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The future looks complex

26 February 2018 Jonathan Faurie

There has been a lot of talk regarding the future of insurance in the technology age. As the insurance industry is being increasingly driven by technology, one of the biggest sectors of the industry that will be affected is claims. What will the claims process in the 21st century look like? This was the topic of a presentation at the insurance claims conference which was held at the end of 2017.

Technology drivers

Nelson Matheus, Claims Leader at NamibRe, points out that the future will be influenced by technology in more ways than we think. 

“Insurers are transforming into a customer centric market through advanced technology. Digitalization, automation and virtualization are all becoming common place in the industry. An aspect that hasn’t been specifically focused on is the role of drones in the claims assessment process,” said Matheus. He added that there are also increased instances of lie detectors being used. 

One of the aspects of technology that is immediately benefiting the industry is that convenience is becoming common place. Apps for the immediate reporting of claims are being used by insurers on a more frequent basis, and a new weapon against fraud is the common use of data trackers in vehicles. 

The human influencer

Outside of technology, climate change is having a major impact on claims. 

“Human activity increase in carbon dioxide warms up the earth which causes ice to melt and ocean levels to rise. This results in increased instances of flood, draught, and wild fires. These are potent ingredients for large claims,” said Matheus. 

Significant impacts

Just how significant have the claims in the industry been? Matheus points out that the top ten catastrophic events in 2017 resulted in an economic loss of $210 billion. By contrast, insured losses were $54 billion. 

This is a trend which is unfortunately becoming commonplace in the industry. An unfortunate reality of the Knysna fires, the Cape storms as well as the storms which occurred in Gauteng and KwaZulu Natal at the beginning of October, was that many people were either under insured or completely uninsured. 

A stable insurance sector is a key driver of economic growth. Therefore, economic losses such as the ones discussed above can seriously affect growth. 

“There needs to be significant participation among members of the public and private sectors. This includes the insurance sector. A lot has to be done so that all participants should collectively move forward,” said Matheus. 

This can be done through setting up early warning systems and sharing risk management expertise which will strengthen resilience before a disaster happens and ensure a better recovery once the catastrophic event has struck. 

“One of the ways of achieving this is to reduce the number of constructions in flood-prone areas, and more broadly by assessing the value and performance of investments into property developments over the medium and longer term. This is best achieved by investing in more advanced infrastructure and technology,” said Matheus. 

Negligence increases

While the above catastrophe events are indirectly caused by human actions, the insurance industry also must deal with losses that are caused by direct human actions. Over the past year, we have seen a significant increase in negligence which is causing an increase in claims.

In May, the FAnews reported on the port explosion in Tianjin China which turned out to be one of the biggest negligent insurance claims in history. According to Matheus, the estimated loss reported by motor manufactures was astronomical. Hyundai and Kia lost $207 855 793 during the explosion. VW lost just under $197 million while BMW lost close to $115 million. Footage of the explosion can be viewed here.

In November, FAnews reported on the Grenfell Tower Fire in London which resulted in the death of 74 people. Final numbers are only expected to be released on 2018 as the investigation into the incident and identification of bodies are only expected to be completed by the end of 2017.

Editor’s Thoughts:
This once again highlights not only the importance and value of insurance, but also the important role of risk management. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

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