Disruptive technologies are driving widespread change across the insurance and reinsurance industry and the property/casualty (P/C) sector is now at an inflection point of the ongoing change, Vincent J. Dowling, Jr. told attendees at the Marsh & McLennan Companies Young Professionals’ Global Forum, 2017.
“I have been following the property/casualty industry for 35 years. And I would argue that there has been more change in the past five years than the previous 30 – and we are just at an inflection point of that change,” said Dowling, Managing Partner of Dowling & Partners Securities LLC.
The global P/C industry is under increasing pressure from low interest rates driving down investment returns, the benign loss environment, and ample competition that is fuelling a supply/demand imbalance underlined by persistent rate declines.
Add to these headwinds the rise of technology and the disruption to the marketplace and insurance value chain that digitalisation and advanced technological capabilities brings, and it’s easy to see just how much change could potentially sweep through the industry.
“In your careers, personal and commercial auto (insurance) business will be gone,” Dowling told attendees, adding that small commercial lines are also likely to be greatly disrupted by technology that is looking to increase efficiency and ultimately jump the value chain.
The rise of InsurTech and FinTech business models is seeing companies look to disrupt value chains, essentially cutting out the middle man and going more directly to the source of risk in an effort to increase business, lower costs, and promote a better client experience.
At the same time, Dowling explained that the P/C industry, specifically in the U.S., isn’t as profitable as it once was, and the loss & expense ratio of the sector compared with profit made on every dollar, “is not sustainable,” and leaves the industry at “significant risk of dislocation.”
Dowling expects InsurTech and Fintech to expand and only increase its influence, adding that “he who controls the customer wins,” in a rapidly advancing and evolving insurance and reinsurance industry.