Viewpoint: Reflecting on 30 Years of Transformation in the Re/Insurance Sector

Executive summary: Reflecting on 30 years of Pro Global’s journey in the re/insurance sector, it is evident that the company’s evolution parallels the broader shifts that have defined the industry’s growth, adaptation, and innovation. This reflection provides an opportunity to dive into the transformation the sector has undergone, emphasizing the need for agility, technological integration, and a balanced focus on innovation and tradition, says CEO Steve Lewis.

Three decades ago, the re/insurance landscape stood in stark contrast to today’s emerging dynamic ecosystem. The industry enjoyed comfortable margins, technological advancement was sluggish, underwriting was more art than science, and regulation was less developed. At the same time everyone looked… the same. It was essentially a sea of grey men in suits in a sleepy industry.

While the fundamental principle of the industry remains the same — the premiums of the many pay for the losses of the few — practically everything else has evolved at a pace that nobody imagined 30 years ago.

Emerging competition triggered this ripple effect of change. Since the early 1990s, the industry’s adaptability has been tested as it grappled with embracing innovation while preserving its traditions.

Entering the Digital Era: A Shift in Operations

As the industry transitioned into the digital era in the mid-1990s, technology began to reshape every facet of the re/insurance sector. From basic spreadsheet calculations to the emergence of the internet, the digitization of operations gained momentum. Email revolutionized communication, digital documentation replaced paper files, and the concept of e-commerce extended to insurance purchasing.

The rise of “ecosystem” thinking has redefined industry collaboration. Recognizing that no single entity can master every aspect of the re/insurance landscape, partnerships and collaborations have become key drivers of innovation. This approach accelerates the creation of comprehensive solutions and enhances client experiences.

Industry Redefining Events

The re/insurance sector’s trajectory over the next three decades will be irrevocably shaped by monumental tectonic shifts that have already set the course for change. The reverberations of events like 9/11, the financial crisis of 2008/2009, the global pandemic, and the ongoing war in Ukraine will continue to cast a long shadow over the industry.

These events have redefined risk, highlighting the need for nimble adaptation in an ever-fluid environment. Climate-related perils, intensified by a warming planet, demand a reevaluation of underwriting practices and risk assessment models. Simultaneously, the potential for artificial intelligence (AI) to revolutionize everything from risk prediction to customer experience necessitates an agile embrace of cutting-edge technology. The re/insurance sector finds itself at a crossroads of unprecedented challenges and opportunities — ones it must face head-on in order to remain relevant.

The Transformative Potential of AI

AI now stands as a beacon of transformative potential. This technology redefines risk assessment, decision-making, and overall performance of any business. As we stand on the precipice of an AI-driven era, the sector’s landscape will undergo unparalleled change. Alongside technological advancements, the sector has expanded geographically and is embracing diversity and inclusion initiatives.

The sector, built on the foundation of underwriting risk, must navigate these seismic shifts, capitalizing on innovation to mitigate risks, seize opportunities, and navigate a landscape where uncertainty itself is a risk to be managed.

Navigating change, however, comes with its own set of challenges. The concept of unintended consequences reminds us of the complexity inherent in transformation. For instance, while embracing technology yields positive outcomes, it also introduces uncertainties and sometimes risks that necessitate careful consideration and responsible progress.

Multi-Pronged Changes Ahead

The next 30 years for the industry will no doubt be shaped by geographic expansion, technology integration, and sustainable practices. AI and data will drive decisions, while systemic risks like climate change will reshape underwriting practices.

The sector has demonstrated remarkable progress but has not yet fully embraced the potential of technology to reshape its operational frameworks and redefine customer engagement. There is much more work to be done to streamline processes, optimize costs, and elevate the overall customer experience.

The sector must also continue to refine its focus on the critical importance of regulatory compliance and fairness. The adoption of risk-based capital models and the enhancement of economic modeling and pricing techniques underscore the industry’s commitment to precision and accountability.

Simultaneously, we are in the midst of an ongoing and significant cultural shift, with corporate leadership and ethical conduct taking centre stage. This shift is not isolated; rather, it’s part of a broader movement across industries towards fostering positive corporate cultures, built on integrity, responsibility, and transparency.

This journey has also highlighted the inseparable relationship between corporate culture and diversity & inclusion initiatives. We are, after all, people businesses and recognizing that a diverse and inclusive workforce as well as tapping into the widest available talent pool drives innovation and decision-making, the sector is taking positive steps to cultivate an environment that values individuals from all backgrounds.

As the industry looks forward, taking a holistic approach to transformation will continue to drive its evolution, paving the way for a more resilient, technologically empowered, and socially responsible re/insurance landscape. This holistic approach involves looking at a business as a whole, in its social and environmental context, as opposed to a siloed approach.

Despite real progress on many fronts, the insurance industry still carries too much cost and in real terms has been slow to innovate beyond that seen in product distribution, in particular personal lines (direct online selling and comparison websites) with very little innovation in the core insurance product which looks very similar to what was provided 300 years ago.

The slow adoption of innovation is due in many cases to the fact that the high burden of regulation in re/insurance dictates a considered approach to change, and ultimately reinforces a somewhat traditional industry where the opportunity for unencumbered innovation at speed is not commonplace. Nevertheless, this absence of substantial change stands in stark contrast to the rapid pace of advancement in other industries.

However, the emergence of transformative technologies such as digitization, data availability, automation tools, and AI and artificial general intelligence (AGI), or machine learning, has the potential to tip the scales. These technologies, which have matured significantly in the past half-decade, hold the promise of reshaping the industry’s landscape. They offer an avenue for unlocking hitherto untapped value, potentially leading to an era of innovation that could redefine the insurance sector’s fundamental processes and value proposition, bridging the gap between its rich history and a dynamic future.

In this dynamic landscape, embracing innovation, fostering diversity, and staying resilient are paramount. The next 30 years promise to be a thrilling ride — a journey where AI will redefine our understanding of intelligence, where data will drive decisions, and where human innovation will shape the future of re/insurance. As we set drive towards this horizon, let’s all buckle up, hold onto the spirit of innovation, and enjoy the remarkable voyage that lies ahead.

Topics Trends Reinsurance