Discussions at the first annual Super Regional P/C InsurerTM conference centered on the theme of “Finding Your True North” – a concept that can be applied to one’s personal and business life of knowing the right path to follow. From this central theme, speakers discussed a number of topics, including the way the insurance industry is evolving through technology (InsureTech), the ongoing presence of cybersecurity threats to insurers and their customers and reinsurance mitigation strategies.
There are a number of forces changing the insurance industry today (e.g., the media and changing customer demographics), but the number one factor is technology. For insurers to survive in this age of digital disruption, companies must embrace InsureTech as an opportunity or risk the possibility of being left behind.
One innovation area discussed in detail was the rise of autonomous vehicles. Because of this addition to the auto industry, business models for traditional auto insurance will likely have to change. Traditionally, auto insurance is focused on the driver rather than the vehicle. As more driving is being done by technology rather than the human driver, auto insurance may shift to product liability insurance. Although autonomous vehicles will likely increase safety on the road, automobile manufacturers may see a new liability develop for driving risk.
In tandem with the technology wave, cybersecurity has risen to permeate the insurance industry. Although data breaches to companies are occurring more frequently, companies are still taking a reactive approach to deal with cybersecurity intrusions. A preventative approach of conducting risk assessments and establishing defensive mechanisms for cyber-attacks needs to be adopted by organizations. Businesses must relook at their current strategy and take a top-down approach when dealing with cyber threats to establish and manage a program that is integrated throughout their business model.
Note: NAIC recently passed new regulations regarding cybersecurity. Look for more information on the new regulations, and rate of adoption by states in the coming weeks.
Several insurance organizations overlook their reinsurance mitigation strategy and program. However, a panel at this conference discussed the use of catastrophe (CAT) bonds as an option to incorporate into their reinsurance plan. With CAT bonds, insurers and reinsurers are able to lower reinsurance costs by transferring some of their risk to investors. By transferring risk to the investor, P/C insurers are able to lower their reinsurance costs and free up money for the company to invest. The bond pricing model is critical in supporting a company’s risk mitigation strategy and allowing for successful sales in the capital markets.
The inaugural conference was filled with high quality content and discussions. We look forward to a second year with additional timely topics pertinent to insurers in 2018.
For more information on these topics, or to learn how Baker Tilly's insurance industry specialists can help, contact our team.