8DECEMBER 2020Innovation and Insurtech are two words that leaders in the insurance industry can't help but see almost every day. Change isn't new to the insurance industry--the industry has dealt with change continually over time, addressing new risks such as those stemming from the Industrial Revolution, to the invention of the automobile, the advent of cat modeling and the internet, along with many changes to the business process of insurance through e-commerce, where even further change is likely. However, the historical pace of change and the ability to manage through it is no indication of the future.Several important differences make managing change over the next 10 to 15 years much different and more important than in the past. First, the speed of change--in areas such as driverless cars, the internet and connectivity, and risk from climate change--is accelerating and will require change in insurance coverages at a much faster pace.What's more, changes in the insurance process and the emergence of new competitors will further pressure current insurance market participants. Past new entrants to the market typically came from an insurance background and perspective, with new capital. The new entrants of the future will come with a strong technology focus or huge customer bases from outside the insurance industry.The huge increase in the amount of data from the Internet of Things has been a big benefit to the insurance industry with regard to predictive analytics. But that same information is also available to new competitors, who are in a very strong position to put it to use in new technology platforms to strengthen their analytics, shorten the insurance delivery process, and change products to fit the demands of a dynamic economy.THE NEED TO BE INNOVATIVE IS OUT OF YOUR CONTROLBy Matthew C Mosher, EVP & Chief Operating Officer, A M Best CompanyTaken a step further, those large potential competitors from outside the insurance industry are already accumulating the data and customer connections that will have a major impact on the business of risk management. The accumulation of data and connectivity position these firms to shift risk management from risk transfer through insurance, to risk avoidance through monitoring services. Yes, there will still be the need for an insurance product to handle the residual risk, but that risk can be greatly diminished through risk monitoring and notification services. Even if those organizations don't assume the residual risk and opt to provide insurance themselves, the reduction in risk will have an impact on the demand for insurance coverage in traditional lines of business.A final driver of the need for innovation in the insurance industry is the shift in society. For the generation now coming of age, personal and commercial transactions are conducted via the press of a button on Matthew C MosherIN MYOPINION
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