HDInsights Edition 7 2022

Insurance Innovation Responding to mega trends reshaping business

With dynamic mega trends evolving during the pandemic – remote work, artificial intelligence, cyber assets and a shared economy for example – the insurance industry needs to adapt and innovate. HDI Global team explore “Insurance Innovation” in a Lunch-and-Learn education webinar.

Alex Tarantino Regional Liability & Cyber Underwriting Mgr HDI Global SE, Australia

Mark Mackay Head of Energy, Eastern Region HDI Global SE, Singapore

Martha Hasan Liability Underwriter & Business Analyst HDI Global SE, Australia

Willem van Wyk Regional Market Manager APAC HDI Global SE, Australia

Mega trends reshaping the supply chain Ongoing interruptions in the supply chain - due to the pandemic, geopolitical crisis and climate events and evolving technologies - have shown that it may be time to re-evaluate producing the cheapest unit overseas. Companies are having to find alternative supply chains, and in some cases, bring industries back and manufacture locally again. “I think it's brought home the balance of low-cost production versus security of supply chain,” said Mark Mackay, Head of Energy, Eastern Region. It’s a global concern, but one that is seeing both a commercial and country based regulatory responses. Notably, the US Senate passed a $280 billion industrial policy bill in July this year to build up America’s manufacturing and technological edge. A move, that was clearly aimed to counter China. Global market forces – high inflation impacting energy and food prices – influence insurance and the market has seen premiums increasing over the past few years in line with the economic conditions. Locally, Climate change has had a significant impact in Australia where bushfires, hail and floods generate significant insurance claims. This results in insurances having to weigh risks, and in some cases, choose if some of these risks cannot be insured in the future. The uncertainty arising from the current geopolitical risks and the pandemic could mean the high costs of energy, supplies, food and services stay for several years. “It is a question whether or not it's twelve to twenty-four months, or if it's going to be longer term, say three to five years and no one really knows the answer to that,” said Liability Underwriter and Business Analyst Martha Hasan.

Rising costs mean insurances have to be “responsive to the challenges that they're facing in terms of prediction,” Mr Mackay said. “For us it is always a challenge on business interruption, because this means looking into the future, maybe one, two or three years along with clients who when they want to do projects, typically have to plan five to seven years in advance to determine whether the project will be profitable or viable,” he said. “This is where we're working with our clients at the moment, firstly to learn these challenges a bit better, and then to be prepared that we have to adapt and to look at insurances in a different way.” Evolving technologies is another mega trend reshaping the way we do business such as the sharing economy with companies growing from tiny start-ups to billion-dollar corporations and household names like Uber and AirBnB for example. “With COVID-19, it really just kickstarted the whole sector into hypergrowth with many people during lockdown, by circumstance or choice, wanting to work on their own terms,” said Ms Hasan. This helped sites like Airtasker and other delivery services take off. What impact do these new trends and developments have on insurance? Some of these new developments, in particular inflation, impact the bottom line of claims. “I think it's really critical that in this current market cycle, as we look beyond 2022, insurance brokers try to maintain market discipline because of the ultimate impacts on our clients,” said Alex Tarantino, Regional Underwriting Manager Liability.

HDInsight Edition 7 - page 9