Predictions for 2018

Praveen Gupta, Chartered Insurer, looks forward to this year’s expected trends

First, a confession: I have no crystal ball to gaze into! What I am relying on is a combination of wishful thinking, past scribblings and current trends.

Overall, 2017 was a year of turbulence – mind, matter and nature were all put to extreme test. And 2018 may be no different – it will surely help if we resolve to think differently. A product of the industrial age, insurers must reconcile with the fact they are now deep into the information revolution. The playing field, and therefore the rules of the game, have changed.

Here are no projections or numbers. No linearity of thought. These are just a handful of defining and definitive tectonic shifts:

• Insurers (and reinsurers) coming of age? While these are early days of ‘going cold’ on, say, the coal industry, insurers seem to be getting ahead of banks. But this is not about insurers versus banks. With the US backing out of the Paris Protocol, could industry groups wrest the influence from the state? I believe insurers should begin influencing the direction of debate on climate change. The recent decision from a few insurers to pull out of coal is only the beginning of a long saga. The fossil fuel industry will be under increasing pressure. Insurers will surely have an opportunity to ensure the centre of gravity moves in their direction, as non-state players take on the role of influencers.
• How green is my policy? The ‘E’ and ‘S’ components in ESG, rather than just the quarterly performance, will drive the stock price and overall governance. Investments in the likes of the tobacco industry, and revenue and profits from fossil fuel, will increasingly turn off investors and stakeholders. Trust will be a function of reputation. Policyholders, customers, investors and other stakeholders will be very mindful of an insurer’s reputation. Boards will be required to spend more quality time on ESG. Diversity in thought and practice, and converging action by roping in talented external experts, would make the insurance industry more meritocratic. We saw Sian Fisher taking a lead for financial services on the ‘HeForShe’ campaign – expect more of these. A superior ESG play will be a booster for our industry.
• Cyber or what? A chief digital officer (CDO) rather than a CMO or a CFO is more likely to get into the corner office. Why? Thanks to being a common denominator, it will facilitate cross-class covers bridging the full spectrum from tangible to non-tangible, product to solutions, centred around discontinuity and reputation. It will also ensure efficiency and transparency of asset allocation in risk transfer mechanisms. This ‘flattening’, courtesy of cyber, will also begin to result in the early days of pushback against the protectionism that is in-built in the form of admitted/non-admitted coverage. This will eventual lead to the removal of political barriers.
• Signals or noise? Let’s not forget that there are too many of these confusing the customer. While the signals bode well for customer journeys, the IOT, big data, AI, blockchain, et al will continue causing excessive noise. This calls for a lot of hand-holding in this transition. Insurers will need to ensure they optimise on trust while they struggle – regulators will begin to blow whistles on account of price and claims optimisation! This year will surely tell us whether there is more space for the likes of Lemonade to grow, whether there will be more Lemonades, or perhaps only Lemonades beyond 2018!

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Praveen Gupta is MD & CEO at Raheja QBE General Insurance Co.