Commercial insurance model not fit for purpose, says WTW

Commercial insurance model not fit for purpose, says WTW | Insurance Business

Commercial insurance model not fit for purpose, says WTW

Asia’s commercial insurance market continues to be beset by large and complex risks, proving the current business model unsustainable and not fit for purpose, a study by Willis Towers Watson has concluded.

The 2019 Asia Market Report laid out the challenges for the year ahead faced by insurance buyers and insurers in Asia, and noted that disruptive technologies, geopolitical risks, and increasing demographic and societal changes underscore the need to adopt a new data and analytics-driven approach to risk mitigation and management.

Last year was an active year for natural catastrophes in the region, severely impacting many lines of insurance across all major Asian markets, the report said. It listed the Lombok earthquake, Osaka earthquake, and the Mangkhut and Jebi typhoons, as some of the events that marked significant attritional losses and continued downward pressure on insurance rates, impacting results across many insurers’ portfolios. These sustained losses, coupled with the increasingly complex global and economic backdrop, have led to international insurers re-engineering their portfolios.

Read more: 2018 could yet be worst year in a decade for insurers

“There have been a tighter scrutiny of underwriting practices and withdrawals by insurers from certain countries, lines of business and, in some cases, the region altogether,” said Ron Whyte, chief operating officer, corporate risk and broking Asia, at Willis Towers Watson. “This is evidenced by the toughening of the market with insurers returning to technical underwriting. However, not all domestic markets have had the same experience nor are all countries seeing a hardening marketplace. China continues to ‘buck the trend’ and grows as an increasingly important hub for non-Chinese business.”

Meanwhile, Scott Burnett, CEO of corporate risk and broking, Asia, and head of Asia at Willis Towers Watson, said that a different risk management approach is needed, specifically one that focuses on risk mitigation. He added that cyber exposures have evolved beyond data breaches and have a significant effect on global supply chains. Meanwhile, liability exposures are adapting alongside the rapid adoption of new technologies and must be carefully considered to ensure that insurance policies remain relevant and responsive. Geopolitical risks are another major factor in the Asia region, with their unforeseen and uncertain impacts.

“It is therefore important for companies to understand, prevent, protect and then respond with the right insurance and risk strategy for their businesses,” said Burnett.

In the report, Willis Towers Watson stressed the urgent need for insurance buyers to go beyond traditional brokerage services, including assessment, transfer, placement, and claims. Risk engineering must be present at all stages, and data and analytics must be harnessed to help companies look beyond current risks, and take a more strategic approach to insurance.