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Insurers need to go back to the future

Anthony BaldwinInsurance is an industry that is defined by its resilience. We have withstood physical and financial catastrophes and have played a vital role in enabling people to invest in their future.

From the foundation of the industry over 600 years ago, insurers have partnered with businesses, reducing their risks. The first known insurance contracts date back to the 14th century, protecting ships and their cargo against pirates. The 14th century insurers would have been traders, supporting their fellow merchants in their business endeavours.

Insurers were also the first to realise that analysing data could help us predict the future. Science and analytics have been essential to the growth of the industry: from the early development of actuarial science, the use of probability and statistics in the 16th century, to using life tables in the 17th century to predict a likely lifespan, to using complex algorithms and giant databases to make predictions.

But right now we’re facing a complex set of challenges. In recent years we have been slow to innovate and embrace new technology. Technology companies with strong credentials in processing data have spotted insurance as a potential market for disruption. Small wonder the PwC Annual CEO survey in February stated that insurance is one of the top three most disrupted sectors.

And guess what? Risk is becoming more complex. Global political dynamics are constantly changing and risks are emerging in geographies previously considered benign. Companies are more global than ever with people, assets and supply chains spanning the world and with people travelling more and more. Cities are getting larger, creating challenges in terms of both resources and societal shifts, while the environmental impact of climate change is not yet known.

On top of this we have technological disruption and increased connectivity. Thanks to the internet of things and the rapidly increasing number of sensors capturing data everywhere we have more information than ever before about choices and outcomes. This creates incredible opportunities and unfathomable risks: privacy risks, cyber risks and risks to tradition business models.

This should mean that as insurers we have an even more vital role to play as a risk taker and economic enabler. But we have relied too long on outdated processes, focused too much on the product, and failed to invest in technology.

So we need to go back to the future. We need embrace our heritage as pioneers, as risk takers and as business enablers. We need to invest in innovation and science and attract a wider talent pool, and we need to use the data we have in a smarter way to help our customers to better outcomes.  Once again, we need to stand side by side with our clients as fellow risk takers, with our eyes firmly on the horizon scanning for opportunities.

Last updated 19/11/2016