Learning how to manage increasingly complex and evolving risks is essential if property/casualty insurers are to serve the needs of their customers in a changing world.
According to analysts and industry executives at Standard & Poor’s Ratings Services’ Insurance 2014: Version 30.0 industry conference on June 4, how insurers go about not only underwriting new policies, but also designing, developing and marketing new products targeted to exposures from cybercrime to climate change could change the insurance landscape.
Cyber risk will almost certainly increase, the panelists agreed.
Tom Kavanaugh, an insurance advisory principal at PricewaterhouseCoopers, said, that “interconnectedness [of data] is a huge concern because there’s potential for a contagious effect.” Companies have to be vigilant. “Data security teams have to win every single battle, while cyber attackers only have to win once.”
Steven Verney, executive vice president and chief risk officer for Allstate Insurance Co., said he’s seeing “more real-time cooperation regarding cyber risk and data security with industry networks.” The cycle time with the government remains a challenge. But cyber security remains “an evolving risk,” according to Verney.
Could cybercrime keep policymakers up overnight? asked panel moderator Neil Stein, a director for Standard & Poor’s U.S. insurance group,
“Cybercrime is a worry,” said Mathew J. Burrows, director of the Strategic Foresight Initiative of the Atlantic Council. “You’re looking at cyber organized crime groups and assessing their capabilities to do enormous damage–these are anonymous groups that don’t have a name or affiliation.”
Social media and new technology continue to alter the insurance marketplace.
“Tech adoption impacts every aspect of a customer’s lifestyle. With social media, there’s a great risk to a company’s broader image, including how you respond to claims and services interactions, and customer reviews and ratings,” Kavanaugh said. But there’s also plus side. “Technology provides a great opportunity for companies to be more creative, and help clients not just protect against loss, but prevent it.”
“Information is where wealth is being created, but it’s also a risk to wealth and its value,” Verney added.
Privacy risk is another consideration. Assessing the risk of sharing information is a huge task, according to Burrows. “There’s a lot more privacy concerns, particularly for bio information such as DNA sequencing,” he said.
What could be the next big emerging risk?
The commoditization of new technology could be a factor in assessing these new risks, Kavanaugh said. “One example is driverless cars, which could present a whole new paradigm in assessing risk for software developers, drivers, and car manufacturers,” he said
Climate change, and the increased frequency of extreme weather patterns–particularly in low-lying coastal areas, is also a contender in the next big risk category, according to Burrows.
As for Verney, he said insuring intangible assets could turn out to be a new risk category that will grab insurers’ attention.