25 October 2016Insurance

Re/insurers must keep pace with changes

A trend towards more tailor-made products in the manufacturing industry is changing the risk exposure, requiring re/insurers to adapt their risk assessment and their products, said Georgi Pachov, global practice group leader cyber at Allianz Global Corporate & Specialty.

Car manufacturers are, for example, implementing flexible production lines which allow the assembly of cars in a customised fashion to meet clients’ differing tastes. Also, 3D printing is increasingly being commercially used to create tailor-made products.

These trends affect the complete supply chain from product development, sourcing and producing to delivery to the final customer, with significant consequences for insurers, Pachov explained.

“These changes in the manufacturing process need to be taken into account when providing liability insurance cover as they affect risk management and pricing, claims payment and the assessment of accumulation and aggregation of risk,” he (pictured left) said.

The challenge for the insurance industry is to define the risk and provide a highly competitive solution, to develop processes that allow for a timely payment of claims and to keep sufficient capital in place to manage large peaks in losses driven by aggregation and accumulation of events.

“Currently, all insurance solutions are going through a transformation, shifting from standard insurance products to more innovative and customer-based solutions in order to better meet clients’ demand and more accurately price the risk,” Pachov said.

This trend is largely driven by technology which is allowing a massive increase in available data on the risk exposure.

“The access to data in order to analyse risk opens an opportunity in terms of reducing the frequency of losses, because we use smart devices and we are able to predict and to monitor what actually could happen; this can help the client to mitigate or avoid a loss,” he said.

However, data-driven products also grow the risks for the insurance system.

“Cyber risk is not properly understood. In case of a cyber incident which for some reason disrupts the whole data flow, this would definitely increase the severity component of the insurance losses,” he explained.

“By deploying more technology in their processes, the insurance industry will get rid of the more frequent losses, but on the other hand, it will get very rare, but quite severe, losses in case of a cyber incident across the digital data flow.”

Georgi Pachov 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://bit.ly/2ae4f3X

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