Notis Vagiakakos: Until recently, the main operational model of insurance companies had largely remained the same for many years. As a result, all the global players in the insurance market are now heavily investing in these technologies, either through acquisitions or by financing fintech and insurtech startups, or through their own innovation labs. This is absolutely normal in a world that is increasingly dependent on technology and its products. The true beneficiaries from investment of this nature will be the insurers who don’t simply react to the new technology trends in insurance but who will define trends by innovating.
New technologies will change the scenery and the way the sector operates to a large extent and in many ways. Some indications of this come from the use of digital communications with clients and technological developments in autonomous driving. This will create a radically different insurance environment. The exploitation of Big Data, machine learning and artificial intelligence technologies will also alter the way we arrive at conclusions about risks and the speed we get there. But this is not enough. The right people in possession of the necessary knowledge need to be behind each result discovered through technology. They need to assess the result and make the right decisions. Let’s not forget that companies are always guided by their people.
Companies like the ones you mention are now active throughout the world in many sectors beyond technology itself. Their aim is to exploit these sectors for their benefit. The same companies provide and simultaneously consume services in sectors ranging from logistics and manufacturing to software development, SaaS, PaaS and IaaS*. Insurance and reinsurance for these companies is at the same time a field of risk management and an opportunity for new business. The insurance sector is capital intensive and operates in a strictly regulated environment. My own view is that these companies are not aiming to compete directly with traditional insurers. Rather, they intend to make them their customers by offering solutions in the above fields. In any case, fair competition is always welcomed in the market and ultimately serves to the benefit of policyholders and those insured.
The capital available internationally remains at very high levels. Capacity or risk appetite is not therefore expected to come down. On the other hand, the price of this capacity – or in other words the premium – continues to vary along normal lines, depending on the capital return of each investor and the claims paid over a given time and across the years. The main factor determining capacity in the market is the availability of capital willing to assume risks and the actual claims these investors are called on to pay out for.
Geopolitical hazards are just one more factor that influences and determines the external environment of risks. Beyond geopolitical risks, I would say that a crucial issue for our country is protection against natural catastrophe risks. These pose a threat to our local geographical region as demonstrated by recent flood events. What is missing from our market is a perception of financing and responding to risk and its consequences in a cooperative way. The state needs to work together proactively with the private insurance industry which possesses the experience and the necessary know-how, and has a flexible response mechanism in place.
Market concentration is expected at European level and Greece is no exception. Indeed, we are already witnessing new mergers and acquisitions in the pipeline. The market favours large-scale players and I believe this is the way things will generally develop. Smaller players can only be viable if they provide high levels of expertise in niche segments and personalised service.
We are active with Non-life industrial and commercial lines in the Greek insurance market and as far as these lines are concerned the downward trend over the past few years is not yet showing any signs of reversal. Additionally, insurance penetration levels remain very low compared to the European average in terms of GDP share. At the same time, already now, significant prospects are perceptible in the Health & Pensions sector and we wish this increase in Health lines to contribute to improvement in the image of the insurance market in the perception of the public and to foster the further cultivation of an “insurance conscience”.
* SaaS: Software as a Service. PaaS: Platform as a Service. IaaS: Infrastructure as a Service.
This interview was first published by Insurance World. Publication on this website by courtesy of Insurance World.