Pure insurance will lose ground to ART in Germany: WTW

German insurance managers believe that for many companies, a holistic risk assessment and broader self-funding and ART options will be more important in the future than traditional insurance.

The Broker of the Future study, carried out by broking and consulting firm WTW, based on research with 43 German insurance managers, found that while insurance coverage remains a viable approach to risk management, its importance will decline in favour of alternative risk transfer solutions over the next decade.

“Companies have recognised that insurance alone does not always provide sufficient protection against today’s complex risks,” said Lukas Nazaruk, head of corporate risk & broking Germany and Austria at WTW.

For the study, WTW asked companies of different industries and sizes how they are organised in terms of risk and insurance management, what services they expect from the broker of the future and what criteria will be decisive for their choice today and in ten years’ time.

Today, around 30% of participants describe a mix of insurance and self-funding as very important. Looking ahead to the next five to ten years, this is expected to rise to 41%. Alternative risk transfer solutions are also becoming more important, rising from 17% to 37% over the same period.

At the same time, the importance of insurance protection is decreasing. Some 64% of those surveyed consider it as very important today, but this will only be 51% in the next ten years.

This means that brokers must adapt to change, says WTW.

“Changing customer preferences mean that the requirements for the industrial broker and its services are changing: contract processing (advice, brokerage, administration) is the most important activity to date, and is being taken over by quantitative risk advice and analysis,” said WTW.

The latter is already part of the expected range of services for 61%, and almost 90% assume that risk consulting will have to be part of their portfolio in the next five to ten years, based on this survey.

“Companies want a partner who takes their individual risk situation and industry-specific requirements into account,” said Safak Okur, head of broking Germany and Austria at WTW.

The competence expectations also underpin the desire to view risks more holistically, said WTW.

“Although risk advisory and placement skills remain by far the most important selection criteria for choosing brokers, they are swapping places. Industry-specific expertise takes third place, both today and in the future,” it said.

Quantitative risk analysis inevitably leads to a digital way of working. Accordingly, companies expect insurers and brokers to increasingly work with them using technology in the coming decade, up from 30% to 46%.

In particular, German insurance managers want greater use of digital solutions for information and data collection and analysis. “The success of data-driven risk management depends on the quality of the data, but also on the ability to interpret it correctly,” said Nazaruk.

“Many companies are reaching their limits due to a lack of skilled workers or expertise. It is up to the broker to bridge this skills gap and help leverage the insights to tailor a risk-hedging strategy,” he added.