The important role technology plays in brokers’ service offering is set to increase and while it can and will help to improve efficiency, it’s unlikely to disrupt the reinsurance broking market, says Deputy Chairman of Willis Re, Mark Hvidsten.
Technology continues to advance at a rapid pace and is increasingly influencing the insurance and reinsurance landscape. The rise of technology and its focus on the risk transfer industry has occurred at a time when market participants are striving for greater efficiency, in an effort to both lower costs and remain relevant in an evolving sector.
For brokers such as Willis Re, the reinsurance arm of global brokerage Willis Towers Watson (WTW), technology plays a tremendous role in their service offering, a role which the firm’s Deputy Chairman expects to increase.
“However, introducing new technologies is not a simple plug-and-play task,” he warned. “The challenge of optimising the benefits that technology brings relative to established work processes is enormous.
“It is essential to ensure that we, as a market, do not become over-reliant on technologies that simply mimic established processes, and therefore miss opportunities to amend and improve our established execution.”
In an interview with Reinsurance News, Hvidsten explained that certain activities such as data analysis are “massively enabled” through the use of effective technology.
“Understanding an insurance company’s capital and volatility management goals in the context of its overall business plan and vision is not a job that can be performed by an algorithm, but tech can play a massive role in how to get to those goals.
“Technology offers brokers the opportunity to concentrate their people on the higher-value parts of their offering, and focus even more intently on value for clients,” he continued.
Supported by the sheer volume of InsurTech startups and ever-growing implementation of new tech to improve operations, the focus of tech on the re/insurance broking sector has raised questions about its potential to disrupt the space.
However, Hvidsten told Reinsurance News that in reinsurance broking, tech is “unlikely to disrupt the market.”
Adding, “It can and will help to improve the efficiency of placement, but will not replace relationships in a market where our ultimate product – capital solutions – is far from commoditised.
“In any case, placement is a critical but subordinated component of reinsurance brokers’ offering. Analysis, structuring, and other consulting functions are its core. These services are in demand and widely valued both by risk carriers and clients, and cannot easily be replaced by technology-driven disruptors.”
While Hvidsten feels tech is unlikely to disrupt the reinsurance broking sector, he highlighted that the broker’s work processes require a chain of valuable people, from front-line brokers to back office staff and everyone in between, all of which can leverage tech to their benefit.
“Mechanisation can be embraced to help these individuals work more efficiently, which will enable them to concentrate even more on those areas within their responsibilities which create value for our clients, and to eliminate rote tasks which do not require much intellectual capital. That will improve both our value to clients over time, and consequently support the financial characteristics of the business,” said Hvidsten.
Regardless of the growing need for greater efficiency and the rise of tech, Hvidsten concluded that risk carriers are increasingly realising the benefits and value of the reinsurance broker.
“Brokers’ share of the reinsurance market has increased dramatically over the past 20 years. In the U.S., for example, it has risen from about half to about 85%, and the numbers are moving in a similar direction in Europe and throughout the world.
“Further, we are now seeing life insurance companies explore increasingly the benefits of intermediation enjoyed by their counterparts in the P&C world, and engage brokers to help them identify and secure the most efficient solutions to their capital and other challenges.
“Risk carriers across the piece value reinsurance brokers, their advice, and their added value more and more,” said Hvidsten.