CH11 page 10

[kiki]

Hi,

Any one can help me to understand the following :

"
Existing sectors of the economy that are a source of insurance business may be severely impacted by technological or regulatory disruption, leading to strategic challenges and a period of heightened uncertainty whilst new markets are developed. "

is that meaning the current business for insurance companies already expose to lots of uncertainty due to technology change (eg big data ? and regulation change ) ? so Insurer need to make changes to adapt to the new environment. however the new investment market also changing , increase the challenge?

thank you

 

[Ppan13]

Reading your quoted sentence in isolation, it's saying that the nature of businesses being insured (i.e. the nature of the customers of insurers, including companies) could change due to the impacts of technological or regulatory disruption on those customers. If the customers' business operations/ models have to change (e.g. due to mandating of new regulation or technology, or banning certain technology perhaps), their risk profiles would change, which would also impact their insurers. During transition from an old regime (of technology or regulation) to a new one, there is uncertainty as to what the final risk profiles may look like, which translates to uncertainty for the insurer as to what risks they are actually going to be exposed to.

 

[Darren Michaels]

A good example of this might be the move to driverless cars / autonomous vehicles. This is likely to cause significant disruption to the motor insurance market as the risks may move away from being covered by a traditional motor policy towards product liability coverages of the vehicle manufacturers.