For months now, industry insiders have argued that the coronavirus will act as a catalyst for insurers to adopt new technologies. Now they’ve been backed by a new study.
In the new study, researchers from Cass Business School, part of City University of London, argued that the pandemic could bolster InsurTech. The researchers warned insurance and reinsurance firms that they can no longer afford to wait and see how the digitalisation of the industry will pan out, but to be active participants in the change.
“This research has implications for the future development of InsurTech and FinTech more generally,” Sarah Ruberry, lead researcher of the study, told City University of London. “In a hardening market, chasing down frictional cost drops down the agenda. However, investing in the right digi-change solutions can building a lasting strategic advantage.
“Insurers who can facilitate adequately priced risks through the efficient mining and analysis of data will be better positioned than their peers moving forward. A year ago, the insurance industry would have dismissed the idea of a wholesale working-from-home model and new business not needing to be conducted in person. Covid-19 has created an opportunity and a paradigm shift and similarly, insurers should refocus their digi-change lens.”
The researchers continued to say that Covid-19 has demonstrated how important it is for insurers to have a chief risk officer to navigate strategy and identify opportunities. This, the researchers suggested, would enable them to break the tradition of often prioritising inward-facing, prescriptive digital strategies instead of daring to look towards an outward-facing integrated strategy to target upside risk.
Having surveyed professionals across nine insurance companies of different sizes, the researchers found that one in three chief risk officers were either not looking at the implementation of InsurTech and other data-oriented digital initiatives or not implementing it.
Risk intelligence through skills, knowledge, experience, education and training was also found to be largely lacking from board level downwards, emphasising resource limitations and unsatisfactory board engagement.
Moreover, the insurance industry was told to focus on transforming the traditional perception of risk as the ‘second line of defence’ into a value-identifying ‘second line of opportunity’. They also said that chief risk officers have become even more important for businesses to uncover risks and opportunities.
Moreover, the researchers said that insurance and reinsurance firms should focus more on realistic stress testing and scenario planning that considers the possibility of a potential second Covid-19 outbreak and their potential susceptibility to future pandemics. At the same time, the researchers warned against losing sight of risks like cyber crime that, as we have reported in the past, have grown considerably through the crisis.
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