The insurance industry is doing more to innovate than at any time, but there is still a long way to go before it meets the growing demands of its corporate customers for new products and solutions. A report published by Airmic at its annual conference says insurers and risk managers need to work together and review how they go about their business in order to boost the rising but still low levels of cover purchased for non-traditional risks such as Cyber.
All parties agree that innovation is a good thing. Customers see it as a way to respond to the growing importance of intangible assets. Underwriters are aware that innovation has the potential for competitive advantage. 61% of insurers saw innovation as a core part of their growth strategy, according to a KPMG report in 2015. Yet, the report says, 49% of Airmic members believe their insurers are ‘hardly innovative’ or ‘not innovative at all’ in developing relevant covers. Only 1% view their insurer(s) as ‘highly innovative’.
John Hurrell – call for change
“All the big gains the market has made in recent years have come about as a result of collaboration between the interested parties and a willingness to change the way they do things. Innovation is no exception. We can meet this challenge head-on as long as underwriters, brokers and corporate buyers work together and are open to new ideas,” said CEO John Hurrell.
The report says there needs to be cultural change among both underwriters and buyers. It identifies a number of specific factors.
- Insurance and risk managers must have early discussions with their boards to assess their appetite for innovative solutions and willingness to finance them. Boards are now more open to talking about risk, which provides the opportunity to ask them to consider new forms of insurance.
- The quality and relevance of risk data is key. Insurance managers must adopt a more collaborative, enterprise-wide approach, which may involve bringing finance, marketing and other business functions into the discussion with insurers. This will help them to open up their businesses to underwriters, who will then be in a better position to respond to their needs.
- Insurers and insureds should move away from the ‘silo’ approach to risk exposures and insurance classes and create integrated solutions wherever possible.
- Insurers need to embrace a ‘culture of innovation’ where staff are given the time and access to the necessary resources to consider opportunities and new ways of working. They need to ensure that their products are what their customers want to buy.
- Insurance managers should be aware that completely new covers are likely to be relatively expensive as well as hard to achieve. Smaller and more tactical product improvements may suit them better, at least until all parties have developed their understanding of the risks involved.
Georgina Wainwright – insurers struggling to keep up with pace of change
“Insurers are working harder than ever to innovate and some areas, such as cyber, have seen notable progress,” said report author Georgina Wainwright. “However, the sheer pace of change within the business environment of their customers has left them struggling to keep up.”
The research, carried out earlier this year, involved interviews with insurance company executives, senior brokers and risk managers.