A report published by Capgemini and Efma found that policyholders are increasingly concerned that their insurance coverage has become insufficient for emerging risks such as cybersecurity to environmental threats.
Insurers, the report said, are less ready for change than their customers, most of whom want more comprehensive and dynamic coverage. At the same time, a significant opportunity exists for insurers to leverage technology and partnerships to get ahead of macro trends and become more proactive partners to their customers.
The report identified five macro trends creating emerging risks for insurance customers and their businesses: Disruptive environmental patterns, technological advancements, evolving social and demographic trends, new medical and health concerns, and business environment changes. Most insurers, however, have been slow to respond to these trends and equip customers for them, according to the report.
Under 25 percent of business customers across all geographies, and fewer than 15 percent of personal policyholders, said that they felt they had sufficient coverage to insure against any one of the emerging risks driven by these macro trends. Fewer than 40 percent of life and health insurers said they had built a pipeline of new products to cover emerging risks comprehensively.
The report suggested that the slow response to emerging threats has created significant coverage gaps for customers exposed to these risks. The report estimated that 83 percent of personal insurance customers had medium or high exposure to cyberattacks and to outliving their savings, yet just three percent and five percent, respectively, said that they were comprehensively covered against these eventualities. Among business customers, 81 percent said they were exposed to escalating employee healthcare costs against which just 17 percent said they were well covered; 87 percent said they were at risk of cyberattacks with fewer than 18 percent who said that they were comprehensively insured; and almost 75 percent said that they were threatened by rising natural catastrophes, for which just 22 percent were effectively covered.
According to the report, as the insurance landscape shifts, customers were showing greater readiness for change than their insurance providers. Over half (55 percent) of customers said they were ready to explore new insurance models, but barely a quarter (26 percent) of insurers said they were investing in them. Although 37 percent of customers said they were highly willing to share additional data in return for improved risk control and prevention services, only 27 percent of insurers said that they had the capability to tap real-time data for risk modelling purposes.
The report declared that insurers must respond to emerging threats and changing customer expectations by embracing new technology and partnerships. Risk assessment capabilities can be significantly enhanced through deployment of machine learning, artificial intelligence and advanced analytics, and effective collaboration with insurtech providers. According to the report, progress in these areas has been mixed: A majority (57 percent) said that they had leveraged AI, machine learning, and advanced analytics, but only 29 percent said that they had implemented automated risk assessment, and just 20 percent real-time insight generation from IoT devices.
According to the report, technological progress also needs to be matched by a shift in attitudes. Where insurers have traditionally seen themselves as a payer, they need to evolve into the parallel roles of partner and preventer, working more closely with customers to mitigate risks and provide on-demand services.
“Emerging risk trends and rising customer expectations are dramatically changing the landscape for insurance, and providers must be agile in how they respond,” said Anirban Bose, the chief executive officer of Capgemini's financial services strategic business unit and a member of the group executive board. “This research shows a coverage gap in areas of emerging risk, but also highlights an important opportunity for insurers. Those that can evolve their products through technology, collaborate with innovators, and think of themselves as partners and preventers to their customers, stand to benefit the most.”
“This research shows that the future for insurance will be partnership-centric,” said Vincent Bastid, secretary general of Efma. ”Insurance providers need to collaborate with partners who offer high levels of expertise in areas from AI to advanced analytics. Simultaneously, they must partner more closely with their customers to provide the more responsive, demand-driven service many are seeking.”
Learn more: www.worldinsurancereport.com; www.capgemini.com; www.efma.com.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].