The long journey toward a unified regulatory system for insurance in the European Union—Solvency II—finally appears to be near its end. With that hurdle behind them insurers and reinsurers have realized they must urgently address major changes in how they do business driven by technology and globalization, speakers said at the recent European Insurance Forum 2015.

“Let’s have a look at how the world is changing,” said Sarah Goddard, chief executive officer of the Dublin Insurance Marketing Association (DIMA). During an interview at EIF, which she organized, Goddard was addressing the question of where organizations like DIMA and other EIF participants are focusing their attention.

The changes, driven by the exponential expansion of technology and social media, are in the process of altering the way the industry does business and delivers its products. “A new client base is developing,” she noted. “So, we take a look at things like how the new delivery systems might take place; how people are interacting with the world around them; what are the new models? What are the new risks?”

Ian Goldin, professor of globalization at Oxford, described the changes that have affected the world since the Berlin Wall fell in 1989 as “everything spilling over,” with the world becoming “globally interconnected.”

He said political crises in the Middle East, continued fallout from the 2007-2008 financial crisis, emerging markets in China, India and elsewhere, a surge in population growth and the interconnectedness of trade and supply chains has made the world far more complex.

Two-thirds of economic growth in the last 25 years—“the most rapid in history,” Goldin said—has been in emerging markets, accompanied by a burgeoning middle class.

Goldin said one side of this has been the emergence of “anthropogenic risks”—those created by man not nature.

What’s more, he said, “this affects risk management, as complex and integrated systems mean the loss of the ability to manage risk curves.”

Goldin’s biggest actual concern, however, is one that’s plagued mankind since the dawn of time—pandemics. They are more easily spread now through international travel than they have ever been.

As well, Goldin also isn’t exactly favorable to increased regulation, because the people doing the regulating tend to address national rather than global concerns. As an example he explained that Solvency II, and presumably other capital requirement regulations, would force investors to “sell assets in a down market—a psychological not an economic—response, and the wrong one,” he said.

Goldin wasn’t alone as a presenter from outside the industry. Many speakers and panel members weren’t part of traditional insurance cultures, such as Joey Boland, a professional Gaelic hurling player who talked about motivating players to optimize their game performance to elevate the level of play of the entire team. In this sense the 2015 EIF departed from conventional conferences. Experts from different backgrounds brought their expertise in other fields to bear on the industry in the hope of finding new solutions to old and new problems.

Educating for the Future

People from within the industry also picked up on the necessity to view the big picture of the changing risk landscape and on a themes of identifying and inspiring talent to tackle emerging challenges. Vicky Carter, vice chair of operations at Guy Carpenter, said you “have to value knowledge, and create a clear path for people to follow. Identify what a person is good at—reinsurance, underwriting, brokerage, maybe not managing—and then develop that talent.”

Carter spoke during a session titled, “Educating for the Future,” with Jim Jones, executive director of the Katie School of Insurance & Financial Services at Illinois State University. Jones explained that he keeps in touch with former students to make sure they are still learning and receiving the kind of training they will need to build successful careers. “If they don’t get any feedback, they have no guide as to what they may expect in the future,” he said.

That advice will become increasingly important as the insurance industry remodels itself to face a changing world. At the 2012 EIF conference, for example, XL Catlin’s CEO Mike McGavick warned that the re/insurance industry was at risk of becoming irrelevant. He said the industry needs to start gathering and correlating data to come up with “new solutions to new problems” and start recruiting as much new talent into the industry as it can in order to do so.

Enda Murphy, executive vice president and head of global business operations at life reinsurer RGA Re, echoed this idea, noting that insurance is not the growth driver it once was.

As a percentage of GDP, insurance penetration has fallen in relation to GDP in most developed countries, notably the U.S. where it used to be 1.6 percent of GDP, and is currently only 1.3 percent, he said. In Europe it’s dropped from 0.9 percent to 0.8 percent.

If that trend is to be reversed the industry must begin to seriously consider how it does business, and that begins with improving the number and quality of the people it recruits and how they are trained, EIF participants suggested..

Commenting about the panel on that included Murphy (“Declining Insurance Penetration in an Affluent and IT-Developed World”), Goddard said: “The vast majority of people, myself included, never meant to go into insurance. It wasn’t something that was a career choice. I actually only know two people I’ve met in my life who decided to go into insurance.”

Darius Kumana, head of IT and digital strategy with Markel in London, isn’t from an insurance industry background. He said he joined Markel because he “saw an opportunity in insurance to use his prior experience to make needed changes.” Although he spoke at a session focused on technological advances that are changing the industry, he stressed that the industry’s problem “isn’t an IT problem; it’s a business culture issue.”

Technology, Customers and ‘New People’

Kumana’s colleague on the technology panel, Ian Lucey, Director of IT company PixAlert, pointed out that with the power of social media, “it’s the consumers who are leading the changes.”

Listening to those actual and potential customers, and finding out what they do and how they do it, is therefore of critical importance. “Customer perceptions are changing,” Kumana said. “People’s relationships with technology are changing. The pace and scale of change, just in terms of ubiquitous tech, is phenomenal.

“Google has 100 billion searches a month. People talk about big data. I think that there’s a stat which is something like 3.4 zetabytes of unique information…I think that’s 21 zeros at the end of that.”

There’s no way the insurance industry will be able to cope with that, and what’s to come, unless it has the people to do it with, Lucey noted.

“Invest in new people,” Lucey said. “People who will come into your company and change it. Get them into the culture of the company; let them create products, or buy products, tailored for that company only.”

Kumana said technology has allowed Markel to reach its customers in a more intimate and direct way, improving their ultimate experience. “The ability for us to reach our customers and have direct, fine-grain conversations with them has now been tremendously empowered through tech,” Kumana noted.

In general, EIF participants suggested that the insurance industry needs more qualified people to develop solutions that take advantage of technology and who will lead the industry into a new era. It already has a wealth of expertise in the underwriters, actuaries, catastrophe modelers, risk managers, specialized brokers and others who are integral parts of its operations. Find their equivalent within the technological community, recruit young people, and give them enough backup to do the job, including treating a failure as a learning experience, not a catastrophe. Then maybe McGavick will be able to tell the industry that it has become more relevant.