In most industries, there are challenges that organizations can’t tackle alone. As the insurance industry undergoes an unprecedented digital transformation, we’re finding that collaboration among industry players is vital to tackle challenges such as closing coverage gaps and more efficiently matching capital to risk.
In June, we gathered a group of innovators from Lloyd’s Lab, Tokio Marine Kiln (TMK) and WTW to share experiences and discuss unmet or underserved insurance needs and how to improve joint innovation efforts. We discovered that challenges such as emerging risks and changing client needs are a constant, requiring strong partnerships and teamwork to identify problems and develop effective solutions that benefit the industry.
From a broker’s perspective, organizations’ risk profiles are constantly changing amid economic, political and regulatory developments. This might be due to uncontrollable external factors (e.g., climate change), or it could be deliberate changes such as a company shifting operations toward AI algorithms to complete work. Both will inevitably affect their risk profile and coverage needs.
Rob Jarvis from TMK explains, “We track emerging risks and how we see the world changing, and then we see the impact of those changes on existing products and where risk gaps start to emerge. The danger is ending up with solutions that insurers want to sell, but clients don’t want to buy.”
Insurers therefore face the ongoing challenge of working to meet emerging client needs while determining how to price these risks at a level insureds are willing to pay, yet can be profitably underwritten. For example, writing a policy that covers a new technology with limited historical data is difficult. There are some risks that are hard to effectively measure – multi-tiered supply chains have innumerable variables that make effectively pricing the risk impossible. Insurers might write a policy with more unknowns (like outcome-based parametric insurance solutions), but they will price in the risk.
Ultimately, brokers and insurers have imperfect understandings of the connection between emerging client needs and the desirability (and financial feasibility) of underwriting the new business.
No one person or organization has all the answers, which is why collaboration is essential. We also know that a specialized industry approach to risk matters. For example, The WTW Research Network works with industry leaders to apply our research specialties and connections to help clients identify challenges and opportunities. This involves exploring emerging risks, analyzing emerging circumstances or markets where existing solutions don’t meet the current needs, or improving familiar ways of doing business.
My colleague, Lucy Stanbrough, explains that “as a broker we are incredibly lucky to have daily interactions with insureds and insurers to understand their pain points, but we also need to think more broadly about the risks they are not yet thinking about. We’re currently working through the results of our Emerging and Interconnected Risk Survey, which covers both perspectives, and we’re looking forward to sharing what they are seeing – or missing – and how they’re taking action.
This is where the WTW Research Network leverages deep subject matter expertise outside of the industry to better understand or model complex or emerging risks – both the new ones, but also the ones people feel really comfortable about and shouldn’t. A recent example of this a new scientific partnership with the University of Colorado Boulder. Historically, the state of the tropical Pacific has cost trillions of dollars in direct damages and reduced economic growth. But most businesses have only begun to take advantage of the strong predictability offered by El Niño and La Niña. WTW and the University of Colorado Boulder will harness the ongoing ‘climate prediction revolution’ for business use and improve our ability to predict global climate for the coming season, year and decade.”
Iryna Chekanava from Lloyd’s Lab sees their programs pivotal in connecting brokers and insurers, enabling them to share client insights and data to understand and identify industry problems. A recent example is a joint effort between WTW, Lloyd’s and insurers to address supply chain challenges, which resulted in a series of co-authored risk reports.
Iryna explains that the Lab Challenge program was specifically designed to tackle industry cooperation in early-stage innovation. “There are lots of areas – especially with emerging risks – where there is lack of collective understanding of the problem. We see shared thought leadership and experimentation as key to exploring problems and figuring out what a viable solution might look like,” she says.
At first glance, many challenges are insurmountable for any single party. Bringing in the right expertise and technology partners can unlock solutions.
This is where the Lloyd’s Lab plays a key role with Accelerator and Launchpad, which bring together brokers, insurers and startups/scaleups to design, build and scale new risk and insurance solutions. The Lloyd’s Lab Accelerator guides cohorts of startups through a program that matches them with mentors from brokers and insurers to develop their solutions. Meanwhile, the Launchpad platform brings innovation leaders from Lloyd’s market insurers together to assess solutions and deploy innovation underwriting capacity.
Rob Jarvis, a co-chair on the Lloyd’s Launchpad, has found benefits in working both with startups and large brokers. He says, “Startups are great at moving fast and will either find product market fit or will fail fast. However, there are also advantages to working with traditional brokers who may move slower but bring a wealth of expertise and the ability to distribute new solutions at scale.”
Here are a few examples that show how brokers, insurers and startups can come together to address emerging needs:
Regardless of the roles colleagues play in the insurance industry, some of the lessons we’ve learned in innovation are common and can be applied across the board:
In the insurance sector, when a diverse group of perspectives and expertise come together to solve hard problems, they can unlock and scale new solutions that improve the insurance industry for brokers, insurers and clients.
Thank you to the insurance innovation experts who offered their insights: Iryna Chekanava, Lloyd’s Lab; Rob Jarvis, Tokio Marine Kiln, and Lucy Stanbrough, WTW.
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