COLORADO SPRINGS — In response to the perennial question whether the insurance market is responding rapidly enough to a changing risk landscape, industry executives told Advisen that product innovation was happening “every day.”
Responses to systemic, global risks including climate change and cyber threats may take time to develop – and include various stakeholders, including governments – was the consensus of executives interviewed by Advisen at the CIAB Industry Leaders Forum here this week.
However, insurers and brokers are constantly listening to clients and evolving products on a smaller scale.
“You probably won’t see a lot of innovation on a grand scale in the short term,” said Lou Iglesias, president of Allied World North America. “However, innovation happens every day on a working level. We are constantly listening to customers and tracking new risks – resulting in constant adjustments to make sure we’re staying up with the times.”
Providing examples of new risks that the industry is tailoring products towards, Allied World executive vice president, Bobby Bowden, cited the healthcare sector.
Noting that frequency and severity of claims had risen sharply, Bowden said that Allied World was looking at solutions to the new risks Obamacare presents and have also been considering non-property business interruption in hospitals as a result of the Ebola virus outbreak.
Berkshire Hathaway Specialty Insurance (BHSI) executive vice president, David Bresnahan, highlighted his company’s business motto: “Simplicity over complexity” to explain its stance on innovation.
“Hire experienced people and empower them to do deals. Put them in the situation to be responsive and creative – that’s all part of a winning customer service proposition,” Bresnahan told Advisen.
Putting their money where their mouth is in terms of listening to their customers, BHSI has assembled an advisory board of 13 risk executives from Fortune 100 companies. The board meets formally twice a year, to inform BHSI on emerging corporate risks and to help prioritize new product development.
Bresnahan cited examples in the travel insurance arena, where BHSI has launched a per-flight “nuisance” cover for travelers that pays out automatically if the flight is delayed or baggage lost. The company is also researching whether earthquake insurance in California could be offered on a multi-year basis, to better address the low frequency of earthquakes in the state.
Despite the every day innovations occurring in the insurance marketplace, broader product development will require a blend of “youthful enthusiasm and experience”, according to JLT deputy group CEO, Mark Drummond-Brady.
Lloyd’s CEO, Inga Beale, said that attracting “Generation Y” into the insurance industry was key to innovation. She stated that the insurance industry should spend similar amounts of time and resource on research and development as parts of the manufacturing sector.
“Why doesn’t the insurance industry give bright minds the time and space to think about emerging risks? Part of that solution involves getting new brains in – young people who are not normally attracted to insurance,” Beale said on a panel at the CIAB conference.
David Long, Chairman and CEO at Liberty Mutual, concurred: “Kids are looking for more than a job – they are looking for challenges, to solve business problems. They’re not interested in a top-down, dictatorial environment. It’s a long haul to change that.”
AIG CEO, Peter Hancock, added that long-term product innovation will be driven by investment in research and development. Hancock noted that AIG had stepped-up its long-term research in engineering and its science group.