Insurtech can fix protection gap

The potential of insurtech is vital to the strategy of Hiscox going forward as its influence will permeate every part of the business and its offering to customers, according to Adam Szakmary, director of underwriting (Bermuda), Hiscox Re.

He said the re/insurer already has a number of strategic initiatives under way and that it will explore more opportunities where relevant.

“Insurtech has the potential to improve every single part of the insurance offering, and we’re keen to harness it for our benefit and that of our customers,” Szakmary said.

“We have a number of teams focused on insurtech and a number of insurtech initiatives already established.”

He stressed that in its Lloyd’s operations, Hiscox is playing a very active role in pushing forward Placing Platform Limited (PPL), the electronic platform designed to support a more flexible negotiation and faster placement at Lloyd’s. He said that under the leadership of Bronek Masojada, chief executive officer of Hiscox, the company believes this will help move the market forward and boost its relevance and resilience.

One area which he thinks will play an essential role in innovation going forward will be big data, and how the industry leverages this.

“Big data is an overused term, but data is a big part of our business. We analyse massive amounts of our own (and publicly available) information in order to price risks and offer the right risk products to our clients—insureds and investors,” Szakmary said.

“For example, with our FloodXtra product we are focused on working with our reinsurance partners to help close the flood insurance protection gap in the US by utilising high definition modelling and advanced analytics. This differentiates us as a trading partner.”

The other big issue on the company’s strategic agenda at the moment is the protection gap and how the industry can create opportunities from what remains a big challenge.

Szakmary said Hiscox is interested in solutions that take a macro approach to national and regional loss by engaging in areas where insurance has lower penetration, such as flood—and he added that insurtech also has a role to play in this sphere.

“We want to do this in partnership with non-governmental organisations and multilateral institutions, offering risk management solutions to governments through indemnity and parametric-based products that can more effectively deal with the protection gap.

“Insurtech and parametric derivatives may hold the key to improving access to cost-effective capital for protection gap hedging needs,” he said.

Part of the answer to this challenge will be the development of micro insurance products, especially in emerging economies, but it is only part of the answer, he said.

“Micro insurance is not the entire solution. For instance, if we think about flood, a micro insurance solution that uses mobile phone technology to measure and document flooding levels could effectively minimise the challenges associated with adjusting claims in difficult geographies,” Szakmary said.

“However, to entice risk-takers in emerging economies, we need to minimise moral hazards in the claims payment process. Rapid claims payment to affected individuals definitely helps to support the immediate needs of a community post-loss, which in turn supports core governmental services and institutions,” he concluded.

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