Member research shows traditional insurance model not fit for emerging risks

According to the research published at Airmic's annual conference in Birmingham, which is based on detailed analysis of a survey of risk and insurance managers, disruptive innovation driven by technological advances, globalisation and evolving corporate demands are threatening conventional insurance models which are geared towards protecting physical assets.

Growth of intangible assets is outpacing that of tangible assets. Indeed, 84% of the S&P 500's market value is now held in intangible assets, up from 17% four decades ago*. The survey of risk managers revealed that the vast majority plan to manage intangible risks in-house, either by reducing or retaining them. It also revealed that risk and insurance managers are struggling to articulate the value of insurance to executive management and across the business.

IS THE INSURANCE MARKET FIT FOR THE FUTURE?

In the first part of the series, AXA Corporate Solutions argues that the insurance industry must move away from a transaction-driven model towards a collaborative model where insurers and brokers work with risk managers to improve the understanding, prevention and mitigation of today's risks. It argues that this should include providing more value-added and advisory services, such as legal and media support, where traditional insurance is limited or unavailable.

DIGITAL TRANSFORMATION

Digital advancement and emerging technologies are key areas where insurers and risk managers can work together, according to Chubb in the second report of the series. Cyber-related risks are top-five risk priorities for Airmic members, while disruption from emerging technologies is perceived as the fastest growing risk. The research revealed clear demand for greater support, both in terms of insurance and value-add services, especially for data recovery and business interruption.

THE VALUE OF RISK AND INSURANCE MANAGEMENT

If insurance is to retain its relevance, the market must work together to ensure its strategic value is understood by business executives, the research argues. In the third report, JLT Specialty notes that insurance is too often viewed as a price-driven transaction, with 39% of Airmic members struggling to articulate the value of insurance to their business. The market must ensure that insurance is better aligned to corporate goals - and that its value is clearly translated into business terms, it notes.

Julia Graham, Airmic's deputy CEO and technical director who led the research, said the findings have deep implications for the risk and insurance communities: "The insurance industry recognises that traditional insurance is losing relevance in face of today's more complex and harder-to-define risks. And yet our members want support in understanding and dealing with these modern risks - both in terms of innovative products, but also in terms of broader support. The insurance industry must provide more than just risk transfer; this requires a shift in thinking but everyone will benefit."

The series is based on the findings of an in-depth survey of 152 risk managers, conducted in March and April 2017. It is part of a wider project into the future of the risk management profession, entitled A profession in transformation: driving business value through risk and insurance management.

The research is comprised of the following three-part series:

• DIGITAL TRANSFORMATION Keeping pace with the ever-evolving threats of technological progress in business - written by Airmic in partnership with Chubb;
• THE VALUE OF RISK AND INSURANCE MANAGEMENT An analysis of the view of risk and insurance managers on the sector's contribution to business - written by Airmic in partnership with JLT Speciality;
• IS THE INSURANCE MARKET FIT FOR THE FUTURE? How the evolving risk landscape is changing the role of risk managers and insurers - written by Airmic in partnership with AXA Corporate Solutions.

Airmic News will be exploring the findings of these reports in more detail over the next three months.

*Ocean Tomo, Annual study of intangible asset market value, 2015