Disruptive technology to reshape insurance and ILS


Disruptive technology to reshape insurance and ILS

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Technology could play a significant part in the ongoing evolution of the insurance market – and also impact the ILS segment as well, claims Rafal Walkiewicz, chief executive officer of Willis Capital Markets & Advisory.

Disruptive innovation happened in photography, destroying Kodak when the company failed to foresee the potential of digital technology and clung on to film. It happened in film rentals, when online streaming made Blockbuster’s video and DVD business model obsolete. And it happened to US Steel when mini mills elbowed out integrated steel mills.

It will happen in insurance too. Technology is shifting the pockets of value. It is eating away at the traditional business model whereby insurers create value from offering loss protection, and is building a new model that focuses on mitigating risk. But that is not the only threat. The insurance industry is already scrambling to respond as investors in search of higher yields pour money into insurance-linked instruments (ILS) in the capital markets, disintermediating reinsurers. Technology could accelerate this trend and broaden its impact on insurers. As a result, those who stick too long with the old model will fade as premiums and their balance sheets shrink. Those who thrive will learn to ride the wave of disruption to capture new opportunities – although whether they will still be known as insurance companies remains to be seen; they will have to reinvent themselves entirely.

Auto insurance shows premiums and balance sheets under threat…

Willis Capital Markets and Advisory, Rafal Walkiewicz, Global, Insurance, Risk management, ILS, Technology, IT

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