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Sharpen up or lose customers: Markel chief

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Insurers must “really sharpen-up” their technical capabilities or lose business, particularly in the SME space, because “the digital natives are coming,” (re)insurer Markel Corporation says.

The US group’s CEO Richie Whitt spoke with Aon’s CEO of Reinsurance Solutions Andy Marcell as part of Aon’s Virtual Reinsurance Renewal Season “fireside chats” last week.

“I am not suggesting we will ever get to an Amazon-like experience in an old-school industry like insurance, but we have to get a lot closer,” Mr Whitt said.

Investing in digital capabilities is critical for insurers trying to secure small to medium-sized enterprises, he says. Small business owners are short on time and expect to go online and complete a policy quickly.

“We have to be able to respond to that need,” Mr Whitt said. “If we do not figure out how to do this within our industry, somebody from outside of our industry will help us with it and take a pretty meaningful piece of our market share while they do it.”

Mr Whitt also says insurers need to take risks beyond the 1-in-250-year return period more seriously. Markel Corporation has become “acutely aware” of tail risk across its operations.

“The cost of tail risk is not well understood,” he said. “It seems theoretical when you are talking about the 1-in-5,000 event or 1-in-10,000 event, but in my insurance and reinsurance career, one thing is clear to me – if it can happen, it eventually will happen.”

He also acknowledged a “significant” protection gap, highlighting that while insurance was originally built around tangible assets, the enterprise value of many large companies is now based on intangible assets that require innovative insurance solutions such as intellectual property cover.

He also predicts that insurance-linked securities (ILS) will continue to be a highly attractive risk transfer option and says he is “incredibly bullish” on its long-term prospects.

“ILS makes so much sense in the long run because catastrophe risk in particular belongs in the broader financial markets where it can be diversified.”