PRECEDENT FROM LEGAL ACTIONS (MEDIUM IMPACT, 1-3 YEARS)
1. As illustrated by a wave of negligence claims in the aftermath of hurricane Sandy, there seems to be a propensity in the US towards suing more and targeting more distant parties (e.g. construction companies in case of buildings incurring nat cat damage). This development is possibly driven by a depressed economy which tempts people into court seeking easy money. There are indications that this trend might also spill over to Europe, changing its so far comparatively benign litigation landscape.
2. In addition, self-proclaimed `consumer protection‘ lawyers in the US are increasingly seeking new targets, and the growing obesity epidemic has spurred them to set their sights on the food industry. By now, they have filed several cases against big industry players, asserting that food makers are misleading consumers and violating federal regulations by wrongly labelling products and ingredients.
3. These ongoing legal actions could change the insurance landscape and may result in claims and litigation costs far in excess of what could have been expected.
PERSONAL DAMAGE COMPENSATION (MEDIUM IMPACT, 1-3 YEARS)
1. An escalation of medical expenses and a steady increase in indemnity create a difficult environment for workers‘ compensation products. Medical expenses are increasing at a pace clearly above the rise of the consumer price index. This development is driven by medical progress and a tendency towards costly home care.
2. Medical progress has made new treatment options available, which may often result in increased per-unit treatment costs. Ultimately, everything which is medically possible is sooner or later applied, with insurance carriers having to bear the costs.
3. In richer European countries there is also a tendency to grant victims a high standard of individual care in a familiar environment, often involving professional carers and sometimes even the installation of medical equipment in the victim’s home. Even if treatment/care were available at lower cost in specialised facilities such as nursing homes, patients are often allowed to stay at home where they feel more comfortable closer to their families.
4. These developments are likely to drive up costs for workers‘ compensation claims, which could also be mirrored in liability claims since the insurers providing the medical care will often be allowed to exercise recourse against a liability insurer.
BIG DATA (HIGH IMPACT, 1-3 YEARS)
1. The amount of data is growing at an ever-accelerating pace, resulting in ‘big data‘ – an unprecedented amount of structured as well as unstructured information that can no longer be handled by means of traditional data management and data processing solutions.
2. Big data can be the key for targeted, tailor-made solutions in many industries. In healthcare, for instance, big data can help aggregate the delivery, administration and documentation of medical treatment, hence providing cost-efficient personally-tailored
medicine.
3. However, non-traditional, unstructured data sets also pose challenges regarding their reliability as it is more difficult to verify that the information contained in a tweet, text message or social media posting is accurate. All data sources have their limitations, but the trustworthiness of very large, unstructured amounts of data with little or no process wrapped around them elevates this concern. Other worries are related to data ownership and intellectual property rights as well as data protection and information security, but also to the accessibility of big data.
4. Limited access to and use of big data could lead to competitive disadvantages for insurers as data-rich and data-apt organisations can differentiate themselves through
tailor-made offers for their customers.
REGULATORY FRAGMENTATION CONCERNS (MEDIUM IMPACT, 1-3 YEARS)
1. The implementation of policy reforms by individual jurisdictions reveals increased fragmentation of regulation and markets, threatening to reverse progress toward a more global and coordinated financial services sector.
2. This trend toward a more territorial approach, especially ring-fencing assets, capital and liquidity, threatens not only to undo recent movement toward regulatory cooperation under G20 initiatives, but also to set back earlier achievements of cross-border cooperation that have helped fuel global economic growth.
3. There is a growing need for the Financial Stability Board (FSB) to address the effects of unilateral, protectionist, or extra-territorial regulatory measures by member states.
4. Uncoordinated regulatory reforms will be less effective in promoting financial stability and could undermine the ability of insurers to undertake their core functions in supporting economic activity and recovery.
CONTINGENT REPUTATIONAL RISKS (MEDIUM IMPACT, 1-3 YEARS)
1. A company‘s sustainability risk management and the way it communicates its risk handling through interaction with stakeholders can positively or negatively affect its reputation. The stakeholders in question consist of a broad group of interested parties including investors, rating agencies, shareholder associations, pension funds, clients, governments/regulators, employees, NGOs and the wider public.
2. Reputational damage does not even require direct involvement in any illicit activity. The insurance industry can also be impacted indirectly by insuring companies involved in illicit, unethical or otherwise reputationally damaging activities – that is, it could incur contingent reputational damage.
3. The importance of environmental, social and governance issues is increasing the risk of a mismatch between a company‘s sustainability risk handling and stakeholder expectations. This may lead to reputational risks and ultimately also to financial damage.
(Source: SwissRe)
