Aon’s Wouter Bosschaart shares insights on growing ‘megatrends’ such as the metaverse, EVs and AI, which all present new insurance opportunities.
The world is changing as a result of new technology, with new industries being developed and existing ones heading toward a period of transformation.
As a result of these changes, various sectors will feel a knock-on effect, with opportunities and challenges popping up as a result. New technology brings new legal considerations for example, with topics such as AI copyright set to keep law firms busy for years to come.
One sector that is predicted to transform as a result of global tech changes is insurance, with radical transformations bringing new forms of risks, demands and volatile markets.
In a recent report, Aon claimed that there are multiple “megatrend opportunities” that will lead to billions of dollars in premiums for insurers.
Wouter Bosschaart is the director of ESG, climate change and energy transition within Aon’s strategy and technology group. Bosschaart told SiliconRepublic.com that technology such as AI will be a major driver of megatrend insurance opportunities.
“AI and prescriptive analytics can optimise insurers’ pricing and underwriting, streamline claims processes, help evaluate and model risks and detect fraud,” Bosschaart said.
He also spoke about several industries that will present opportunities for insurers, but warned that companies will need to be “proactive, not reactive” to benefit.
“Fast-moving markets will not wait for (re)insurers to get comfortable with the risks, but they will need to increase their access to capital,” Bosschaart said. “The scale and complexity of many megatrends can paralyse (re)insurers if they passively wait for greater clarity and data.”
Here are some key trends that Bosschaart and Aon predict will be potential gamechangers for the insurance market.
Bosschaart argued that the “versatile nature” of the metaverse will make its impact on the insurance sector “wide-ranging”.
“As the metaverse expands and the usability of it increases, the virtual economy will expand with it which will result in a need for the insurance industry to respond,” Bosschaart said.
In its megatrends report, Aon estimates that the metaverse will have an insurance market value of roughly $20bn by 2030. Combined with shared mobility and intellectual property, Aon predicts that these markets could generate roughly $80bn gross written premium by the end of the decade.
However, this market is still in development, with Bosschaart noting that the current “shortest route” to deploying insurance to the metaverse is through the use of NFTs.
“At present there are few insurance products servicing the metaverse, but expected growth in digital economic activity will create opportunities for insurers to cover virtual assets and cyberattacks in this space,” Aon said in its report.
The use of biological processes to develop products and services is a wide-ranging field that impacts multiple industries. Some examples of what biotechnology can achieve include creating new ways to tackle diseases, creating forms of clean energy, helping the environment and improving industrial processes.
Bosschaart predicts that the three main industries that will benefit from biotech developments are healthcare, agriculture and sustainable energy.
“The pace at which technologies are being introduced is increasing and so will need to be the response rate at which insurance can adapt,” Bosschaart said.
The push to reduce emissions is helping to spur the development of electric vehicles (EVs) as a way to replace combustion engines. There are estimates that roughly 10pc of global car sales were electric in 2021, four times the level of sales compared to 2019.
Aon predicts that roughly 30m EVs will be on the roads by 2030 and will account for 63pc of all vehicle sales. Batteries in particular is an area that Aon predicts will be an “key risk consideration”, making it a driver for insurance in this market.
“Batteries within EVs can often account for more than 50pc of the vehicle price and therefore can result in costly repairs, even with minor damages,” Bosschaart said. “Another issue is the residual value of the vehicle which is less predictable than that for ICE (internal combustion engine) cars.
“This is a gap that insurance companies could fill with various insurance products.”
Carbon capture storage
A developing market in the climate space is carbon capture storage, which involves capturing C02 to reduce emissions, particularly from industrial processes. This C02 can then be stored in various ways, such as deep underground.
There are various start-ups working to expand this technology, but Bosschaart said the technology appears to be in early stages, with the market’s future remaining uncertain.
“Research globally shows that a considerable number of projects have either failed to launch or failed after launch,” Bosschaart said.
He claims that insurance companies are still “wrapping their heads around the associated risks” of this market, which means the “appetite” for insurance remains low.
“This is an ideal case where new talent, like engineers known to the technology, could step into the world of insurers and guide underwriting these risks in the right direction,” Bosschaart said.
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