New research by Capgemini and Efma has underscored the need for insurance companies to respond to emerging threats and changing customer expectations by embracing new technology and partnerships.
The World Insurance Report 2019 found an increasing concern about the insufficiency of insurance to address emerging risks, with only under 25% of business customers across all geographies and less than 15% of personal policyholders saying they have sufficient coverage to insure against any one of the emerging risks.
These emerging risks are driven by five micro trends: disruptive environmental patterns, technological advancements, evolving social and demographic trends, new medical and health concerns, and business environment changes, the report said.
Findings revealed that insurers are slow to respond to emerging threats, creating significant coverage gaps for at-risk customers. An estimated 83% of personal insurance customers have medium or high exposure to cyberattacks and to outliving their savings, while a mere 3% and 5% respectively are comprehensively covered against these eventualities. Among business customers, 81% are exposed to escalating employee healthcare costs against which just 17% are well covered; 87% are at risk of cyberattacks with less than 18% are comprehensively insured; and nearly 75% are threatened by rising natural catastrophes, for which just 22% are effectively covered.
Meanwhile, less than 40% of life and health insurers said they have developed a range of new products to cover emerging risks comprehensively.
Customers have also been found to show greater readiness for change than their insurers, with 55% saying they are ready to explore new insurance models, yet a mere 26% of insurers are investing in them. More than a third (37%) of customers also said they are highly willing to share additional data in return for improved risk control and prevention services, yet only 27% of insurers are capable of using real-time data for risk modelling purposes.
To significantly enhance their risk assessment capabilities, the report said insurers should evolve, from their traditional role as payer, into the parallel roles of partner and preventer, collaborating with insurtech partners, as well as deploying machine learning, artificial intelligence, and advanced analytics.
Progress in these areas has been mixed, however, with 57% leveraging AI, machine learning, and advanced analytics, but only 29% have implemented automated risk assessment, and just 20% real-time insight generation from IoT devices.
“Emerging risk trends and rising customer expectations are dramatically changing the landscape for insurance, and providers must be agile in how they respond,” said Anirban Bose, CEO of Capgemini’s financial services strategic business unit and member of the group executive board. “This research shows a coverage gap in areas of emerging risk, but also highlights an important opportunity for insurers. Those that can evolve their products through technology, collaborate with innovators, and think of themselves as partners and preventers to their customers, stand to benefit the most.”
“This research shows that the future for insurance will be partnership-centric,” said Vincent Bastid, secretary general of Efma. “Insurance providers need to collaborate with partners who offer high levels of expertise in areas from AI to advanced analytics. Simultaneously, they must partner more closely with their customers to provide the more responsive, demand-driven service many are seeking.”