According to the latest PwC report, "Broking 2020: Leading from the front in a new era of risk," the risk of loss is likely to increase in the coming years. With the globalized nature of the economy creating vulnerable supply chains, and a growing reliance on technology that introduces a new array of risks, the risk environment can no longer be managed through traditional approaches.
Complex challenges require a comprehensive risk facilitation leader to educate, promote and coordinate solutions across a range of stakeholders, including corporations, insurance and reinsurance companies, capital markets and policymakers around the globe.
So what does this mean for brokers? Protecting against a new breed of emerging risks will require coordination across the board. As the traditional intermediary in the risk transfer chain, brokers are positioned to identify and develop innovating solutions.
PwC examined the forces reshaping the marketplace, detailing the steps insurance brokers need to navigate the changing landscape. They found that the disruptive forces that are reshaping the global risk landscape and the impact on businesses, brokers, insurers and reinsurers are vested using social, technological, economic, environmental and political frameworks.
But that's not all. Click through the following slides to learn more about each of the five forces transforming the risk landscape moving into the coming year.
Social
Social media is changing the face of commerce, even innovating traditional notions of e-commerce. Various social media platforms have allowed customers to engage and interact with businesses in a whole new way. The tracking of these interactions provides valuable new sources of Big Data, but it also allows for the viral speed of negative news and misinformation to lead to a sudden loss of value, which can be crippling for client relationships.
Technological
Technology shapes the way people communicate and conduct business. For agents and brokers, technology can boost information flows and also create value-adding analytical capabilities, minimizing the cost of distribution services.
As a result, the industry is seeing new ways of engaging with risk managers, insurers and reinsurers, and also providing the basis for richer discussions and sharper insights.
But, at the same time, technology presents challenges across different market segments. For brokers, whose client base includes large risk management accounts, there is an ever present disparity regarding fees and expenses. Standardized placement options would allow for greater cost controls, but consulting activities and the requisite intellectual capital to provide appropriate solutions to emerging insurers will create alternative costs that must be divided between clients and insurers. But there's also the dark side of technology, specifically cyber security, which was a top concern for the participant survey of risk managers reported in the PwC study.
Environmental
Catastrophe liabilities are continuously heightened by the increasing values of assets and production in Southeast Asia, Latin America and other rapidly growing regions. These regions also happen to be climactically or seismically unstable. To make matters worse there is often a lack of risk information available to ensure pricing adequacy.
Economic
Improved risk insight, protection and transfer are essential in sustaining global growth, but there is a huge and growing protection gap. Under-insurance creates threats to growth and liability to recover from disaster.
At the same time, globalization has resulted in the creation of ever more diffuse supply chains, which is another top concern for survey participants. Supply chain risk is starting to become a bigger consideration for the manufacturing strategy than costs within many major corporations, the survey reveals.
Political
Governments in self-dominated insurance sectors, including China and India, do not always have the desire (or the capability) to absorb their countries' fast rising insured values.
But even mature markets see governments unable or unwilling to continue to play the role of "insurer of last resort," according to the report, especially if major or multiple loss events have occurred.
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