Dr. Wolfgang Strassl
Opinion: Know-how for profitable business
Developing intelligent and innovative products in the field of occupational disability is one of the main challenges insurers face today. Munich Re not only has the experience needed to achieve this task, it can also offer its clients the best-possible tools to optimise the market opportunities available.
Whether we are talking about new types of disease, the changing nature of work or increasingly tight state budgets, the occupational disability risk has undergone radical change over the past few decades. What has remained constant, however, is the fundamental importance of occupational disability insurance, which can be considered a basic right of all working people. After all, if young or middle-aged breadwinners have to stop work due to illness, they and their families invariably face a major financial crisis.
From an insurance point of view, occupational disability insurance pursues one central goal: it helps those affected to cushion the blow of a loss of earnings resulting from disability or incapacity. Such protection is therefore a highly important component of our socio-political system. Although there is a broad diversity of parameters and regulations in individual countries, there does seem to be a clear common trend emerging almost everywhere. As in so many other areas, state support is being scaled back. This is creating painful gaps in cover, and insurers must find the appropriate business models to fill this gap.
The insurance industry already makes a significant contribution in this sphere, without which social insurance would barely be able to function, and its share in the over-all system of old-age provision is growing all the time. In order to fulfil this socio-political role, insurers need to develop intelligent, innovative and risk-adequate products which can cover occupational disability and adapt to the constantly changing parameters involved.
Early identification of trends
As a global risk carrier, Munich Re has many years of experience and great expertise in the field of product design. The development currently taking place in Germany is something that other countries went through years ago,albeit in a slightly different form. Thanks to its presence in all important markets, Munich Re has been able to closely follow the processes that have taken place in other countries and is therefore familiar with the cycles and special features of this business. This know-how enables us to identify and analyse trends at an early stage and share this experience with our clients. Indeed, we consider the transfer of knowledge to be one of our key tasks, as it is the only way of guaranteeing a supply of adequate products tailored to individual market customs and practices.
Profitable participation in the market requires not only sound risk assessment but above all optimal business processes. This includes thorough risk evaluation and effective claims management. Evaluating whether and on which conditions a risk can be accepted is a particularly difficult task, constituting a major challenge to underwriters. Primary insurers can count on our support here as well. In order to facilitate the transfer of knowledge and know-how, which has always been of top priority at Munich Re, we have developed the internet-based underwriting system MIRA (Munich Re Internet Risk Assessor). Just a few clicks of the mouse will provide all the information underwriters need in order to react quickly and cost-effectively to business opportunities and to keep pace with the rapidly changing nature of the risks.
Exerting a positive influence on loss experience
The status quo and the pace of new trends can differ significantly from country to country. Consequently, there are markets where the private insurance sector has almost no experience of the occupational disability risk. Giving due consideration to the sometimes highly complex regulations in some countries during the product design process requires great know-how, especially with regard to the underwriting risks involved. Munich Re offers insurers its support to help them come to grips with these risks. As there is a distinct and recurring pattern to the cycles in different markets, our international experience can provide valuable impulses for optimising control of business and risks. The results of our statistical analyses permit conclusions to be drawn on risk-adequate underwriting or on the wording of insurance conditions, differentiated on the basis of risk groups. This will certainly have a positive influence on loss experience.
Intelligent products to cover occupational disability are an excellent growth market in developed countries in particular. The challenge the insurance industry faces is to come up with solutions which adapt insurance cover to the increasingly complex parameters involved. As the career paths of today's insureds are nowhere near as straight forward as they used to be, innovative products also have to take account of the increasing career volatility. Moreover, the target group has also changed significantly, with the self-employed, students and young people yet to embark on their careers increasingly interested in occupational disability cover.
The market for occupational disability insurance in the future will continue to be heavily influenced by strong dynamics in terms of demand, products and loss experience. Given the numerous imponderables involved in disability risks, Munich Re sees it both as a challenge and an obligation to support primary insurers in their risk assessment. Our objective is to help our clients to develop new markets and to support them in the assumption of new, frequently unknown risks along the entire value chain.