Insurers may face a decade-long bad weather cycle, according to the MD of actuarial firm Finity Consulting, Estelle Pearson.

In a wide-ranging presentation at last week’s National Insurance Brokers Association Convention Ms Pearson looked at how Australian insurance markets have developed over the past three decades, before examining possible future directions.

She says there is “emerging evidence of long-term weather patterns that suggest we have recently come out of a 20-year good weather cycle” – raising questions about the impact a negative shift could have.

Ms Pearson says insurers have not yet seen the impacts of climate change, and these are likely to be felt gradually. “However, there is the risk that we will start to see accelerated change over the next decade leading to more extreme, more costly events, much more quickly than we have anticipated.”

Technology is another future game-changer, Ms Pearson says. Companies will be judged on their electronic interactions, making brand management difficult because “customers pay more attention to social media than traditional marketing”.

Ms Pearson predicts a proliferation of brands will result, catering to consumers who demand more choice and exhibit less loyalty.

Technology advances will also continue to improve insurers’ ability to price risk accurately. Ms Pearson highlights telematics in the motor market – which monitors all aspects of how a car is driven – as a key leap forward.

New technology will also reduce transaction costs for brokers and insurers, with contestable broker platforms having an impact in the commercial insurance space, she says.

Ms Pearson says such platforms will also make it easier for new insurers to grow market share and will result in reduced prices for customers. “The insurers that are the winners will be the ones that are smarter at pricing risk at a very granular level.”

Increased regulatory demands will also drive insurers to get smarter, with companies soon to make their own determinations about the amount of capital they need.

“The… winners will be those that can conduct a more sophisticated analysis of their capital needs and operate with a lower relative amount of capital than their competitors,” Ms Pearson said.

The continuation of offshoring is another future trend. “As time and distance become less and less important and quality in offshore centres improves, might we see the whole Australian insurance industry offshored?” Ms Pearson asked.