October 15th, 2018

Real-Time Risk Management and Next-Generation Insurance

Posted at 1:00 AM ET

john_drizik_2John Drzik President, Global Risk and Digital at Marsh

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A confluence of trends is enabling businesses and the insurance industry to move toward a revolutionary new approach: real-time risk management.

Managing risk in real time offers the potential to both reduce risk and transfer it more effectively. It means businesses can have an up-to-the-minute view of their changing risk exposures—and take actions to mitigate them—and that the insurance industry no longer needs to rely only on historical data to price risk.

What makes real-time risk management possible? Three concurrent developments are starting to reshape the risk landscape:

  • New real-time data streams. From telematics to satellite imagery to wearable technology to property sensors, there are a growing number of emerging technologies generating new data streams that provide dynamic signals with risk content. Mobile phones are also a growing source of risk signals, especially as more and more of them are run on high-speed wireless networks. By 2025, the world will have 1.2 billion 5G connections, and 4G will reach 5 billion connections, according to the GSM Association, a global trade association of mobile telecommunication operators. This means the majority of the global population will have access to the advanced wireless networks that can power real-time data streaming.
  • Analytics driven by artificial intelligence. Advances in AI and machine learning now enable the processing of large-scale data streams at a speed significantly faster than previously possible. AI-powered analytics can distill the expanding set of real-time data signals into a dynamic view of risk that can be used to trigger mitigating actions or consideration of risk transfer alternatives.
  • New insurance products. New policies that adjust price or coverage in relation to changing risk signals are creating incentives to manage risk more actively. The most developed area is personal auto insurance, where some policies now provide premium credits in relation to telematics-based information on driving behavior. While still embryonic, innovative insurers are exploring the potential to create next-generation policies in other property and casualty areas that use new data streams to adjust price or coverage dynamically and that also use real-time streams to process claims more rapidly.

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