Risk Innovation of the Year by a re/insurer, Argo Group
Technological change has the potential to revolutionise the insurance industry, so how should incumbent insurers respond?
That is a perennial question for risk teams, and one the Argo Group has tackled head-on.
In the new digital landscape, emerging technologies create urgent demands from customers, and insurers' strategic planning cycles and traditional product offerings often lack the required agility.
To meet this challenge, Argo looked to redesign its emerging risk strategy, linked to its underwriting strategy, to evaluate risks arising from product disruption.
The firm's chief risk officer (CRO) Americas and head of underwriting strategy delivered a "Product Portfolio Disruption" review to identify, evaluate and manage risks to Argo's product offering. The exercise considered disruptive factors, materiality to Argo's portfolio, likelihood and other many other factors.
The analysis identified a high potential for disruption to number of insurance products over the longer term, to be addressed through the forthcoming strategic planning cycle, to determine investment in sustainable mitigation strategies.
The product disruption review and planning process also identified areas where Argo had opportunities to build on its existing product offering to incorporate emerging technology driven coverage demands, reducing the future threats to the Argo business model.
"The emerging risk process has been instrumental in informing and developing our innovation and underwriting strategies both in managing threats and exploiting opportunities. This innovative and advanced approach formed a key part of the recognition and scoring by our rating agencies of a strong risk culture at Argo," said Kevin Rehnberg, Argo Group CEO.
For 2020, a third cycle of Argo's product portfolio risk analysis will be performed, using underwriting performance data by sector to develop a five-year disruption timeline for all industry sectors Argo insures. The outcome will inform product strategy, capital allocation and underwriting appetite.
Alex Hindson, chief risk officer at Argo Group, says one impact from the risk innovation process has involved its public sector business in the US. This business was increasing its use of drones and wanted liability cover, so a solution was developed, says Hindson.
On the topic of emerging risks facing re/insurers, Hindson says: "Rather than having a list of emerging risks, we are trying to focus on what we need to do about them and think about upside to them."
At Argo Group, he adds: "A focus is making internal processes more efficient from a digital point of view, so we can grow the business without having to grow headcount."