A survey of brokers and the small and medium-sized businesses (SMEs) they serve, conducted by global specialty re/insurer Argo Group International Holdings, Ltd., has identified cybercrime, climate change, and talent retention as among the areas where re/insurance is most likely to fall behind.
For example, Argo found that 71% of brokers claim to be familiar with cyber risks, while 84% of SMEs considered cyber threats to be a priority issue, yet only 40% of SMEs carry any cyber coverage.
Argo noted that cyber pricing is particularly difficult given the re/insurance industry’s limited experience in assessing the impact of emerging cyber risks, and said that it expects to see a further disconnect between reductions in the cost of cyber coverage and the increasing scope of risk.
Similarly, climate change may entail a host of emerging risks, such as heightened flood exposure due to rising sea levels, and stronger, less predictable hurricanes due to changes in sea surface temperatures.
Argo’s survey indicated that brokers seem to understand climate risk, with 77% of respondents stating that climate change poses a medium to high risk to their clients in the long term.
However, insurance uptake was again found to be deficient, with fewer than half of SME clients saying they intend to purchase additional insurance within the next five years.
Argo also noted that re/insurers may be faced with a shortage of talent over the coming years as many industry veterans begin to retire. 54% of survey respondents said they expect a talent gap to appear in underwriting, while 39% expect a similar gap in broking.
Among the possible causes of the coming shortage, 35% of brokers said that the industry’s slowness to innovate is a key factor, while 32% said lack of knowledge about the industry is to blame.
However, re/insurers may be able to compensate for shortfalls in coverage by leveraging the vast amount of data that is to be made available through sources like the Internet of Things, Argo claimed.
“For the first time, we will be able to measure almost anything that happens,” said Mark E. Watson III, Chief Executive Officer (CEO) of Argo, in the company’s mid-year Letter to Shareholders.
“And for anything that can be measured, our ability to precisely assess the risk will continue to increase,” he added. “That will take us a long way toward making almost any object, event or activity insurable for the first time in history.”
“Our industry is changing radically and forever. Those who win in the future will be focused on innovation, using technology to solve their clients’ problems and deeply improving the customer experience.”