So much commentary about life today begins with some form of the phrase “In these uncertain times…” I think most would agree there is some truth in that phrase – we are in the midst of a global pandemic and its residual fallout, after all.
But for those of us who have been around for a while, we recognize that uncertainty is nothing new: it is built into the human condition, and the crises of today echo the challenges of years ago.
In the insurance industry, we focus on mitigating uncertainty; we provide protection against unforeseen events – including, even, a global pandemic. After decades in the business, I have been particularly proud to witness the industry rise to the challenge of COVID-19. It has reaffirmed my confidence in this industry’s ability to adapt to changing times to meet consumers’ needs, and this adaptability will be essential to building the future of insurance. Reinsurance, which has evolved over the years to take on an ever-larger role, will be at the center of making this continued progress possible.
When we started RGA nearly 50 years ago, the reinsurance landscape was very different, consisting mostly of small companies or divisions of companies with limited scope and capabilities. Only a very small amount of business was reinsured at the time compared to today, but the market held obvious potential. I remember our reinsurance market share increasing in 1979 when I joined – but we still held only the 31st rank among the life reinsurers operating in the U.S. market. Most of those companies either merged or retired from the business, and the remaining players gained scale and capability.
As reinsurance became more prevalent over the years, the smaller, part-time players and those not willing to invest, left the market while RGA and other major reinsurers grew into large global organizations. With size came a greater degree of professionalism and a much more robust and holistic skill set. While in the past reinsurance may have been viewed as a reactive business that most often served strategies set by primary insurers, today’s reinsurers increasingly augment those strategies and deliver the skills and capabilities necessary to proactively drive business across the insurance value chain – from consumer engagement through claims processing.
An industry-wide perspective often enables reinsurers to identify trends and equip insurers with the tools and resources to pursue emerging opportunities. As advances in digital technology, data analytics, and personalized medicine re-shape the industry, reinsurers will help drive the transformation.
While in the past reinsurance may have been viewed as a reactive business that most often served strategies set by primary insurers, today’s reinsurers increasingly augment those strategies.
Great Opportunities Ahead
Technology continues to change the way we live and work at an ever-accelerating rate. While insurance traditionally has been slow to embrace change, the pace of major advances in related fields has made it imperative that the industry adapt more quickly to keep up. These advances should be viewed as opportunities rather than threats, and the changes they inevitably bring as improvements to the way insurance is bought and sold. Some of the biggest drivers of change will occur in the areas of data and genomics.
While insurance traditionally has been slow to embrace change, the pace of major advances ... has made it imperative that the industry adapt more quickly to keep up.
The data revolution is well under way and only gaining momentum. Insurers now have access to massive streams of information, both internal and external, along with the technology to process this data. Moving forward, data-driven insights will determine the kind of interactions insurance companies choose to have with people, including prospects, current policyholders, and claimants. Advances in data will enable more refined segmentation of large pools of business into unique cohorts, so that policies can be customized and recharacterized to provide the right protection for the right consumer.
Meanwhile, I believe some insurers will become more profitable through better risk selection, better data applications, and more informed pricing. Both insurers and insureds will benefit from this win-win alignment of incentives. Perhaps best of all, such progress promises to help narrow the global protection gap as data from various new sources provides a spectrum of untapped avenues for engagement and built-in cross-sell opportunities.
Progress promises to help narrow the global protection gap as data from various new sources provides a spectrum of untapped avenues for engagement and built-in cross-sell opportunities.
Genomics will also change the way insurers do business – and that’s a good thing. Many in insurance focus on the potential threats to the industry from advances in genomics, particularly the risk of anti-selection from applicants armed with genetic information. This is indeed a challenge that must be worked through, and will likely become more widespread as knowledge in this field explodes and the cost of a full genomic sequence drops under $100. At some point, virtually everyone will benefit from insights about their own genome that these changes entail. As the cost of genome sequencing becomes increasingly affordable, insurers must acknowledge information asymmetries and adapt.
The industry may be well-served to avoid focusing on use of genomics in underwriting except for defensive purposes in these early days and turn instead to the potential impact of using genomics and precision medicine to improve the life expectancy of in-force lives. Examples have begun to appear: genetic cancer support, diabetes monitoring and management, and several more are in the works for either insurance in-force or employee groups. In the future, genetic information and related medical advances, currently barreling their way through the scientific community, will lead to healthier lifestyles and longer lives, to the benefit of insureds and insurers alike.
Expanding Innovation in Asia
Insurance is a long-term business that values longevity and stability, which means that, by its very nature, the industry sometimes lacks the dynamism we see in other fields. Nevertheless, innovation in insurance has advanced significantly in recent years and was catapulted forward by the pandemic. Lockdowns and social distancing measures moved formerly in-person consumer engagement online, and remote work forced companies to re-think processes and operate more efficiently. This evolution was underway well before COVID-19, but was thrown ahead several years by the pandemic and will continue to advance from here. So many areas will be impacted: distribution, risk assessment, product design, and more. Companies that choose to be proactive and embrace this transformation will be those emerging as industry leaders on the other side.
Asia stands at the epicenter of ongoing insurance innovation, adopting new technologies and creating new products at an unprecedented rate. The region’s role as a sort of industry laboratory for new ideas should only grow in the years ahead. Asia comprises 60% of the world population, contains the top three countries in longest life expectancy, features unparalleled economic and demographic diversity, and includes a fast-growing middle class and an expanding high net worth segment. These factors contribute to a dynamic environment unlike anywhere else in the world.
In addition, markets in Asia are generally less impacted by the kind of legacy processes and systems so entrenched in other regions. This enables existing companies to readily implement new approaches and allows new entrants to bring new ideas into the insurance space more easily. With many consumer segments in Asia still underserved the exploding market share we are seeing in the region promises to expand even more moving forward.
Asia stands at the epicenter of ongoing insurance innovation, adopting new technologies and creating new products at an unprecedented rate. The region’s role as a sort of industry laboratory for new ideas should only grow in the years ahead.
The Noble Purpose of Insurance
I am proud to have devoted my career to insurance. History shows that societies with more insurance prove to be more stable, and as risks change, insurance adapts to mitigate those risks. We may have conquered smallpox, for example, but now face the possibility of outliving our incomes or developing Alzheimer’s disease, among a long list of continually evolving risks. In an ever-changing world, insurance enables societies to move forward by diminishing obstacles to progress.
Emerging stronger from the COVID-19 pandemic as a global community will require taking the right actions now and over the next several years; insurance will help make those actions possible.