Insurers not doing enough with technology and innovation, say risk managers

Asia’s Risk managers have such low expectations of insurers’ and their ability to innovate that two thirds of them believe they will never receive a policy document on the day of inception in their lifetime.

This revelation was one of the more striking findings from this year’s Risk Frontiers Asia survey, produced by Commercial Risk Asia in partnership with Parima and Generali. And it is all the more surprising given the amount of attention directed towards the growing insurtech market in Asia.

Whereas last year’s inaugural survey focused on the use of captives and global programmes by Asian risk and insurance managers, this year we focused on examples of innovation in corporate insurance.

And while there remains clear scepticism toward the ability of insurers to correct some of its most glaring inefficiencies (such as the late delivery of policy documents), there is also a strong belief among risk managers that insurers should be doing more to realise the potential for technology to provide genuine innovation.

For example, more than two thirds of respondents believe (68%) that technology can be better employed to tackle emerging risks, and the same percentage believe insurtech can be successfully used for corporate insurance as opposed to retail and personal lines, despite the relatively few examples of insurtech initiatives in the commercial insurance market.

“The insurance industry needs to perform a soul-searching exercise in regards to becoming a truly effective industry in terms of operating model: policies issued prior to inception, integration of the client’s maturity of risk management in their offering and pricing, the ability to develop better coverage for emerging risks such as cyber,” said Franck Baron, chairman of Parima.

The findings also leave the insurance industry vulnerable to disruption from more digitally-efficient challengers, said Hayden Seach, regional head of global corporate and commercial, Asia at Generali.
“One area in which insurers are particularly vulnerable is claims disruption. A way forward may be to have greater involvement from risk managers in the claims process and its data management. Risk managers have consistently stressed the importance of both their own and industry-wide data, and they would like to see more cooperation on this front to help them better manage their exposures,” he said.

The Risk Frontiers survey also asked risk managers to rank their top risks. Once again, cyber came out on top (47%), followed by political and economic risks (both 36%), although the percentages were almost double that of 2016, suggesting that these exposures are widening.

More worrying is that despite the fact cyber risk continues to dominate risk managers’ agendas, there is still only a modest take-up of cyber insurance. “Cyber risks are taking a toll and yet cyber insurance is not considered to be valuable,” said one respondent. “More needs to be done.”

The survey also asked risk managers if their role was taken more seriously by board members. Encouragingly, the most commonly cited figure was 8 out of 10, reported by more than a quarter (27.8%) of risk managers, which is also considerably higher than the 21% of respondents that answered 5 or below.

However, before any complacency sets in, the high numbers for the 6 and 7 (which had a combined percentage of 37%) suggest that more work could be done to improve the level of boardroom acceptance and to see risk management attain the same status in Asia-Pacific as enjoyed in Europe and North America.

Furthermore, some of the anecdotal information we have amassed during the past year tells us that there are still some challenges for risk managers to overcome in their journey up the corporate ladder. For example, the risk manager at a conglomerate operating in Southeast Asia and with a business portfolio covering industries as diverse as property, retail, construction and manufacturing, confessed that while he has an enterprise risk management framework in place including a comprehensive risk reporting process, the implementation of the reporting still leaves a lot to be desired, chiefly as a result of senior management.

The findings on the acceptance of risk management at boardroom level were welcomed by Parima’s Mr Baron, who stressed that this remains a core issue for the association. “This survey is very much aligned to the core purpose of Parima, which is about helping our members that deal with risk management to be as relevant as possible to their executive committees and boards.

“This implies a lot of education, maintenance of accurate knowledge and training on how to relevantly engage with the c-suite. Risk (and risk financing) should be a nodal point to each and every board discussion.”

Mr Baron has also recently spoken out on the need for risk managers to better articulate their value to senior executives and to emphasise the strategic rather than technical features of the profession.