By AltFi News on 9th October 2014
The insurance industry is not renowned for being remarkably quick on the uptake – but it might be time to take notice of the alternative finance phenomenon.
This year’s Aon Advanced Risk Finance Conference threw up a number of questions about financial innovation. Lambros Lambrou, CEO of Aon Risk Solutions in Australia, suggested that the risk industry faces a problem in that it tends to look to the past as a basis for making future decisions. Mr. Lambrou explained:
“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.”
“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.”
The “increased connectivity” referenced by Mr. Lambrou may refer in part to the alternative finance industry – which has allowed people all over the world to fund one another through the power of the internet. That heavy reliance on the World Wide Web has led Stephen Cross, Chairman of Aon Global Risk Consulting, to suggest that the cyber crime risk is becoming an increasingly pivotal concern for insurance companies:
“Cyber risk is to our industry what asbestos was to the building industry, a ticking time bomb just waiting to explode.”
“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.”
The astute pair of Lambrou and Cross are calling on their industry to display a level of agility and invention in the coming years, in order to respond to radical changes in the way that people interact. The alternative finance movement is among the most sweeping of those changes. For insurance providers there will be a host of new challenges – but there may well be even greater opportunities.
Indeed, the interplay between the two industries has already begun. A few examples are listed below:
Clearly the two sectors are already beginning to coalesce. What we have in the above list of three are two distinct forms of interaction: alternative finance platforms partnering with established insurance providers – and platforms that instead disintermediate those providers. It will be fascinating to see which of the two models prevails.
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