Time to hit the reset button
The insurance industry is uniquely placed to confront issues, such as climate change, rather than simply picking up the pieces from disaster.
The past year has prompted many of us to reevaluate our concerns and priorities. This applies equally to the insurance sector, which has a generational opportunity to re-frame its relevance in a world shaken to its core.
“It’s a chance to hit the reset button,” says Simon Laird, Global Head of Insurance at law firm RPC. “We don't yet know what the post-pandemic world will look like, but there's a real sense that this is a chance for insurers to choose a new role to play on the global stage.”
The past year has triggered fight-or-flight responses among many businesses. There’s increased anxiety, with customers yearning to feel more secure again, after having experienced such a sharp shock to the accepted norms. “The pandemic has shaken everything," says Peter Mansfield, Partner at RPC. "What’s coming up in the next decade isn’t the same as what happened in the past decade.”
The pandemic has changed customers' priorities; 12 months ago most companies would have said bricks and mortar buildings were critical to their business. Now, many are looking at the implications of a growth in home working - will corporate data be safe on an employee’s home computer? In a changed world, Insurers have a choice. They can simply assess and cost the risks, or they can help clients navigate those risks to the benefit of both insurer and insured.
Insurers have always played a role in risk prevention - after all, some of the earliest fire brigades were set up by insurance corporations looking to limit the very event they had insured. Insurers may no longer look for fire badges on buildings, but that same mentality can be seen today. The use of Big Data translates into insurance that can provide real-time advice to insureds – by suggesting less risky places to fly a drone, or alternative routes for cargo ships about to enter a war zone.
“The question is whether, and to what extent, insurers should get involved with their clients’ choices,” says Mansfield. “Modern technology enables two-way communication. The insured's data comes one way and insurers respond with revised premium calculation. All instantaneously.” The Pushmi-Pullyu discussion for insurers means a constant tension between responding to changing customer demand and producing innovative solutions and new products to respond to common problems.
This raises existential issues for insurers. “The pandemic is contributing to hard market conditions and rising premiums,” says Laird. “That makes people question the role and purpose of insurance even more.”
Global trends such as the desire for increased, visible environmental and social responsibilities have been accelerated by Covid, and again the industry must choose how to respond. “Ultimately insurers are commercial beasts, but the ‘purpose’ of insurance is really important for attracting investors and recruiting the right talent,” Laird believes. “Insurers have been learning a new language – no one talked about empathy 20 years ago, but it’s part of the corporate lexicon now."
Insurers can also use their unique position to speak on global issues. "Insurers may well need different people with different skills," says Laird. "In addition to the data scientists already so much in demand, perhaps there is more need for, say, policy negotiators who can work with governments on big issues such as climate change.”
The future role of insurance may be less to do with picking the pieces from disasters than confronting policies and preventing corporate actions that contribute to such disasters. Certainly the sector has global muscle that could be turned into an active, powerful force for societal good – which might, in turn, bring financial prosperity in its wake.
“It’s about insurers reasserting their place in this new world,” says Laird. “Insurance is a powerhouse of innovation and progress and even small, incremental changes can make a big difference. This is the time for the insurance ecosystem to put itself front and centre, helping to lift us beyond the issues that have developed in the past year.”
* This article was originally featured in 'The Future of Insurance' - a joint publication with Raconteur and The Times, published on 29 March 2021. You can download the publication in full here.