The insurance industry has been told it must adapt to both increasing traditional risks as well as to new threats from technology in order to remain sustainable.
Consultants Aon said today it was 'disappointing' and a cause for 'real concern' that many of the risks listed by insurers as the most pressing were uninsurable within their current policy structures.
New threats facing the industry included increased connectivity between individuals, the accelerating accumulation of data and the speed at which information is sent digitally around the globe.
Lambros Lambrou, chief executive of Aon Risk Solutions in Australia, said these changes meant insurance companies were essentially borderless and all risks were global.
However, the industry tended to look at the past as a guide to future decisions, Lambrou said. This practice could lead to a failure to innovate, despite this being needed 'to address new or changing risks which fall outside of what is routinely offered.
'This 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,' he added.
Lambrou explained the industry was 'very sophisticated' in handling smaller risks, such as health and vehicle insurance, owing to a wealth of data and experience which informed decisions at all levels of the value chain.
However, if something went wrong outside established 'comfort zones', it was more likely to be catastrophic, even if it was as less frequent occurrence.
Stephen Cross, chair of Aon Global Risk Consulting, added cyber risk was a prime example of a new and changing risk which required innovation on the part of the industry in order to help companies understand and address it.
'Cyber risk is to our industry what asbestos was to the building industry, a ticking time bomb just waiting to explode,' Cross said.
He also said that hyper-connectivity, if not effectively addressed, could 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.'
