Durgesh Vyas: Working Together to Evolve and Modernise
The insurance industry is often searching for effective ways in which it can collaborate to evolve, modernise and improve its reputation, comparative to other sectors.
On 7 September, Insurance Insider’s Pre-Monte Carlo Briefing hosted around three hundred insurance industry professionals, setting the agenda for the Rendez-Vous in Monte Carlo. Many of the topics raised at the event gave me food for thought, but two in particular stood out for me: the role of the broker in driving growth; and making the insurance distribution value chain more efficient.
On the first point, raised by CEO of Aon Benfield, Eric Anderson, it is apparent that there is lots brokers can do to help the industry to cooperate and evolve, but this led me to think about the roles of both brokers and insurers and how we can work together.
Underinsurance around the globe, for example, is something we can – and should – be putting our heads together to alleviate. We have sadly seen the devastating impact of underinsurance with the 6.2 magnitude earthquake in Italy. The disaster devastated a string of mountain towns and villages in central Italy, killing at least 250 people and leaving many unaccounted for. Total insured losses are estimated to make up no more than 10% of total economic losses.
Over the last 20 years, increased data and catastrophe modelling tools have enabled insurers to make more informed decisions, in some cases this has also led to carriers avoiding cover in certain territories, or making it too expensive to purchase – leading to underinsurance in areas where it is perhaps most needed. The financial crisis also added to insurers’ wariness of taking on certain risks.
Both carriers and brokers need to work more closely with governments to deliver better resilience in the event of catastrophic events and assist with programme design. Correct pricing of programmes is of paramount importance to attract capital interest and alleviate strained state budgets.
Furthermore, the insurance industry is in a good position to pool data on disasters resulting from the effects of climate change and we should be collaborating to produce innovative preventative initiatives, not just ‘mop up’ the mess afterwards. The ‘protection gap’ offers both opportunities to deliver growth with genuine accretive business and fulfil a much needed socio-economic benefit to communities.
Which leads nicely onto the second point, raised by Axis Re CEO, Jay Nichols, about the challenges facing reinsurance and improving the distribution value chain. With so many potential stakeholders in the insurance value chain, the cost to transport risk to capital is becoming increasingly expensive and there is perhaps a tendency for information becoming ‘lost in translation’. Hopefully, the new Target Operating Model (TOM) will deliver on this. The goal of one-touch data capture will allow cost savings and greater efficiency, with centralised administration and data integration which will produce a ‘common language’ across the market.
Carriers also need to think about how they can execute a more collaborative approach with local partners. At Probitas 1492, our strategy uses technology and analytics to improve the value chain, by delivering accretive opportunities – which would not normally come through London – by going to the origination of business.
Durgesh Vyas, Senior Analyst & MI Manager, Probitas 1492