Insurance brokers: adapting to a new era of environment and supply chain risk for clients
September 22, 2014
Broking is at a once – in – a – generation crossroads to adapt its business and operating model, to better anticipate and understand new and emerging risks for clients and to develop analytical tools to quantify them. Jon Williams, financial services specialist, PwC sustainability and climate change, examines the findings of PwC's Broking 2020 report.
Insurance Brokers, the traditional and critical link between insurers and major corporates risk planning and strategy, need to take on a wider risk advisor role in the market or face losing profitable business to special risk advisors.
The findings, drawn from PwC’s new report ‘Broking 2020: Leading from the front in a new era of risk’ examines the views of risk managers in multinational organisations.
In the same week as the UN Climate Summit in New York, which invites participants from business as well as world leaders to take action on managing climate risks, it reveals that organisations think that the evolving risk environment can no longer be managed solely through traditional approaches. Brokers need to adapt their approach to provide the specialist advice needed and the data analysis tools to assess these risks, or they face losing business.
Emerging environmental, geopolitical and supply chain risks were identified as amongst the key risk areas that clients rely on brokers as their main information source when placing risk.
But according to the research, nearly three quarters of risk managers said the analytics they want to help inform their decision making from brokers is falling short. Less than a third of respondents said they were very satisfied with brokers’ analytical and modelling services.
“Climatic and geopolitical instability are making once unthinkable losses seem almost commonplace" according to the report, with the average catastrophe losses since 2000 almost doubling to around US$600bn.
The report highlights how the 2011 Thai Floods focused attention on how the industry and risk managers approach supply chain risks.
Globally linked supply chains and economies are creating ever more connected and systemic risks, and impacts that once seemed distant can now affect seemingly unconnected businesses on the other side of the world.
Broking is at a once – in – a – generation crossroads to adapt its business and operating model, expanding their information gathering and networks to better anticipate and understand new and emerging risks facing their clients.
The report warns that brokers must ensure they stay on top of the “frenetic pace of change in the new era of risk”, expanding their information gathering and network to understand new and emerging risks, and improve their ability to collect, analyse and communicate data to provide actionable insights to clients.
Brokers’ clients’ expectations are also now changing faster than ever, with risk managers looking for consultative partners who have the skills to both identify and develop solutions for the changing risk landscape. For some brokers this will require a shift in mindset from hindsight to foresight as they evolve from being simply placers of coverage to preventative risk advisors and managers.
Nowhere is this more important - and indeed possible - than in assessing climate risks, given the amount of data that has been produced and the increasingly sophisticated and accurate models available to predict future climate scenarios. This will require new types of partnerships, bringing together brokers, clients, reinsurers, consultants and climate scientists, working together to link climate change scenarios with quantified business impacts and risk management solutions.
PwC’s research shows that developing advanced risk and loss analytics and capitalising on big data analysis will be key to strengthening brokers’ position in the market.
Download the report here: http://www.pwc.com/insurance/broking2020
Follow Jon Williams @jonwilliamspwc