Overarching macro trends are driving changes within the insurance risk landscape

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Disruptive environmental patterns, technological advancements, evolving social and demographic trends, new medical and health concerns, and a shifting business environment are driving several prominent emerging risks that demand high-priority insurance industry attention.

These new and emerging risks may seriously affect policyholders’ lives, health, property, and business, which could drive up business interruption, liability, property damage, and life and health claims. Insurers must recognize the impact of emerging risks on customers and adapt offerings to meet policyholder needs better.

Across the globe, customers say they feel the impact of these macro trends in their lives, according to the World Insurance Report (WIR) 2019. The report also explores interesting demographic and geographic variations in how customers perceive these trends.

Emerging risks are transforming the insurance risk landscape

World Insurance Report 2019

Commercial customers feel the impact of evolving macro trends more keenly than individual policyholders

While both business and personal customers are unanimous in their view of the significance of evolving macro trends, more than 40% of business customers said macro trends would impact them considerably as compared with nearly 28% of individual policyholders.

Commercial customers across the globe expressed concern regarding risks related to the changing business environment and cybersecurity while individual policyholders polled for the WIR 2019 overwhelmingly indicated concern about moderate to high exposure to emerging risks associated with healthcare costs and medical matters.

What could these risks mean for insurers?

The changing business and regulatory environment indicate the need for insurers to more closely monitor and regularly update policy coverage as well as terms and conditions.

Similarly, new medical and health concerns, compounded by escalating healthcare costs, may spur life and health claims. The result could drive health payers to a preventive model of care that leverages technology to monitor members and provide timely care interventions.

Customers perceive high potential impact from fast-paced technological advancements

Nearly a third of individual customers and close to 47% of business customers perceive significant risk impact from technological advancements. In fact, respondents in Europe, Latin America, and Asia-pacific (excluding Japan) rated technological advancements as having the highest impact on their lives or businesses.

New risks emerging from technological developments such as the increasing use of automation and artificial intelligence (AI) offer credence to customer concerns. For instance, automotive insurance could transition from personal-line to commercial-line insurance as autonomous vehicles gain popularity.

As cybercrime and data breaches receive increasing attention, 83% of WIR 2019 individual respondents said they were concerned about exposure to cyber attacks. However, only 3% currently have comprehensive coverage as part of their insurance. This gap reveals a significant opportunity to develop propositions that meet policyholder needs and concerns.

Insurers could also face an increase in liability claims as well as heightened severity of claims pertaining to AI systems’ damage, which could require enhanced actuarial models to better estimate losses from AI-based systems.

Emerging markets face higher exposure to new and emerging risks

The reported impact of macro trends is significantly higher in emerging markets when compared to developed markets, with 40% of individuals and 51% of businesses from emerging markets feeling exposed to the impact of evolving macro trends as compared with only 23% individuals and 35% businesses from developed markets.[1]

These figures may indicate unease among emerging-market customers based on their regions’ low preparedness to face challenges posed by new risks.

Thus, we see that the impact of emerging risks is inevitable and customers from around the world are feeling its effects.

However, a cause for concern is the fact that a vast majority of customers do not feel adequately covered for these risks. Less than 15% of individual customers and less than 25% of business customers said they were covered comprehensively for any of the emerging risks analyzed in the WIR 2019.

Clearly, a coverage gap exists, but is it top of mind for insurers? Not exactly. Less than 45% of insurance executives surveyed acknowledged that life and health-related risks are driving demand for new products, and less than 20% recognized the demand impact around personal property risks. Although commercial space alignment was somewhat better, a significant coverage gap remains.

How can insurers recognize customer needs better and uncover opportunities presented by the coverage gap? Download your copy of the World Insurance Report 2019 to learn how insurers can build key capabilities that address emerging-risk needs.

[1] Emerging markets referenced in the WIR 2019 refer to surveyed countries in Latin America and Asia-Pacific (excluding Japan).

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