On 12 June, David Franco, Lloyd’s Europe Head of Strategic Intelligence, delivered a Keynote at the Insurance Innovators conference in Munich entitled ‘Unleashing a new era of innovation in insurance’. After his Keynote, David participated in a Leaders’ Forum entitled ‘Building resilience in a time of uncertainty’, chaired by Tony Tarquini.
The following is an edited transcript of David’s contribution to the Insurance Innovators Leaders’ Forum in Munich.
David Franco
Head of Strategic Intelligence, Innovation Lead, Lloyd's Europe
Insurers have a dual profile: they are themselves exposed to these risks, and are at the same time in the business of selling solutions to those same risks – in other words insurers are both risk facing and risk taking.
So all the more reason for them to build macro-resilience, understood as the ability to withstand shocks while adapting to new conditions. Insurers do not have a crystal ball, but they can look to anticipate upcoming shocks through rigorous scenario analysis, planning, modelling and stress testing – something Lloyd’s is very familiar with, especially when you think of natural catastrophes.
Insurers must balance the need for strategic flexibility while ensuring they remain fit and competitive in the long run.
Lloyd’s is a global subscription marketplace where capital, carriers and brokers meet to develop and provide insurance solutions to end clients, traditionally corporate clients. So Lloyd’s per se is agnostic as to what risks the market wants to spearhead.
We are, however, a P&C and Specialty market and globally and in Europe in particular we are seeing continued and sustained appetite for wholesale, complex, large and often unique risks, some of which are in higher demand due to the current changing landscape: from cyber and financial risks through to general liability, political risk or terrorism, also natcat risks where there is a very material protection gap in Europe.
But these risks keep evolving and so at Lloyd’s Europe we recognise the need for continued innovation. In this sense, through the Lloyd’s Lab accelerator programme we are currently supporting four insurtechs developing digital and climate solutions for Europe:
Insurance takes risks off the balance sheets of customers, and also of governments, but insurance is also a key driver for increased prevention
Obviously innovation needs investment, and this can and is often challenged in times of heightened inflation, geopolitical and climate risk. At the same time, we recognise that innovation is not a nice-to-have but a must, and this is reflected in our history of firsts as per my presentation earlier today.
The Lloyd’s Lab is celebrating its fifth anniversary this year, having completed 10 accelerator cohorts since launching in 2018, and with the 11th cohort being announced last week. This reflects that market appetite for innovation continues to thrive. We recognise the need to evolve our programmes, however, and as mentioned earlier for the first time this year Lloyd’s Europe sponsored a Europe theme in Cohort 10 to develop, together with selected insurtechs, much needed digital and climate solutions to tackle our clients’ needs in these areas.
We are also seeing appetite for insurtech development grow in Europe, and in Belgium in particular we are looking to develop long lasting partnerships in this area.
Without repeating myself too much, insurers and insurtechs must work hand in hand to help society to navigate, anticipate, prevent and manage these risks. Gone are the days where insurers saw insurtechs as a threat, and I think we all recognise the need for their tech-savvy contribution to developing joint solutions and crucially to learn from each other and grow together.
Insurance takes risks off the balance sheets of customers, and also of governments, but insurance is also a key driver for increased prevention. Think of the sprinkler system, the seat belt, or robust IT security in property, motor and cyber insurance respectively. Whether an insurtech develops a new underwriting product or an add-on service, both types of innovations are needed and welcome.
Parametric solutions are a good example here: unlike traditional indemnity-based solutions, which carry small print challenges, parametric solutions offer immediate relief upon the triggering of a pre-agreed event. And best of all, they can complement, rather than replace, indemnity policies. These can play a key role against climate and transition-related risks.
Insurers must make insurance more accessible to the public, and its benefits and social impact better understood. Insurtechs, with their passion for tech and their often simple and more straightforward language, are great partners on this journey
Just as risks are changing, so are clients’ needs. In some cases, this means needing new types of cover, for example against cyber ransomware via third parties or cover against the rising risk of flood – here technology has the potential to turn what was thought to be uninsurable into insurable and help tackle the protection gap.
It may also mean new integrated sales channels through embedded insurance, to make the process of buying insurance less cumbersome, less separated from the protected product or service and crucially, more customer-centric. Finally, it may also mean offering solutions where cyber prevention and cyber insurance are sold together, which could also help reduce the length of upfront questionnaires.
But all this requires talent, which is another word for human capital, and insurers must make insurance more accessible to the public, and its benefits and social impact better understood. Insurtechs, with their passion for tech and their often simple and more straightforward language, are great partners on this journey.
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