According to Aon,“many of the risks that businesses list as their most pressing are uninsurable within current policy  structures, which is both disappointing and cause for real concern. To remain sustainable and support clients, the risk industry must find ways of staying relevant as traditional risks get bigger and non-traditional risks pose new threats.”
Lambros Lambrou, CEO for Aon Risk Solutions in Australia, made these comments in the wake of this year’s Aon Advanced Risk Finance Conference, while warning that the future of risk financing will look very different from that of the past.
“Our industry is very sophisticated in handling smaller risks, such as health, vehicle and even safety. There is a wealth of data and experience around these risks which informs decisions at all levels of the value chain,” Mr. Lambrou explained.
“However, when something goes wrong outside established “comfort zones”, while it may be less frequent, it is more likely to be catastrophic. And the truth is that the risk industry has struggled to develop strategies relevant to clients’ needs in the catastrophic risk space.”
Mr. Lambrou explained that part of the problem is that the risk industry tends to look at the past as a guide to future decisions, a practice that can lead to a failure to innovate as required to address new or changing risks which fall outside of what is routinely offered.
“Changes such as the increased connectivity between individuals, the accelerating accumulation of data and the speed at which information is sent digitally around the globe mean that all companies are now borderless and all risks are global,” he said.
“And that means the risk industry must stay ahead of clients and develop risk mitigation and financing strategies if they are to continue offering value and relevance,” Mr. Lambrou explained.
Stephen Cross, Chairman of Aon Global Risk Consulting and Aon Centre for Innovation & Analytics in Dublin, said that cyber risk is a prime example of a new and changing risk requiring innovation on the part of the industry in order to help companies understand and address cyber risk – before it’s too late.
“Cyber risk is to our industry what asbestos was to the building industry, a ticking time bomb just waiting to explode,” Mr. Cross said.
He also cited the hyper connectivity that now underpins the functioning of our world as a factor that, if not effectively addressed, may affect the very structure of the risk industry.
“Insurers and brokers alike should take a long hard look at the traditional distribution model we’ve lived with for years.
Peer-to-peer lending, peer-to-peer sharing of risk and even crowd-sourcing of insurance policies and capital could change the way we do business forever.”
Mr. Cross concluded by saying that while some of the changes to the industry are profound, responding to them on behalf of clients requires the industry to stay alert and take advantage of the research and analytics available.
“The Aon Centre for Innovation & Analytics is dedicated to data analytics and innovation with the sole purpose of anticipating and responding effectively to the needs of our clients.
“Our real aim is to help our clients, insurers and our brokers look to the future of risk armed with fact-based data and insights,” Mr. Cross said
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