Second of two parts. Read the first part here.
James Maudslay (pictured), global head of insurance at major data centre and colocation services provider Equinix, discussed with Insurance Business the five major technological issues insurers need to address in this time of huge developments and innovations across the industry.
Cyber, Maudslay said, will become the largest threat to all businesses in 10 years’ time. As such, he advised insurers to make sure their cyber defences follow industry best practices to safeguard themselves.
The next point of contact, which is unique to the insurance industry, is providing cover for other people/businesses against cyber risk.
“There isn’t a huge amount of data available to try to model and detect what might happen in the event of a cyber breach,” Maudslay said. “I think that is a concern because there’s an element of companies maybe not fully understanding what they’re getting themselves into in this situation.”
He continued: “Insurance has always been an enabler of commerce and [providing cyber cover] is the newest way in which it needs to be there to back enterprises so they can trade.”
As time goes on, the volume to data regarding cyber breaches will increase, as well as the amount of modelling that can be done. Maudslay stressed the importance of robust analytics and modelling as the backbone of cyber insurance.
“It is absolutely fundamental to get themselves into a position where they have their systems working fast enough that they can analyse the information when its needed – increasingly at point-of-sale, rather than in arrears,” he said, adding that being able to analyse and model data as effectively as possible will bring some level of control to a very fluid and unpredictable risk such as cyber.
He explained that there are a number of areas of friction on the insurance process – the way in which businesses take risk onboard, maintaining policies and paying claims, and accounting, which underlies all insurance activity.
“Blockchain is perfectly suited to performing complex accounting processes consistently and rapidly and in a way it can be proven,” he said. “There is absolutely huge room for blockchain to help insurers deal with their accounting processes and make them more efficient.”
He shared that a firm in Hong Kong, known as Galileo, is building a full policy administration system based on blockchain technology, demonstrating the benefits the technology can bring to insurance.
However, he also noted that, in a blockchain, more clearly outlined by alternative name of distributed ledger, all parties need to be linked electronically. To be able to harness the full potential of blockchain, insurers’ digital connections must be in proper order.
First, he echoed many other experts in saying that China will soon become the largest insurance market in the world. This is because of an expanding middle class, and the enthusiasm of the Chinese government in having insurance participate in disaster recovery, which is only possible if they can get people to buy insurance in the first place.
He added that insurance in Asia has always heavily leaned towards the life insurance side, due to more familial culture. However, property insurance is now catching up as people now have more things to be protected.
His next prediction was that technological development will move at a faster pace, partly due to a younger population that is more open to technology, as well as significant investment from both private sector and government.
“I learned that investment in chatbots in Asia is roughly 25% higher than in Western markets,” Maudslay said. “That’s backed up by the fact that China invested more in insurtech than the rest of the world put together. Tech development is definitely running ahead in Asia.”
Finally, Maudslay believes that there will be an increase in the amount of analytics that is being performed by insurance companies in Asia.
“In general, Asian insurers tended to lag behind the traditional markets in terms of analytics. There are several reasons for that, one of which is that it hasn’t been part of the business culture,” he said, adding that it is about to change due to regional and worldwide developments.
All markets are struggling under additional regulations, such as know-your-customer, anti-money-laundering, and anti-terrorism, which means insurers have to step up their use of data today and in the future.