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Embracing the Future of Insurance

By Phil Dodridge
Head of Business Intelligence and Disruption

The traditional model of insurers as capital providers is becoming less and less relevant.

The traditional model of insurers as capital providers is becoming less and less relevant as the environments our customers operate in change, their buying behaviour alters and their expectations of what it is we should be doing for them evolve.

In Aon’s 2017 Global Risk Management survey only four of the Top 10 business risks were insurable. Just because we don’t have a wording to suit or an appetite to underwrite the unquantifiable does not negate the changing nature of the risks our customers face or their need to mitigate them. What it does do however is place the onus firmly on the insurance sector to come up with solutions.

We need to shift our mind set from protection to prevention and brokers and insurers alike need to redefine their roles to ensure we are adding value at all points in the chain.

Data is the lynchpin in all of this and we are at a game changing juncture in our industry. Ubiquitous open source data combined with proprietary information, both ours and our customers, which is then mined through exceptionally clever AI platforms now gives us a more complete view of the true nature of risk and the wherewithal to counsel and partner with our customers on best practice risk mitigation measures and back them up with optimal levels of capital protection.

Last year, we announced QBE Ventures, a US$50m investment fund for partnerships with Insurtechs and our most recent investment and partnership was with Cytora, whose Risk Engine, driven by machine learning algorithms, combines an insurer’s internal data on a specific cover with external information from a broad spectrum of sources to provide enhanced insight into expected claims activity at a whole portfolio and also at an individual risk level.

We are in the process of deploying this across a number of our Property and Casualty lines. Having a more complete view of a risk means we can provide the right level of protection at a fairer price that reflects the true level of exposure. That’s just one side of the coin however, it is also feeding into to our risk advisory service and allowing us to have practical and actionable conversations with our customers vis à vis risk prevention.

There is considerable debate in the industry about disruption and which companies are going to come in from the left field and eat our lunch. This is healthy debate and we are starting to see some real innovation coming through as a result of it. The traditional underwriting model, with the insurer playing the role of capital provider, has been unquestionably fit for purpose for hundreds of years and much of it is still valid today and always will be valid. There are big gaps however and those gaps are only going to widen. We need to augment our business model so that we continue to be relevant, placing more emphasis on risk prevention and consequently less focus on just risk transfer. Our customers expect this of us and if we don’t deliver, they will look elsewhere.

This article first appear in Insurance Post