The insurance industry is striving to keep up with the rapid rate of change that is transforming not only the industry itself, but also its customers’ way of life and businesses.

David Hollander, EY’s global insurance leader, told The Royal Gazette that industry leaders were battling on multiple fronts to keep their businesses competitive and relevant.

Asked what keeps CEOs up at night, Mr Hollander said: “It’s the simultaneous equation: I’ve got to become more profitable, at the same time I’ve got to change my business model to go after new customers, maybe different servicing methods and new geographies, and at the same time I have to become more efficient with my capital.

“It’s really hard, but everyone has to do all of those things right now to compete effectively.”

Data collection and analysis, as well as attracting talent were also high on the industry’s list of concerns, he added.

Mr Hollander was speaking on the sidelines of the EY (Re)Insurance Outlook 2018 conference at the Hamilton Princess and Beach Club yesterday.

He said the pace of change was unprecedented. “The industries we insure are all changing. It’s exponential. That’s exactly what Moore’s Law said. If computing power continues to double every couple of years and their capabilities are doubling every couple of years, think of what’s possible.

“People are getting smarter. Young businesses with a great idea can build it, host it in the cloud without having to buy computers, so things change fast.”

He said there was a building sense of urgency among insurers to keep up with the fast-changing world.

“In the last three years, there’s been a quantum change in the pace of trying to get better at what you do today, but also to think about where you need to get to tomorrow, because the world will be in a different spot,” Mr Hollander said.

“The products will be different, the customers and how they want to be served will be different. The partnerships you will need to have will be different and potentially, even the regions you will be playing in. There is also the need to get rid of things that don’t contribute to the bottom line.

“I think there is a sense of urgency and the industry gets it. They’re moving ahead very quickly. You could debate whether is fast enough but it’s not that there’s not effort there.”

Making effective use of advancing technology will be essential for insurers to survive and thrive in the coming years. Mr Hollander said insurers should start by understanding their customers.

“If you start with that orientation, around the problems you’re trying to solve for the customers you’re going after, then that’s step one,” he said.

“The power of technology will continue to advance. So there will be enabling technologies, tools, that can solve some of those problems. The companies that will do well will be those who invest in talent, who partner with companies who might have access and insight that they don’t.

“The island will never have all the brains around this — it can’t — but it can be better connected with India and China and the places in the world where the talent is.”

The Chinese are leaders in artificial intelligence, helped by the enormous data trove created by its 1.4 billion population, he added.

Insurers also had to work out potential opportunities to work with established tech giants like Amazon, Google, Alibaba and Apple.

Disintermediation is a word often being used in association with technological change in insurance. One suggestion, mentioned by Darren Wray, CEO of Fifth Step, in his commentary in The Royal Gazette today, is that reinsurers could eventually connect their capital directly with the end user of insurance, cutting out brokers and primary insurers.

“You’ll get diverging opinions on that, depending on who you ask,” Mr Hollander said. “Would it happen like that in the extreme — I don’t think so. But it’s pushing the envelope in the right way to say that every intermediary adds cost, so there has to be value that comes with that cost.

“If you have somebody who understands the needs of customers really well and somebody else who has a source of capital to match up with that, why do you need anyone else participating in that process?

“Well there are regulators who will take strong points of view on both the product, from a business perspective, and also on the sources of capital.”

Harnessing technology will also depend on attracting the necessary brainpower. Insurance executives frequently proclaim that the industry does a poor job of communicating its value to purpose-driven millennials. Mr Hollander had some thoughts on the kind of message that was needed.

“We’re here to deliver on a promise,” he said. “We’re here to help people avoid losses and if they have a loss, we’ll get it fixed. We’re going to help people in their daily lives and to help businesses to come back from losses.

“If we start with the purpose first and then simplify everything to make the job content more enjoyable, we can show it’s a great place to work.”

David Brown, senior partner of EY Bermuda and regional insurance leader, said he believed Bermuda remained as relevant as ever despite external threats and the challenges that come with rapid change.

“I see Bermuda continuing to be one of the leading financial centres in the world,” Mr Brown said. “It’s a centre of excellence for underwriting and service providers.

“If you’re going to start a company, Bermuda continues to be the right place to do that. I don’t think that has changed.

“The regulator [Bermuda Monetary Authority] is very strong and has Solvency II equivalence — but it’s also nimble and will talk to you in a way that doesn’t happen in many other jurisdictions. Bermuda has challenges and always will, but it’s very resilient in addressing them.”