed particularly young, and arguably higher-risk, drivers to reduce their premium rates significantly.
“New technologies will disrupt the insurance industry and therefore eventually impact reinsurers as well,” said Benedikt Schmid, chief information officer of AXIS Re.
But this development is also set to have positive effects for the re/insurance industry. The new technologies are helping to automate processes, increase scale and save costs by enabling the use of a digital workforce such as robots, Schmid said.
In addition, it will create a market for new business. “The changing world will also ask for new products from insurers and reinsurers—an example is the emergence of cyber risk,” Schmid (pictued left) said.
“In essence, there are always risks to be protected. Growing volumes of data and the deployment of technology is expected to increase the risk and potential severity of data breaches or cyber attacks. Cyber risk is a threat and an opportunity to the industry.”
Re/insurers need to have the right measures in place to protect key data against cyber threats, and on the other hand offer new cyber reinsurance products to cover arising threats, while working with less historical data, Schmid said.
Reinsurers can play an active role in supporting the development of the business by offering enhanced services to the insurance clients through their ability to aggregate data broadly combined with data from other sources, he suggested.
Further opportunities for reinsurers to improve services may be provided by the use of blockchain technology, the platform underpinning e-currency bitcoin. Blockchain allows for the recording and storing of data—transactions, contracts, agreements—in a way that it can be updated in real time, on hundreds or even thousands of computers globally.
“For reinsurers, the technology could allow for automated claims transacting or smart contracts, which would reduce transaction cost, but the complexity of reinsurance contracts with many special clauses will certainly not make this a trivial exercise,” Schmid said.
“A key challenge may be to bring all relevant players together at the same table,” he noted.
Benedikt Schmid is one of the speakers at the Intelligent InsurTech Europe event that will take place at the Grange Tower Bridge Hotel on Wednesday November 16. For more details, visit: http://newtonmedia.swoogo.com/intelligentinsurtecheurope2016/agenda
