Swiss Re CEO’s vision for insurance
The reinsurance business is facing “revolutionary” changes through the introduction of new technologies such as blockchain, while the primary insurance market will receive a boost through the widespread use of digital personal assistants, Swiss Re CEO Christian Mumenthaler suggested at the 2017 Monte Carlo Rendez-Vous.
The use of blockchain, a mutual distributed ledger which is owned equally by all partners and dominated by no-one, is expected to reduce inefficiencies in the exchange of data between re/insurance companies.
A group named B3i has brought together 15 insurers and reinsurers, working on a joint distributed ledger for reinsurance transactions driven by blockchain technology.
This new technology may result in significant change for the re/insurance industry. Because the risks will all be public, it will be a much more transparent market, where everyone knows who owns which shares in a programme, Mumenthaler said.
This is likely to lead to a completely different risk trading system, similar to an exchange platform where reinsurers may bid for certain risks, he added. This will allow for an easy change in ownership of risks and carry very low transaction costs. “That would be revolutionary,” Mumenthaler said.
On the insurance side of the business, he believes that technology has the potential to help to reduce the protection gap. Digital personal assistants such as Apple’s Siri or Amazon’s Alexa will become so intelligent and sophisticated that in the future people will have actual conversations with them and be in constant dialogue.
As trust in the system evolves, Mumenthaler thinks that this will facilitate the sale of insurance cover. Personal assistants will recommend insurance products that perfectly fit the needs of an individual and buy it on behalf of the person. “This will close a lot of the protection gap,” Mumenthaler believes.
While such a development may take a few years to become reality, bundling insurance with products such as cars is likely to become widespread and change distribution in the short term. A carmaker such as Tesla would pay potential claims, Mumenthaler noted.
The downside is that the digitisation push which is set to transform the re/insurance sector will also increase society’s vulnerability to cyber attacks.
“It will be part of our lives, similar to the nuclear threat,” Mumenthaler said. “That’s the reality we will have to get used to.”
For the re/insurance industry, cyber represents a significant accumulation risk. The internet can be brought down with potentially catastrophic consequences, according to experts. This means that governments, as with terrorism or nuclear threat, will have to take the role of insurer of last resort, which will allow the private sector to participate in part of the risks.
The potential of cyber risk, which may be so large that it is not insurable, is unlikely to deter the trend to digitisation, however.
“The benefits of technology will be so big that we will just take the risk,” Mumenthaler concluded.
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