Paolo Ribotta, Head of Global Corporate & Commercial, Generali Group, considers the question: what are most challenging emerging risks for the insurance industry to cover for their commercial clients?
Let’s set the stage. There are some mega trends that clearly will have an impact. On one hand, we have, of course, technology. On the other, the world today is highly interconnected, and so are the risks from water crises and interstate conflicts to fiscal crises, cyberattacks, social instability, extreme weather and pandemics.
Cyber is by far the number one emerging threat, but a lot has been said about it, so I would like focus on other issues.
Within this context, I see some of the most important emerging risks coming from the following three elements:
1. Business continuity and reputation;
2. The evolution of the business models of our customers and
3. An overall shift (especially in Europe) from production and manufacturing to intellectual capital and services.
I see reputation as more and more one of the key risks and challenges, and, actually, opportunities for a client.
For example, if we look at how our clients have developed their geographical presence, we can see how new risks related to this expansion have emerged and are becoming more important.
Expansion into new countries with natural catastrophe risks or related social conditions could and will drive more reputation and business continuity issues. If you think about everything we have seen in recent years in terms of social unrest or critical social factors, clearly these could have an impact on the business continuity and /or reputation of clients.
Another element that plays towards the reputation challenge is the digital space and communication channels, such as social networks. What happens in a given place is immediately known everywhere in the world, within the blink of an eye. Even more importantly, within these technologies and channels there is less and less the ability for the users of this information to distinguish between true and false. Corporate and commercial clients can have their reputation exposed in any single moment either for good or for ill.
One of the emerging risks of the insurance industry is in connection with the evolution of the business model of our customers and how this is already changing some of their risk priorities. Such development pressures us, insurance companies, to act immediately and wisely to improve dramatically our ability to listen to clients, understand their needs and especially know how we can play a role in their own business models.
For an increasingly number of corporations, the key success factor is the customer experience and the value proposition that they are bringing to their clients.
Now we see that what makes the difference between one successful corporation and another is not only the quality of the goods that they manufacture and sell but, as I was saying before, the customer experience and how well these corporations manage their clients’ lifecycle.
I believe that the ability to evolve in their business model so that companies defeat their competition without compromising on margins is the critical aspect. In connection with this, our key challenge is really to remain relevant as insurers, not just as a contingent capital providers but even more so as a service providers, ensuring that our value proposition helps corporations to deliver their fully fledged customer experience and promise.
Another aspect, which is a subset of the above, relates to the shift we have been seeing for some years from production and manufacturing to intellectual capital and services. This shift creates an approach that goes much more towards what we traditionally look at as liabilities instead of traditional protection of assets.
Let’s take for example driverless vehicles and sharing economy companies. These are creating a disruption in the way insurance companies and clients are looking at the traditional motor cover, so there again we will have a shift in the liabilities.
Another example is domotics. Home is no longer just four walls with furniture inside where you can have a water leak or a fire. All of a sudden, it becomes a complex system where many devices are interacting. The interaction among them, and their potential failure to provide the service they were intended for, will create needs or exposures that today we may not think about. You can expand these examples across the corporate segment.
For insurers, I strongly believe that technology and big data play a huge role empowering us ever more with insights to support clients’ business in upgrading and improving their value proposition. One on hand, therefore, it is essential for us to invest heavily in data analytics. On the other hand, and even more importantly, it is fundamental for us to invest in creating the skills to transform data into insights and knowledge to drive decision making.