- Where Insurance & Technology Meet

Bill Berkley: Technology’s Influence on Risk and Insurance

Lots of people have strong opinions about insurance, business in general, and the state of the world. A small number of these people have a four-and-a-half-decade track record of success putting their opinions into practice. Bill Berkley, Chairman & Chief Executive Officer of W.R. Berkley Corporation, is one of the select few.

Given the opportunity to hear Bill speak, we jumped at the chance. Bill was the guest of Berkley Canada on the occasion of that organization’s fifth anniversary in the Canadian market. His remarks covered a variety of topics, including the state of play in different parts of the world, the economic outlook for North America, and factors impacting the practice of insurance.

We will focus on Bill’s opinions on our domains of insurance and technology. Bill sees technology causing substantial changes in the insurance and risk management business.

We’d like your thoughts.

Telematics, Technology, and Auto Insurance

According to Bill, GPS/telematics devices and Usage Based Insurance are world-wide phenomenon, but could have the most rapid impact in North America.  Bill agrees with some of the assessments posted in this space about autonomous vehicles (see, e.g.,Insurance 2023: Changes to the Auto Means Changes in the Auto Insurance) that the reduced risk profile associated with the use of driver-assisted and self-driving vehicles will cause a decrease in automobile insurance premium of up to 50% over the next period.

In Bill’s view, highly automated insurers (Bill cited GEICO as an example) being highly vulnerable in this scenario.  In addition to the concentration of auto business, the high fixed cost of technology does not change as revenue decreases.

Reduction in auto premiums will cause more capital to be available in the market. Bill sees cyber liability as one of several new technology-driven risks which could absorb some of the risk capital.

Securitization, Analytics, and the Future of Insurance

Bill believes that a variety of factors will reduce the number of insurance carriers and will allow greater competition from outside sources.  He also sees the emergence of other risks (cyber liability is an example) which will drive new coverages and methods of underwriting.

Bill recognizes that the use of analytics and securitization will have impact on insurance, but will not replace the need for traditional insurance. While improved data analytics will improve the ability to effectively transfer risk, Bill feels that this does not eliminate the importance of risk selection.  According to Bill, while hedge funds will seek (and find) statistically calculable risks in which to invest, “looking at numbers alone won’t succeed” on its own as it doesn’t deal with “unforeseen risks.”

What do you think?

We had heard some of these thoughts before,  but not all.  We don’t agree with everything, but found it all to be refreshingly coherent and positive.

What do you think?  Do Bill’s views reflect your feelings or conflict with your views.  Let us know.