The insurance market must be reimagined to reflect the changing nature of global risk, according to a report by DAC Beachcroft.
Insurance Remodelled, 2018/19 Market Conditions & Trends highlights the changing nature of global risk, ranging from the escalation in terrorist attacks on people rather than property, cyber-attacks and the impact of climate change on natural catastrophes at one extreme, to the fragmentation and individualisation of insurance at the other. It notes that ‘changing lifestyles mean the established model of annual insurance contracts is no longer relevant to many people and businesses’. An example of this is the fast, mobile and social way in which people communicate, and the increasing willingness to share personal details. Driverless cars are another game-changing innovation, throwing up new issues of responsibility as well as potentially lessening dangers.
The risks involved in global supply chains are a particularly fierce challenge for insurers. ‘Mapping the potential risks along the chain around the world—fire, natural catastrophe, industrial action, regulation, trade wars, the spread of isolationism and cyber to name a few—is fraught with difficulty,’ the report states. ‘And the potential information saviour—sophisticated digital connectivity—is itself vulnerable to cyber-attack, system failure and energy supply disruption.’
The report makes 50 predictions about the insurance market, including that a European regulator will take its first ‘financial scalp’ for a General Data Protection Regulation (GDPR) breach in the first half of 2019.
It also predicts that cryptocurrencies will offer real benefits to the reinsurance market as they mature and become part of everyday commercial life, and that board directors face new responsibilities with the wider use of artificial intelligence.
Helen Faulkner, head of insurance at DAC Beachcroft, said: ‘The very nature of insurance, its role and its relationship with society is undergoing a profound and irreversible transformation.
‘The biggest drivers of this change are technology and globalisation, but alongside them is the changing nature of risk. The combination of these powerful forces is not just reshaping the insurance industry; it's demanding that we reimagine what insurance is for, what society expects from it and how it can deliver the promises that lie at its heart.’ It also means reimagining the skills insurers and brokers need.’
