Insurers can control destiny by grasping opportunities in change

Insurance companies in the US are facing such an unprecedented plethora of disruptive forces that their leaders have no choice but to try to look over the horizon, adapt and see the opportunities in this changing landscape, David Sampson, president & chief executive of the Property Casualty Insurers Association of America (PCI), told PCI Today.

Sampson said the agenda for this year’s annual PCI conference was first outlined back in February this year.

“I met with the 25 CEOs on our executive advisory committee and there was a sense that there are so many disruptive forces at work now that we wanted to help the industry get beyond simply being in a reactive mode and instead help them look to help design the future and turn some of the threats they are facing into opportunities,” he said.

“We based the programme of this event on that basis. We invited some experts with a very deep understanding of various subject matters to help us understand what the disruptors are, how they are impacting society and where the opportunities reside. Our job is to help chief executives look over the horizon and help them adapt to what is ahead.”

He listed a number of the biggest so-called disruptors the industry is grappling with. Some of the most difficult are based around the challenges certain economies are facing. He noted the problems China has faced and the resultant stock market crash; he also described emerging markets as now being more a risk than the cushion they used to be regarded as.

Political disruption is a growing problem and it is changing in its nature. He described the current US electoral nomination contest as being a topsy-turvy affair that demonstrates that political risk is no longer confined to developing economies.

“It is now something that needs to be factored into every company’s planning, even if all its activities are domestic,” Sampson said.

More regulation

On top of these economic threats, insurers must also grapple with greater regulatory oversight.

“Global regulatory convergence is something our members are very worried about,” he said. “It is based on the one-size-fits-all model which is also very banking-centric and is not suited to the insurance industry.”

Rapidly evolving technology and the rise of cyber crime is also a big challenge, he said. He stressed that the scale of security breaches and their potential damage was greater than ever. As a result, this was one area in which insurers should see opportunities.

“The potential impact of these is huge and the industry should see that as an opportunity,” he said. “It is still in its early stages here but companies are trying to get their heads around it.”

Some of the other areas he identified are around the use of drones and autonomous motor vehicles. “That will become a very big market in the next 15 years,” he said.

He also believes there will be growing opportunities for the industry to take on risks previously covered by the US government. Flood and terrorism are two obvious examples where he foresees growing private sector involvement in the way these risks are dealt with.

“Governments at all levels will come under increasing fiscal pressure and there will be a growing focus in 2016 on what opportunities may exist for the private market in this regard.

“As a trade association, we exist to promote and protect private competitive markets because we believe this is good for innovation and price competition.”

That said, Sampson believes the Terrorism Risk Insurance Act and the National Flood Insurance Program will both be required in some form into 2017 and beyond.

“We are looking at opportunities in that space and we expect that PCI will be integral to those discussions,” he said.

He stressed that the PCI annual conference and the trade association more generally is looking to encourage and help the industry control its own destiny in this period of rapid change.

“To hope that the forces of change pass us by will not be a winning strategy. We need our leaders to be actively engaged in shaping the industry and their companies. We hope that their spending a few days away from their day-to-day operations with some inspirational speakers and their peers will help them grasp the opportunities emerging with change and take control of their own destinies.”