Transformation is underway in P&C commercial lines – finally! The nature and speed of the transformation will play out quite differently for small/medium/large commercial, workers’ comp, and specialty lines. And the stage of the transformation journey may be very different based on business strategies, the appetite for innovation, emerging technologies, InsurTech, and the geographic scope of the insurer. But the overriding theme is that commercial lines insurers are more aggressively looking to go beyond business as usual.
Guidewire Insight
As Strategy Meets Action (SMA) Founder and CEO Deb Smallwood states in her blog and the SMA report, "Across commercial lines, leadership teams are experiencing a new urgency to transform." We at Guidewire agree. Commercial lines insurance is experiencing significant disruptions—from new modes of digital engagement, rapid technology change, and competition—that are raising the expectations of customers, producers, and employees. We've seen it with our customers, including Nationwide. When we listen to stories like Nationwide's Commercial Lines Transformation, we get first-hand information on how our customers are using our products to deliver innovative digital experiences to their prospects, customers, partners, and customer service representatives.
Business interruption and cyber incidents are this year’s top business risks globally, according to the ‘Allianz Risk Barometer 2018.’ Larger losses from natural catastrophes are also a rising concern for businesses, with the record-breaking 2017 disaster year also ensuring climate change and increasing volatility of weather appears in the top 10 most important risks for the first time. Meanwhile, the risk impact of new technologies is one of the biggest climbers, as companies recognize innovations such as artificial intelligence or autonomous mobility could create new liabilities and larger-scale losses, as well as opportunities, in future. Conversely, businesses are less worried about market developments than 12 months ago.
Guidewire Insight
According to the Allianz Risk Barometer, for the first time, cyber incidents rank as the most feared business interruption trigger, with business interruption also considered the largest loss driver after a cyber incident. Risks, such as these, are evolving rapidly and pose unique underwriting and pricing challenges for insurers. Complexity and non-obvious patterns of risk linkage and risk accumulation require more diverse and dynamic data sets to be modeled effectively. Guidewire Cyence Risk Analytics exists for this reason. The data listening and risk analytics solution combines internet-scale data curation from public and proprietary sources together with machine learning and robust risk modeling to enable risk selection, pricing, and analysis of risk accumulation.
To succeed in ecosystems, insurers will have to take a hard look at their traditional roles and business models and evaluate opportunities to partner with players in other industries. They must also understand how ecosystems will shift value pools and change the nature of risk. Adopting an ecosystem mind-set will be an arduous journey for many insurers, but those that understand this evolving landscape can take the first steps to creating new revenue sources.
Guidewire Insight
This McKinsey article lays out a provocative vision of how insurers will have to reinvent their value propositions and participate in emerging global business ecosystems. We, at Guidewire, agree that P&C insurance is an industry in rapid change and shifting profit pools. The mission of our industry platform is to help insurers harness the powers of core, digital and data and capitalize on the opportunities that emerge from such change.