Are your clients ready for the Century of Risk?

The future is always uncertain. It comes with risks, rewards, opportunities, and threats. In insurance terms this means there is a need to understand key trends, to analyse “black swan” events, and to use innovation to chart the future of Insurtech in commercial insurance.

In the 21st century, the pace of change is accelerating. The types of risk are wide-ranging: from war, supply chain shortages, and financial loss, to the COVID-19 pandemic and any potential future public health crisis, to climate change, and cyber risks. With so many new challenges, managing risk is becoming more complex and clients need to have the right tools to improve their outcomes.

Greg Boutin,Chief Executive Officer of  Relay Platform, joins Intelligent Insurer at Commercial Line Innovation USA on Day 1 of the conference (May 9, 2022), to discuss whether technology provides the answer to managing this increasing risk complexity and volatility, by asking in his keynote speech: “Are your clients ready for the Century of Risk?”   “The Insurtech Revolution! Understand Key Trends, Breakdown Black Swan Events, and the Future of Insurtech in Commercial Insurance”.

Boutin will explore the new solutions that have emerged to increase top lines, reduce costs, and alleviate errors and omissions, and consider how incumbents have adapted, to uncover who is winning and how.

Ahead of the event, Boutin spoke to Intelligent Insurer about the impact of insurtech on processes, and how to overcome the obstacles of transferring risk.

What key trends are driving change at the intersection of insurance and technology?

That’s an important question, so let’s take a wide lens to answer it first, as we may get lost in the details otherwise.

The 21st century is clearly going to be the “Century of Risk”. By that, I mean that our world is changing at a faster rate than in pretty much any previous period in human history, with lots of new risks.

We witness unprecedented volatility in our broader environment, which impacts our ecosystem and the very nature of human evolution. Climate change, pandemics, conflicts, and global trade make headlines daily. New risks emerge rapidly due to this collision of events and ideas.

This volatility has a larger impact than ever, because economic, cultural, and political systems are much more interconnected and interdependent. Tipping points trigger systemic shocks more quickly, turning previously isolated incidents into full-blown, global black swan events. Some are visible tsunamis of change, and others are undercurrents.

Regardless, they increasingly call for global, proactive responses. We are changing with our world, but we currently struggle to keep up or, preferably, to get ahead, by developing our ability to steer that change in more favourable directions.

How is that connected to commercial insurance?

At its core, the business of insurance is to enable and guide risk-taking. Insurance increases our ability to take risks, by covering those risks and by alleviating them in the process.

That second part is becoming more important than ever. Insurance executives cannot sit on the sidelines and passively watch all those new global struggles unfold.

Our ability to identify, measure, prevent, transfer, and recover from all sorts of risks is more important than it has ever been. It must evolve and adapt so that we humans can continue to do both as well. And insurance executives have a responsibility to drive this adaptation.

The insurance ecosystem sits between governments and businesses, with droves of unique insights and data which it can use to influence our global response. Insurance can connect critical dots, and in particular trigger earlier responses to major challenges.

No longer can insurance companies limit themselves to acting as the capitalist equivalent of a lighthouse, and simply signal shoreline risks. The great ones are turning into futuristic lighthouses with the power to directly affect both weather and currents.

Insurance can help businesses and governments adopt new technologies to navigate new risks. Going even one step beyond, insurance can adopt new technologies themselves to better drive change in their ecosystem. That is the biggest rupture I currently see in the insurance landscape, compared to a few years ago.

What does that mean for commercial insurance and insurtech businesses?

Insurance and insurtech companies are in the business of identifying and preventing risk, not just covering it. And although some will think they have always been, today the leading players in our industry are taking that to a whole new level.

Even more practically, that means that they must combine three concrete assets more tightly than ever before:

A. Data

B. Processes

C. Algorithms

Data is being collected to assess risks before they turn into a claim, of course, but much more than previously, to prevent and minimise that risk in a more proactive manner. Third-party data is often proving most accurate and structured, so you find an explosion of insurtech startups in that domain. Faster, smaller, and cheaper sensors that collect rich data drive this trend. If the term were not used for something else, I would call that “embedded insurance” (as opposed to the current meaning which is narrowly focused on selling insurance with a product).

Processes are being automated to accelerate our ability to transfer data, and thus risks, which support a major boost in the industry’s agility and response time. This is driven by what I would call “computer-assisted risk transfer”—increasing collaboration between large established companies and innovative startups. It is composed of a series of insidious, pervasive, and unstoppable advances in process digitisation, cloud computing, graphic user interfaces, optical character recognition, and no-code technologies. This is the main area in which my company,  Relay Platform, currently plays.

Algorithms are penetrating the industry at a faster rate as well. They are evident not only through the innovation we see in underwriting models, but also through the emergence of risk prevention models, often spearheaded by digital managing general agents (MGAs). We see that a lot in cyber insurance, but it is also happening in trucking and other transportation insurance, and other business classes. Machine learning is a key technology in that space.

You focus on processes—can you tell us more about that?

We have built a solution to what is commonly called quote-bind-issue, which is designed to work across commercial lines. We launched it in cyber insurance, with many carrier integrations, but also put it to use in other lines such as management liability, reps & warranties, terrorism, high-net-worth clients, and in facultative reinsurance.

Our solution has a unique ability to support specialty lines, by combining features that are not often found in a single system, such as:

All this is in a highly usable, white-labelled interface, for managers and their teams. We sell it to practice leaders within retail and wholesale brokerages. We also work closely with carriers and MGAs/managing general underwriters, to ensure that both parts of the value chain are cared for.

We have had tremendous interest from the industry, given the rising challenges of capturing more information, finding capacity, and attracting talent. We have attracted many of the largest and most innovative agents, brokers, MGAs, and carriers to the platform.

You can learn more about that at  www.relayplatform.com 

What is the largest obstacle in achieving your vision of transferring risk better?

In the short term, we are focused on helping our many clients to best utilise their  Relay system, while adding new participants to our ecosystem. We have grown placements by over 50 percent each month for the past 12 months, which of course requires our attention.

Looking forward, I would say that I foresee the “atomization” of risk—and that is a personal hope. I predict the creation of a “unit of risk” in the future, which may support increased risk securitisation. While this “theory of everything” may sound out of reach or far-fetched today, it is not far-fetched to envision that we will develop ways to quantify and compare very different types of risk.

The industry already does this within narrowly-defined domains—next it will focus on tying different domain risks together through common, dynamic standards.

Having a common language in the risk business, meaning a joint approach to expressing risk, going well beyond static standards, will unlock tremendous potential in commercial insurance.

Join Greg Boutin, chief executive officer of  Relay Platform, to learn about  “The Insurtech Revolution! Understand Key Trends, Breakdown Black Swan Events, and the Future of Insurtech in Commercial Insurance”, on May 9, 2022, at 10:45 am EDT.