Insurers will increasingly need to act as a true partner in corporate risk management, and offer more than insurance products currently deliver, says QBE’s Pat Regan.
Businesses will eventually demand an holistic ‘digital risk solution’ in the future rather than the insurance products that we know of today, says QBE group CEO Pat Regan. He was speaking to Asia Insurance Review while on a management retreat in Singapore recently, where the group’s leadership team met to discuss what insurance may look like in the future.
Having been appointed CEO a little more than two years ago, Mr Regan has overseen a turnaround in the Australian insurer’s fortunes recording profit after tax of $520m in 1H19 ending 30 June 2019 – up 35% from the previous corresponding period. This was after QBE posted a record annual loss of $1.2bn in 2017, attributed mainly to large CAT claims and poor performance in its emerging-markets division.
Much has been written about its remediation efforts which resulted in a leaner and more profitable outfit, with a laser-like focus on technical performance leading to a 74% increase in underwriting profit for its international business in 1H19. The combined ratio for the same period also improved further to 94.3% from 96.8% the previous year.
A true partner in risk management
With the group on a much firmer footing, QBE has more than one eye on the future – where the questions revolve around how it can become a more effective company, and what the future of insurance would look like.
“We strongly believe that what customers will want is not just a traditional insurance product but something that helps them run their business better and avoid losses from happening. Every day there is new technology that allows for new ways of doing that. There are rich data sources that allow us to provide better solutions and risk advice to customers which will give a very different customer interaction,” said Mr Regan.
He sees three things that will be increasingly dominant as the industry transitions into the future: Digital, data science and customer risk-management solutions.
Given these dynamics, insurance solutions will take on even greater sophistication in the future underpinned by a more enlightened approach to underwriting.
“We will depend less on claims history and actually use much richer third-party data, sources that give us much better insights into the customer risk profile. Things like AI, the internet of things and the advent of quantum computing will provide opportunities to do that,” he said.
Distribution dynamics will be altered
With insurance products potentially becoming much simpler and easier to understand, he believes that more customers may be ready to buy basic products directly from carriers rather than through intermediaries.
“We distribute most of our products today through our broker partners and I think for the bigger risks that will still be true. But as you get down to things like SME risks, I think it is not really economic for there to be both an insurer and broker in 10 years’ time.
“There will need to be a lower cost of doing business for SMEs. It has to be fully digitalised, and maybe there’ll be one or two of them (brokers) in that space,” said Mr Regan.
Outlook for Asia
QBE has taken concrete steps to return to profitability in the last two years, including taking the unprecedented step of installing a chief underwriting officer in each of its division – led by group chief underwriting officer Jason Brown.
Its ‘back to basics’ approach, which included setting consistent standards for underwriting, pricing and claims in all of its units across the world, has paid dividends. And now, aided by a favourable pricing environment, QBE is once again geared to pursue growth. In Asia, the group operates in four markets namely, Hong Kong, Singapore, Malaysia and Vietnam. QBE has plans to transform its Hong Kong operations into the group’s first fully digitalised business.
“The Greater Bay Area is potentially a huge opportunity, especially if you’ve got a digital business where you’re working with obviously a very highly digitally literate population of 75m people,” said Mr Regan.
The insurer also owns a license in China, although it currently writes minimal business there.
“It is a difficult place to make a lot of money today, but it is one market which we will look at for the longer term,” he said. A