The risk landscape of the insurance industry is constantly evolving. From natural disasters to cyberattacks, insurers have always been at the forefront of assessing and mitigating risk.
However, with the emergence of new and more complex risks, insurance companies are faced with a daunting challenge.
One of the world's leading insurance companies, Swiss Re, is leveraging its technology and data expertise to tackle these emerging risks.
In this article, we unpack the innovative strategies that lie at the secret of Swiss Re’s success. Dr. Christoph Nabholz, Chief Research Officer and Head of the Research, Engagement & Sustainability Team at the Swiss Re Institute (Swiss Re), shared some insights in our podcast.
Introducing Swiss Re
Swiss Reinsurance Company Ltd, commonly known as Swiss Re, is one of the world’s largest reinsurance companies based in Zurich, Switzerland. The company is a part of the Swiss Re Group, which provides reinsurance, insurance, and other forms of insurance-based risk transfer. Established in 1863, Swiss Reinsurance Company Ltd today has operations in more than 25 countries worldwide.
Swiss Re offers several products to help people manage capital and risk. The company offers a broad range of reinsurance products and services, including property and casualty, life and health, and specialty lines such as aviation, marine, and energy. These are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management.
The group also has a research arm called the Swiss Re Institute, with about 900 researchers who work to orchestrate the forecasting task for the company and derive new products for the market.
Challenges for innovation in the reinsurance industry
When asking about the biggest challenges reinsurance companies are facing these days, Christoph Nabholz pointed out the changed consumer behavior and the need for digitalization resulting from the COVID-19 pandemic. When the pandemic hit, insurance agents could not go and sell their policies anymore. This brought the realization that insurance companies must digitize their operations.
This leads to another challenge: keeping up with the latest technologies to transform processes, such as AI. Christoph highlights that it can be difficult to keep track in such a fast-moving field and that it requires access to the right data, which is another big challenge insurance companies are facing. Access to data has become restrictive and it’s difficult to transfer. Insurance companies must thus show their end customers that their data is being used meaningfully in the risk assessment process.
Other challenges that Christoph sees in the insurance industry are those “big changes that can be foreseen, but come at a low frequency.” These challenges are the ones that build the insurance risk landscape. One such element of the insurance risk landscape is the looming cyber threat. With the rapid increase in digitalization, insurance companies are exposed to the risk of cyber attacks targeting their sensitive data. If they are unable to adequately protect their data, insurance companies can lose the loyalty of their customers and even their reputation.
Another element of the insurance risk landscape is climate change. As the frequency and severity of natural disasters increases, so does the financial risk to insurance companies due to rising insurance claims and costs. According to Christoph, the insurance industry is seeing a 6% increase in claims frequency of cumulative risk each year. These direct risk elements, as well as the "interconnected" risk element created by the war between Ukraine and Russia, require the insurance industry to continuously monitor and develop new, innovative solutions.
3 ways Swiss Re is driving its transformative change
One of the key principles in the insurance industry when it comes to mitigating the risks is to “move from protection to prevention.” For a B2B insurance company like Swiss Re, it is important to work in partnership with its customers, the B2C insurance companies that have access to the end customers.
Christoph Nabholz believes that if all the parties involved have a better understanding of the risk exposure and get the right protection, they can work collaboratively towards a more sustainable outcome. To manage the insurance risk landscape, the teams at Swiss Re rely on innovative technologies and solutions in all aspects of operations.
Data models for risk mitigation and prevention
Tracking customer data can help insurance companies manage their customers and price policies more accurately. Swiss Re believes in leveraging the dynamic information that can be generated by data. Insurance companies can use this data for predictive modeling techniques to identify patterns and trends. This can help them predict future risks and estimate the likelihood of claims. Studying the behavior and history of policyholders based on their personal data can help insurance companies assign risk values to them. In this way, they can price their policies more accurately and identify high-risk customers who may need extra attention.
For example, using various Internet-of-Things devices to connect and bring together different aspects of the insured's lifestyle can help insurance companies gain a better overview of their risks. Insurance companies can motivate customers to use wearable devices or have sensors installed in their homes and analyze their data to develop prevention programs for their customers.
