Technology risks require deeper partnership

Insurance solutions for emerging technologies will require closer partnerships between those in the risk transfer chain, as well as more information sharing, according to Jason Harris, chief executive, international at XL Catlin. But while new technology will change the risk landscape, it may help to help reduce the cost of insurance and improve service at carriers, he told Commercial Risk Europe. “There is no doubt that technology, and increasingly robotics, is transforming the risks of our customers and driving an evolution in the risk landscape,” said Mr Harris. For example, the majority of car accidents are caused by human error, but the introduction of driverless vehicles should see a reduction in accident rates, explained Mr Harris. However, automation will bring about new risks, such as greater interconnectivity and issues with data and cyber security, he added. It is not just driverless cars that will cause problems; automation and robotics are already finding uses in mining, manufacturing and logistics, Mr Harris added. In response, XL Catlin has been partnering with technology firms to better understand the implications of emerging technologies on risk management and insurance solutions. “Robotics and automation are transformational and we are working with our customers to pilot technology on their premises and learn with them how to understand it,” said Mr Harris. For example, XL Catlin recently joined a consortium led by Oxbotica, the Oxford-based artificial intelligence company developing driverless car technology. The partnership will see XL Catlin work with others to create a risk profiling tool and insurance proposition for driverless cars. “There will be new and emerging risks as we adopt new technology. And as insurers we have to think about how exposures will change and ensure that products we provide are relevant. We are obliged to understand these new and emerging risks and make sure that insurance products can cover them,” said Mr Harris. Technology will also change the way in which insurers deliver their products and services, he continued. Corporates may need to seek closer partnerships with their insurers, sharing more information as they tackle ever more complex risks. “I hope that we will see deeper partnerships and more transparency, where clients feel they are able to share information. Some risks with the biggest impact – like economic loss cover or cyber and data-related issues – require a deep relationship between client, broker and insurer if we are to underwrite those concepts,” said Mr Harris “Some of the biggest challenges for clients will be unique to them, and technology will help us create bespoke products for those sophisticated buyers able to articulate their risks in areas like product recall, business interruption and reputational risk,” he said. While technology should lighten the load of risk managers when it comes to arranging insurance, this will be balanced against an expected increase in the complexity of risk. “I hope that technology will reduce the burden for risk managers but the reality is that dependencies and connectivity will increase and risk managers will need to understand new exposures more fully,” said Mr Harris. Technology could also improve servicing at insurance companies and reduce the cost of cover, he said. Blockchain technology could reduce “frictional costs” in the insurance market and help improve servicing of global programmes, he said. “There are a number of features around commercial insurance where I am convinced we can improve service quality and improve efficiency,” added Mr Harris. But to offer bespoke solutions to complex risks, insurers need data and clarity on where companies see specific risks, according to Mr Harris. This has implications for future skills of risk managers, he said. “Some risk managers will need to become even more sophisticated in terms of their skill sets and get closer to the board. They will need to be even more familiar with analytics and speak the language of the board,” he said.

Technology risks require deeper partnership

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