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THE future of insurance, particularly reinsurance, lies in data analysis and the application of technology, said observers and industry players, who pointed out that it also hinges on their ability to innovate and price risks transparently for small segments of the population.
Still, this remains a slow process, hampered by their ability to gather and interpret clean data, which is the single biggest challenge the insurance industry now faces.
Most insurance companies have grown over time through acquisitions but have never really integrated the different businesses, said EY's global insurance leader Shaun Crawford. The problem in such cases is that insurers sometimes have very old technology or outdated programming, he added. This inevitably means access to clean data is harder.
Then there are other issues that need to be worked out - for example, whether the gathering and analysis of data is safe and protected from cyber threats.
Besides the issues surrounding Big Data and data analytics, the insurance industry is also grappling with system upgrading and digitalisation of manual processes.
Already, around 20 per cent of the market is using computers to underwrite risks, said Inga Beale, chief executive of insurance marketplace Lloyd's. And this will only increase over time, especially for relatively straightforward risks, she said, adding that customers now want tailor-made products.
"We need to smarten up in terms of insurance and follow that trend and technology would enable us to do that."
This becomes more important as real premium growth in the non-life reinsurance sector is expected to weaken in 2016 and 2017, according to a Swiss Re report.
It added that property catastrophe reinsurance rates are close to bottoming out given the strong erosion of profit margins over the last two years.
As for casualty and specialty lines, significant differences in pricing developments by market and line of business are expected in the months ahead, said Swiss Re.
Meanwhile, world premiums in traditional life reinsurance are expected to increase only marginally over the next two years, noted the report, adding that growth will be driven by emerging markets while advanced markets will see a slight decline.
"In emerging markets, life reinsurance premiums are expected to increase by about 7.5 per cent annually in the next two years. In these markets, life reinsurers' main value proposition will be to support primary insurance in product development, underwriting and claims management," the report added.
For more of BT's year-in-review stories, visit bt.sg/review_15