“The insurance industry is already evolving, and is now on the doorstep of major change. The challenge is for us to adapt.”
This was one of the main themes of an insurance industry panel discussion held by Norton Rose Fulbright in Sydney on 4 February 2016 titled Consolidation, Competition and Challenges on the Global Insurance Stage – What Does this Mean for the Australian Market?
The panel comprised seven industry heavyweights:
Heinrich Eder: Managing Director, Munich Re
Colin Fagen: Group Chief Strategy Officer, QBE Insurance
John French: Country President of Australia and New Zealand for ACE Insurance Limited, and incoming Country President, Australia and New Zealand, for the new Chubb
Steve Gibbs: Head of Asia Pacific Claims, XL Catlin
Robert Kelly: Managing Director and CEO, Steadfast
Scott Leney: CEO, Marsh Australia
Chris Mackinnon: Lloyd’s General Representative in Australia
Key messages from the Panellists:
- There’s more consolidation to come
With a lot of capacity and capital in the marketplace, the panellists agreed that there’ll be even more consolidation in the insurance industry in 2016. In a presentation which preceded the panel discussion, Mike Steindorf, head of Norton Rose Fulbright’s Insurance International Business Group in the US, commented that “as the ACE/Chubb merger shows, no deal is too big anymore.”
These new, bigger insurance and broking organisations will add capital, leading to increased competition between fewer players in both the insurer and broker markets.
- Technology is an enabler
Technology facilitates connections and efficiencies that weren’t possible in the industry in the past. The panel predicted that we’ll see major change in the underwriting market due to technology, and that technology will also drive significant changes in distribution.
According to one of the panellists, although data and analytics are one of the most important areas in the industry right now, advances in technology could even overtake the need to gather data.
- Focus on underwriting profits, not investment returns
The panellist agreed that insurers need to rely on underwriting profits, not investment returns, to generate revenue. In order to save costs, the insurance industry will have to look at new distribution channels.
- Global Trends – cyber risk and the regulatory environment
Liam O’Connell, head of Norton Rose Fulbright’s Insurance team in Europe, observed that currently, European countries are managing cyber risk very carefully. Data protection and data breaches are major issues.
Globally, the industry is also facing increased regulation.
- Despite all the change, there’s still conservatism
Although there’s an enormous amount of change taking place right now, there’s still conservative behaviour in two areas of the industry:
- The reinsurance market; and
- Emerging risks: Some risks are emerging faster than the insurance products to manage the risks. But one of the panellists commented that “it’s important [for insurers] to understand the risks we’re underwriting”, which explains the conservative approach.
There was a consensus between the panellists and Norton Rose Fulbright insurance partners that it’s hard to know what the insurance landscape will look like five or ten years from now. But one thing’s for sure: no matter what, there will always be a global insurance industry.