The modern-day business faces risks that are ever evolving and increasingly complex. This is mainly due to advances in technology, political influence and uncertainty about the business environment. A survey by PricewaterhouseCoopers (PwC) of risk buyers from multinational corporations found that emerging risks are the top priority for risk functions in surveyed companies.1
Putting additional pressure on businesses is the fact that catastrophes (both natural and man-made) are also on the rise. Economic losses arising from catastrophes can be devastating, especially if the business is underinsured or not insured at all against these losses. The gap between insured and uninsured losses is high. In 2018, total global economic losses from catastrophes were $165 billion and only $85 billion of those losses were insured. The gap between insured and uninsured losses reached an all-time high in 2017, at $199 billion. The proportion of uninsured losses is even higher in the African continent, where the majority of the losses remain uninsured.2
Research shows that 50% of businesses choose not to buy insurance because they think it’s too expensive or that they already have cover under their homeowner’s policies.3 The lack of understanding highlights the need for insurance brokers who can explain the different cover options businesses can buy and the importance of the different types of cover available. Brokers can help clients purchase tailored insurance cover according to their unique business needs. They can also help clients better manage their business risk, as a result helping to keep the cost of insurance low.
Brokers are best positioned to lead the conversation about emerging risks between insurance customers, insurers and other stakeholders in order to find real solutions to protect their clients. The interaction between brokers and these stakeholders is increasingly focusing on information. Today’s insurance broker must have a detailed understanding of their clients’ businesses. They need to collect data from different stakeholders and analyse it to come up with meaningful solutions for insurance customers. This results in brokers to have consultative as well as analytical skills. A recent survey indicates that 74% of survey participants said they are looking to brokers for analytics to help inform their decision-making.1
Old approaches to risk management are now being overtaken by the speed emerging risks are changing at. Brokers need to be able to respond quickly and effectively to changing customer needs caused by changes in the risk landscape. This is why using big data analytics to develop real solutions for clients will give today’s broker an advantage.
- PWC survey, Broking 2020 – leading from the front in a new era of risk
- Swiss Re Sigma, No 2/2019