Swiss Re tech executive talks about digital transformation

November 22, 2023 6:07 AM

Swiss Re Next headquarters in Zurich — Swiss Re Next headquarters building, the newest part of the Swiss Re Mythenquai Campus in Zurich, as seen from Lake Zurich.

As an arm of reinsurer Swiss Re Group, Swiss Re Reinsurance Solutions serves property and casualty, life and health insurance companies with data, analytics, distribution and consulting services. Digital Insurance spoke with Russell Higginbotham, CEO, Reinsurance Solutions at Swiss Re, about a variety of the division's services and concerns, including the overall digital transformation of the insurance industry, applications of technology for preventative health care to support life insurance coverage, the challenges of using AI to assess climate risk, and managing risk data.

How is competition driving digital transformation in the industry?

Russell Higginbotham of Swiss Re — Russell Higginbotham, CEO, Reinsurance Solutions, Swiss Re.

Digitalization has been happening, clearly. The pandemic accelerated that process because insurers found that they needed to be able to operate in a less face-to-face way that allowed their businesses to still run. Having a digital platform and having digital systems and the way you interact with customers becomes more like table stakes, in terms of efficiency in your business and the way that your customer wants to interact with you.

In that sense, I think we're already there. Some years back, we used to talk a lot about disruption, and some of the big well known names coming in and disrupting the industry and eating our lunch. I don't think it's happened in that same way because those so-called disruptors have become partners and helped the insurance industry become a more digital modern business. In that sense, we've disrupted ourselves from within.

How does the increasing amount of data from underwriting and risk assessment affect digital transformation?

The protection gap just gets bigger and bigger. Unless it's a mandatory product like car insurance, whether it's natural catastrophe, life insurance or health insurance, the gap between the amount of coverage people need versus what they actually buy, collectively gets larger. The challenge for the insurance sector is to try and find ways to close that protection gap.

Data is a way we can address that because the availability and the presence of data, whether for individual life, business, home or car insurance, the available data is much more now. Our ability to harness that data in the right way, responsibly, with the right quality presents a good opportunity for the insurance industry to close that protection gap.

What remains to be done for digital transformation?

The technology is there to make it work to a reasonable extent. With wearables for life insurance, like the Apple Watch, the availability and the accuracy of the sensors have improved. There's further that you can go with that technology as it matures, but it's there to an extent that allows people to track elements of their health or lifestyle. Insurers can leverage that to provide useful information. The more an individual lives a healthy lifestyle in exercise and diet, that reduces their cost of insurance.

To go back to the protection gap, it's the same with climate change. People need awareness and understanding of risk before they want to protect themselves and buy insurance coverage. The pandemic raised awareness around health and risk. People became much more interested in health insurance, and spent more time looking at policies rather than just buying the cheapest ones. They wanted benefits of services and access to service.

It's the same with climate change now, because the impact of climate change is very apparent for us to see. That presents an opportunity for the insurance sector to work with the customers to say these things are very real. Where you live can be at risk from flooding or storms and you need to have the right insurance protection. The value add there is not just about transferring the risk to insurers, it's also about mitigating the risk yourself.

How is AI being used to assess risks for underwriting property and casualty coverage?

I'm neither an AI evangelist nor an AI zealot. At the Reinsurance Rendezvous in Monte Carlo in September, reinsurers and insurers talked about pricing, capital and the state of the market. AI was the number one growth opportunity topic. At that event, PwC does annual reports asking executives what their top insurance risks are, and the top one was AI.

There's a lot of opportunity, but there's a lot of things we have to be cautious around. The insurance industry has a lot of access to data and increasing volumes of data. With the volumes of data we see, AI and algorithms around that can help in underwriting and claims – and is already doing that.

We experiment internally with use cases. The use of data and the quality of data needs to be carefully watched and understood. Algorithmic bias needs to be carefully watched and understood. We're positive about the potential but we'll proceed in a more balanced way. AI has the potential to close the coverage gap, getting the right product in front of the right people for the right price at the right time.

How may technology disrupt management of data for underwriting and risk?

There are different sources of data. We have a huge amount of data ourselves, in the normal course of business, but also historically. We also increasingly partner with organizations who have access to different forms of data as well. In reinsurance solutions, we spend a considerable amount of money each year purchasing data from various sources. We work with our insurance partners and bring in their sources of data. The ability to find an abundance of data is already a reality.

The challenge is understanding it and getting insights from increasingly large volumes of data. What Swiss Re brings to all this data is risk knowledge. We're a 160-year-old company that operates in every insurance market around the world. Data in itself has limited value, but the ability to structure it and bring insights to help our clients grow, optimize their portfolios and enter new markets, is the core proposition of what Swiss Re offers.

How do the partnerships expand the scope of information you have and the knowledge you get?

The sources and the variety of data and knowledge out there is beyond the scope of a single organization. Changes in wildfires and our ability to understand them mean our historic data becomes less helpful as world climate dynamics changes, and our ability to predict future patterns.

That applies as much to wildfire as it does to flood and other secondary perils as they've been traditionally called. They're probably more primary perils now. We need to work with other organizations. That's why we embrace that and feel very privileged actually to have partnerships with Google and others.

Do you also work with insurtech or technology startups generally?

We work with a number of different organizations in terms of partnerships, and from different sectors. We're currently working with Guidewire as a source of data. We partner with One Concern [an AI-based climate disaster risk advisor]. We're interested in their business interruption risk scores, and building those into our platform. One Concern will bring the knock-on effect in supply chains and an organization's ability to continue running with physical damage or other effects in their geography or supply chain. This distinguishes what we offer as a reinsurer and solutions provider, and are a competitive advantage.