Technological developments will profoundly change the way in which the re/insurance industry develops, distributes, underwrites and administers the insurance protection it sells to consumers, Swiss Re said on Monday.
New technologies such as cognitive and cloud computing as well as big data will simplify and accelerate the industry’s underwriting process and reduce the price of insurance protection overall, Swiss Re said in a press release. This development will allow insurers to tap into the vast insurance protection gap and build up new revenue streams, with the biggest sources of value creation in “reducing costs and creating completely new services.”
According to Swiss Re, the main catalysts for change include mobile-first preference from the end consumer (edistribution), increasingly dynamic and regular consumer interaction with computers (digital advisors), an exponential increase of data on people and objects (e.g. Internet of Things, telematics), the common and secure use of distributed data (blockchain technology) and the ability to recognize patterns in large and unstructured data (artificial intelligence). These technologies are expected to shift risk pools and create new opportunities.
With regard to price levels, Swiss Re expects price levels to stabilize, even though “the second quarter of this year was a reminder that natural catastrophes can happen in clusters, and this experience, combined with several years of decreasing prices, shows that the industry cannot be too far away from the bottom of the cycle.”
Price erosion in natural catastrophe cover is expected to slow down and stable rates are anticipated for the property per risk business. In liability lines, Swiss Re expects pressure on reinsurance rates to abate, while broad rate increases are possible in the case of deteriorating reserve adequacy across the industry, the release said. In specialty lines, Swiss Re expects differences in price developments by market and lines of business. High growth markets will drive long-term exposure growth. In Motor, overall slight hardening is expected with differences by market. Increased loss trends have continued in the United States, but accident frequency in the long-term is expected to decrease, Swiss Re suggested.
“Even though macroeconomic conditions and the overall industry environment remain challenging, Swiss Re believes that technological advances will create new and valuable efficiencies,” the release said. “The industry can increasingly access new risk pools emerging from the integration of data, analytics and technology that addresses the insurance protection gap, creating new opportunities for growth. These trends will challenge the industry to adapt quickly in order to provide greater value to customers and enhance resilience on a global scale. Reinsurers and insurers should work together to manage and profit from these advances.”