AI for early risk detection
The use of artificial intelligence for risk modeling and training of these risk models is essential for predicting future scenarios. There are numerous ways insurance companies can use AI for risk identification:
- AI can be used to develop predictive models that analyze historical data to identify patterns and trends to help detect early signs of potential risk.
- Analyzing images from satellites and drones using AI can help identify signs of risks like changes in land use or property damage.
- Insurance companies can use AI to analyze telematics data, such as driving behavior, to identify early signs of risk, and take precautionary measures.
- AI can be used to analyze claims data to identify signs of fraudulent activity, such as suspicious claims patterns or inconsistencies in customer data.
Swiss Re understands that choosing data sources that are ethical and that fit the AI model is the only way to make sure that the AI is transparent. Since the insurance industry is a highly regulated one, you need to be mindful of using the most recent and advanced technologies, along with their regulatory requirements. However, Christoph Nabholz points out that AI is only as good as the underlying data. Therefore, it is important for insurance companies to use verified and trusted data sources.
Automate claim process
Swiss Re sees the automation of claims processing as a great opportunity for innovation. Claiming insurance involves reams of paperwork and unimaginable hassle. Digitizing claims processing can help not only policyholders, but also insurance companies by relieving them of the reams of paperwork that need to be filed. For example, many insurance companies now approve video claims from customers. And while this opens numerous doors for loopholes and fraudulent claims that use AI to create fake videos, Swiss Re believes a few fraudulent claims "should never outweigh the great trust companies have in their customers."
Unlocking transformation and innovation in the insurance industry with ITONICS
The development of new, innovative policies is the most important strategic task for any insurance company. In doing so, insurance companies rely primarily on the following:
- Market research to study consumer behavior and identify trends in the market. This helps understand what customers are looking for in a policy and what types of risks they are willing to insure.
- Risk assessment to analyze the potential risks associated with a particular policy to help insurance companies determine what types of coverage to offer, what exclusions to include, and what types of claims are likely to be made.
This is where innovation management software like ITONICS can be just the tool you need to streamline innovation processes in insurance. The ITONICS Innovation OS comes with several powerful features that help you build capabilities in:
1. Environmental scanning
The ITONICS Innovation OS provides comprehensive trend and market analysis capabilities to help insurance companies identify emerging risks and opportunities. Be on the lookout for weak signals and monitor trends, emerging technologies, startups, and competitors in the insurance sector with ITONICS Insights. The Insights tool provides you access to millions of data points from verified sources. You can build search queries to scan your business environment, save and share the results in workspaces, and monitor developments continuously together with your team.
2. Collective evaluation of data
After you have collected different information pieces on drivers of change in your business environment, teams across departments and branches can collaboratively analyze their business potential. The ITONICS Innovation OS has rating capabilities that allow teams to evaluate these drivers of change based on various criteria. This results in faster and more efficient decision-making processes, which in turn helps to speed up the time to market for new products, or in this case: insurance policies.
The ITONICS Radar tool helps you consolidate various information on one collaborative platform and visualizes the relevance and impact of drivers of change on your business based on ratings. To easily kickstart your foresight activities, the ITONICS platform provides analyst-curated and pre-rated trends and emerging technologies in the insurance industry.
Check out the ITONICS Insurance Trend Radar: If you want to create your own radar with the most relevant trends and technologies for your organization, read on here: How to Create Your Trend and Technology Radar in 5 Minutes
According to Christoph Nabholz,“Foresight can only work if you have the whole spectrum of individuals that help you actually scope out what the different options are that you need.”
With ITONICS Campaigns, you can run ideation campaigns to collect ideas from people inside your company as well as external parties. Leverage the power of crowdsourcing to generate ideas for new insurance policies or solve existing problems with external knowledge and expertise. With features configurable to your particular needs, ITONICS Campaigns allows you to evaluate and prioritize ideas and turn them into projects on one central platform.
5. Strategic portfolio management
With ITONICS, companies in the insurance industry can gain insights into emerging market trends, shifts in customer behaviors, and regulatory changes. These insights can help assess and optimize the existing portfolio of insurance policies and services. Moreover, by analyzing the innovation portfolio holistically, insurance companies can identify opportunities, redundancies, or gaps and make informed decisions about investments, resource allocation, and product adjustments.
Discover how you can leverage software to propel innovation in insurance. Get a free demo and see for yourself!
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