Emerging Technology Redraws Lines of Risk, Challenges the Underwriting Paradigm

By: | October 26, 2018

Warren Berey is SVP of Multinational Insurance at Generali Global Corporate & Commercial U.S.A., overseeing the development of international casualty and package insurance solutions for U.S. companies and U.S. subsidiaries of foreign companies. He can be reached at [email protected]

There has been a lot published lately about how emerging technology will change the insurance process, but what is often overlooked is how emerging technology will change the very nature of risk.

Underwriters, brokers, and risk managers need to be thinking about how their future loss trends will be affected by changes in technology related to things like assembly lines, distribution, and end products. The evolution of technology is of course enhancing processes and products, but it is also clouding the ability to measure risk. To date, future risk is primarily calculated by past events – but the speed at which technology is advancing is now turning past events into a less influential benchmark of potential future issues.

Cyber as a risk is certainly one of the industry’s most prominent concerns, but the evolution of risk does not end there.  Many companies are already beginning to think about how the sharing economy and autonomous vehicles will affect liability lines. Robotics, artificial intelligence, and blockchain are only beginning to take over common industry and should have an impact on how we evaluate risk. These technologies will not only bring about change that the insurance industry has not yet seen but it will also come about at a greater pace than ever before.

The risk landscape for organizations is changing rapidly and is therefore shifting the entire paradigm.

So, what does this mean to risk management professionals?  Most importantly it means that risk managers, brokers and underwriters need to be thinking proactively. The risk landscape for organizations is changing rapidly and is therefore shifting the entire paradigm. Coverage, pricing, risk engineering, and claims needs are already evolving. For risk management professionals of multinational organizations, it is especially important to understand how their company is evolving and what that means for the different jurisdictions in which it operates around the world.  Accordingly, it is important to work with organizations that can help you understand and manage this global evolution of risk.

Of course, as corporate and commercial insurers we must also look toward many of these new technologies to help balance the additional burden this evolution of risk will have on our underwriting processes.  For a traditional industry built on a legacy of fundamentals there is a lot to learn from these changing times.  Remaining aware of how other industries, where technological disruptions have already taken hold more significantly, is critical. Taking a holistic view in analyzing how other sectors evolve from an operating perspective and from a risk management perspective is key to maintaining long term stability for insureds and insurers.

For a traditional industry built on a legacy of fundamentals there is a lot to learn from these changing times.

In short, we need to become more proactive instead of reactive, as the future is looking less and less like the past with each passing day.  Despite the growing popularity of predictive models which are largely driven by past observation, understanding the evolution of risk is where experienced risk management professionals will excel.  Since models can only predict the future based on existing data, risk management professionals that apply their experience toward predicting the future will create a more stable environment and build more predictable solutions.

This is not to say there is no applicability for big data and predictive analytics in the future of underwriting and risk management.  It simply means that it is not a catchall and a balance is required between technology and quality risk management professionals.

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The R&I Editorial Team can be reached at [email protected]