"Our industry should see this as an encouragement to continue investing in innovative solutions and adapting to emerging risks."
- Pravina Ladva, group chief digital & technology officer at Swiss Re
Swiss Re has found that digital value creation has led to an increase in intangible assets, including digital data. Likewise, it has increased dependency on digital infrastructure which in turn, makes these assets more vulnerable to business interruption, cyber attacks etc…
However, Swiss Re’s latest report, ‘The economics of digitalisation in insurance: new risks, new solutions new efficiencies’, has found that the potential benefits across countries and throughout the insurance value chain are far from exhausted. Consequently, Swiss Re has introduced the Insurance Digitalisation Index, which monitors the digitalisation of the insurance markets in twenty-nine sample countries.
South Korea sits at the top of the index, followed by Sweden, Finland, and the USA. Although advanced markets with “strong physical infrastructure and high internet access rates” have made progress in digitalising their economies, China, Slovenia and India are catching up. This is due to emerging markets jumping straight into adopting the latest digital technologies rather than transitioning from legacy systems.
In the wider economy, Swiss Re believes digitalisation will create new risk pools, opening up new opportunities for insurers. The reinsurer highlighted that digital technology has facilitated sharing economy business models, which have resulted in fundamental shifts in operational risks and liabilities that require innovative insurance risk transfer solutions. Meanwhile, sharing services like Uber and Airbnb are increasingly replacing private ownership. This requires a shift in business mix from personal to commercial lines based on usage since personal lines typically exclude cover for commercial usage of vehicles and homes. Insurers can help provide coverage through “innovative digital risk transfer solutions.”
Due to this shift from physical goods to providing information and services, the global value of intangible assets of listed companies has increased fivefold over the last two decades. Nearly 80% of that value remains uninsured despite the threat of business interruption, cyber attacks, and the emerging liability risks related to AI.
Discussing the global appetite for cyber security, Swiss Re found that cyber security is a key concern for businesses as reflected by the demand for cyber insurance. Swiss Re Institute estimates that the global cyber premiums will reach USD 16bn in 2023, increasing by 60% in the last two years.
Swiss Re believes that digital technology will allow for more holistic and accurate risk assessments and better pricing of risks. The reinsurer also hopes that digital solutions can help automate standardised tasks, such as data collection and analysis for underwriting, driving down costs and ultimately leading to lower premiums.
Commenting on these findings, Jerome Haegeli, group chief economist at Swiss Re, has said:
"The study clearly shows a positive correlation between resilience and digitalisation. For society, digitalisation is a force for giving more people access to insurance and thereby closing protection gaps. For insurers, gains from better underwriting, risk mitigation and risk measurement from digitalisation of insurance improve the quality and efficiency of their work."
Pravina Ladva, group chief digital & technology officer at Swiss Re, added:
"Despite the rapid digital transformation of the insurance industry, accelerated by recent advancements in cutting-edge technology, we still see significant potential to make insurance more accessible and affordable for consumers. Our industry should see this as an encouragement to continue investing in innovative solutions and adapting to emerging risks."
