BOSTON—He's said it before but a different forum doesn't stop him from reiterating his thoughts.
“The world is changing too fast to innovate the way we used to,” says XL Group CEO Michael McGavick, one of the most outspoken industry executives on innovation. “We must become more daring.”
During a CEO Panel here at the PCI Annual Meeting, McGavick said insurance as a percentage of the global gross domestic product has declined. The gap between insured losses and economic losses is widening. “This is the sound of us becoming irrelevant,” stated McGavick, who points to companies taking on higher retentions and using self-insurance options for coverage the market can't or won't provide.
Quite simply, the insurance industry has to try to come up solutions to the world's newest risks and XL, according to McGavick, has. The insurance group has given the market a “long list” of new products, he said. Most recently it started a team to provide U.S. corporate clients with product recall, war, terrorism and political violence, and kidnap, ransom and extortion insurance and its Political Risk and Trade Credit business expanded into the supplier trade credit market.
“Don't just see the potential failure of the product,” McGavick told PC360 after the panel. “Why not take on the problems,” of flood, cyber and business interruption and supply chains? Yes, the industry does not have a wealth of data on these risks but some are moving too fast to wait and keep playing catch-up, he added.
“You must look at adjacencies rather than historical data sets,” he offered.
With overall company vitality in mind, McGavick admitted insurers must establish some parameters. “Like your pocket money at the casino, once that runs out you may be done for a little while.”
But things cannot go on as the have because, in part, the industry looks bad. With flood insurance, for instance, the industry “gets a black eye” after every event as it points to the government program, “which isn't working very well.” The government has a role but it must allow the private market to enter and create solutions.
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