The insurance industry should avoid returning to its previous low-tech ways of working when the coronavirus pandemic has subsided, according to two senior industry executives.
Speaking on an S&P Global Market Intelligence webinar about the future of the European insurance industry, David Williams, managing director of underwriting and technical services at AXA Insurance UK PLC, said it was "amazing" how the insurance industry was able to switch to using technology during lockdown that it had previously considered unworkable. He noted that within a few weeks insurers had "achieved what would previously have taken us several years."
Williams asserted that one of the biggest barriers to making change at large companies was culture, and that as a result of the pandemic, company culture had been "completely thrown up in the air." He added: "Therefore I think the opportunity is there to make sure that we don't just drift back to the old ways of doing things."
The pandemic has given insurers a chance not only to change their own processes, but also to analyze their products and exposures, according to Williams. Acknowledging the damage to the industry's reputation from disputes over business interruption claims, he said: "We need to make sure that we have the products that we need going forward and we need to find a way to communicate to our customers so that we are much more clearly telling them what they are paying for and getting them to understand the value of the product."
Fellow panelist David Flandro, managing director of analytics at broker Hyperion Insurance Group Ltd.'s Hyperion X digital arm, said there had been a "pretty remarkable" increase in using digital trading platforms such as those provided by AkinovA and Tremor Technologies, as well as Hyperion X's own xTrade marketplace. Volumes on xTrade had increased 320% year on year, much of which was trading of wholesale business, which had largely been transacted manually before the pandemic, Flandro said.
He added: "I don't think we're ever going back from that, and I actually think that's good."
The shift to digital trading, Flandro said, would allow insurers to cut acquisition costs, which make up a big chunk of their expense ratios, and ultimately create better products for customers. The next step, he said, was taking the data from digital trading to allow insurance to be traded in a similar way to other financial instruments.
Flandro said the shift would be "disruptive" rather than incremental, accelerated by the pandemic. He added: "I think risk trading in five years, in fact even risk underwriting, will look very different than it does now just because of this acceleration that we have seen during this period."