COVID-19 and climate change set to impact the insurance industry significantly
The
repercussions
of
COVID-19
and
worsening
climate
change
are
among
the
issues
that
will
impact
the
insurance
industry,
according
to
Tony
Wirjanto,
University
of
Waterloo
professor.
Wirjanto,
working
as
a
curator
in
Insurance
and
Asset
Management
for
the
World
Economic
Forum
(WEF),
identified
eight
key
issues
poised
to
influence
the
insurance
industry
in
the
recently
released WEF
Transformation
Maps.
Transformation
maps
are
dynamic
knowledge
tools
that
help
users
explore
and
make
sense
of
complex
forces
transforming
industries.
It
allows
leaders
in
that
space
to
visualize
and
understand
more
than
250
topics
and
their
connections
between
each
in
one
place.
The
result
helps
support
better-informed
decision-making.
The
eight
issues
explored
in
the
insurance
transformation
map,
in
this
case
specifically,
are
big
data,
commoditization,
privacy
trends,
cyber
risk,
artificial
intelligence,
insurtech,
Internet
of
Things
and
climate
change.
COVID-19
will
be
the
latest
topic
to
be
added.
According to the insurance transformation map, climate change is a systemic and irreversible process that introduces sensitive paradigm shifts to insurers’ risk-return profiles — significantly affecting both the asset and liability sides of their balance sheets. Climate change risk affects both the “property & casualty and life” insurance sectors in several important ways. These, in turn, pose a threat to the reinsurance industry through coverage of exposures that are in excess of insurers’ capacities.
Wirjanto believes the insurance industry may, in the end, be able to survive the COVID-19 pandemic as it has done in other notable crisis episodes in the past. However, to do so, insurers need to quickly determine how best to meet the needs of their employees, brokers and customers with products, financing, sales and service that work best in the presence of the unprecedented scale of this pandemic crisis.
“This
project
started
before
the
pandemic,
and
this
is
why
I
haven’t
included
the
impact
of
COVID-19
in
the
initial
insurance
transformation
map,”
Wirjanto,
a
professor
jointly
appointed
in
Waterloo’s
School
of
Accounting
and
Finance
and
Department
of
Statistics
and
Actuarial
Science,
explains.
“My
job
is
to
update
these
key
issues
every
three
to
four
months
over
the
next
five-and-a-half
years,
and
I
will
include
the
impact
of
COVID-19
for
each
of
the
eight
key
issues
in
the
next
edition.”
The
maps
are
driven
by
an
AI
algorithm
that
anticipates
what
type
of
information
policymakers
and
public
officials
may
need.
The
curator
then
collects
relevant
and
actionable
information
and
makes
it
available
in
one
linkable
source
to
aid
the
decision-making
process.
In
coming
up
with
the
map’s
content,
Wirjanto
and
his
team,
former
PhD
student
Mingyu
Fang
(’19
ActSc)
and
Rong
Brenda
Dang,
a
current
master’s
student
in
the
Computational
Mathematics
program,
undertook
a
tremendous
amount
of
research
to
ascertain
the
challenges
CEOs
working
in
the
insurance
industry
face.
Based
on
research,
Wirjanto
believes
worsening
climate
change
and
the
global
responses
to
the
COVID-19
pandemic
so
far
have
highlighted
the
need
for
insurers
to
adopt
various
innovative
approaches.
These
methods
include
customer-centric
digital
tools
and
other
innovations
that
respond
to
stakeholders’
needs
in
times
of
a
crisis,
such
as
online
payment
of
premiums
and
claims
and
acceleration
of
digitization
adoption
to
improve
data
collection,
products
and
customer
relations.
“It
has
become
increasingly
clear
that
insurers
need
to
tailor
their
products
and
processes
to
accommodate
differing
risk
profiles
as
well
as
differing
needs
of
their
diverse
customers
and
work
to
mitigate
the
extent
to
which
this
pandemic
crisis
further
widens
the
existing
gender
gap,
income
gap,
etc.,”
Wirjanto
says.
“Whereas
the
climate
change-related
impacts
merit
greater
amounts
of
risk-related
research
in
the
insurance
industry.
“Integrated
assessment
models,
which
can
aggressively
leverage
cross-disciplinary
tools
from
climate
science,
finance
and
actuarial
science,
should
increasingly
be
used
for
robust
quantitative
analyses
of
risk
and
effective
qualitative
studies
on
the
subject
will
also
be
valuable.”
Interested to hear how green innovation is driving our economic recovery? Register for our next Waterloo Innovation Summit scheduled for November 30, where industry leaders will explore how green innovation and sustainable enterprises can drive economic growth while ensuring our planet’s future.