Costs need to fall to allow for re/insurance growth: Swiss Re
Technology has the potential to reduce costs of insurance, enabling expansion into uninsured markets, Swiss Re chief underwriting officer Edouard Schmid told Monte Carlo Today.
Automation and digitisation may help to reduce costs and increase efficiency in the re/insurance sector.
“On average, in most markets and products, there is a lot of frictional cost to sell the policy, administer the claims, settle the claims, and everything around it, and we need to use technology to bring down the cost of the whole value chain,” Schmid said. “That is the key adaptation the industry needs to go through.”
Products based on technology could allow the re/insurance industry to cover new markets. For example, under one scheme farmers in Kenya can be offered drought cover based on satellite images. The farmers can buy the protection over their mobile phones. The payout is triggered automatically and reaches the farmer through a Paypal account over their phone.
Such efficiency is key to overcoming the affordability barrier. To cover lower income populations distribution and settlement costs need to be reduced, Schmid said.
Technology can also reduce the insurance cost through risk mitigation. One example is a plan which includes built-in sensors to detect leaks in apartments as part of a home insurance policy, to reduce the risk exposure and thereby reduce premium.
However, a wider use of technology is also likely to increase the accumulation risk for re/insurers due to the interconnectivity of the world, Schmid said. Loss scenarios that go across many policyholders tend to increase, for example through urbanisation, leading to a concentration of risks.
Within the re/insurance industry, the bigger players are arguably better positioned than smaller companies to take advantage of the opportunities offered by technology, not least because of their superior financial power and know-how, Schmid suggested.
Smaller insurtech players are likely to be successful in the market, bringing a fresh proposition without legacy costs and systems—but one shouldn’t rule out big tech companies successfully entering the re/insurance sector, he concluded.
Get the latest re/insurance news sent to your inbox every day - Sign up to our free email newsletters
Today’s Monte Carlo stories
Beale mulls ILS solution to protect Lloyd’s market using new UK regulations
Allianz may seek additional reinsurance protection for cyber
VIG Re sets sights on Germany, France
Buyers seek extra protection after scare
XL Catlin sets its sights on the ‘fascinating’ Indian market
Irma, Harvey risks not reflected in price
Specialty lines ‘the next frontier’ for ILS
“The first thing the Bermuda Market will do is pay”: KPMG
Irma will focus rating agencies on reinsurers’ ERM performance
Barbican eyes new opportunities ahead
Irma an opportunity for ILS to prove its credentials
Bond Dickinson unveils US combination deal
Irma: too early to see an effect on rates
JLT Re well placed for changes in market
Insurers facing data protection trouble
Fourth industrial revolution will transform insurance value chain
