Prevention is better than cure: How technology is reshaping approaches to risk

In an era of escalating geopolitical tensions, from the Red Sea crisis to the ongoing conflict in Ukraine, the insurance industry is undergoing yet another fundamental transformation.

What is emerging is a picture of an industry leveraging technology and data analytics not just to provide coverage, but to actively prevent and mitigate risks.

It takes many innovations to truly change a market. But insurers and technology providers argue perhaps the most striking development to date has been the quick embrace of preventative risk assessment and real-time pricing in certain markets.

“Some underwriters are now updating their rates daily, or even a couple of times a day, for the areas of highest risk," Stefan Schrijnen, chief commercial officer at insurtech Insurwave, says.

It’s a move that is “unusual and innovative”, Schrijnen adds, and one that represents a seismic shift for specialty insurance, particularly in marine coverage, where static pricing models were once the norm.

More importantly, it enables insurers to act as early warning systems for their clients, using pricing signals to highlight emerging dangers before they materialise.

Increased granularity

The granularity of risk assessment has also increased dramatically, reflecting this new preventative approach. Take the Red Sea region, where what was once covered by three or four different rates now has 25 or 30 “distinct pricing zones”, according to Schrijnen.

The approach to risk assessment – an approach some may call microscopic – is not limited to the Red Sea. Similar patterns are emerging in other high-risk areas such as the Gulf of Guinea, where some policies now incorporate 50 to 60 different rates within a single region. This technology-fuelled granularity enables precise risk mitigation strategies tailored to specific geographical areas.

This evolution is not happening in isolation; it is being driven by a perfect storm of technological innovation and necessity. “We need insurers to be moving as fast as the landscape that they're operating in," comments Lorraine Stack, risk management leader for Europe at Marsh. This means not just developing new products but fundamentally rethinking how risk is understood, prevented and managed.

“We need insurers to be moving as fast as the landscape that they're operating in”

^{Lorraine Stack
Marsh}

It is an evolution that is happening on land as well as at sea. Stack says a recent collaboration with the Ukrainian government used Marsh’s data platform to show that more than 60% of the country was not affected by the ongoing Russian invasion. In doing so, Marsh was able to help drive investment in the country despite the conflict, she adds. 

Gone, it seems, are the days of relying solely on historical data and human judgement; today's risk assessment demands real-time analysis of complex, interconnected factors to stop losses before they occur.

This preventative approach is again particularly evident in marine insurance, where firms such as Insurwave are partnering with analytics providers to scrutinise vessel affiliations and ownership structures against published threat criteria – a crucial capability when dealing with actors like the Houthis, who openly publish their targeting criteria.

Proactive risk prevention

The transformation extends beyond maritime risks to the broader supply chain sector, where artificial intelligence-powered solutions are revolutionising how risks are identified and managed. Stack says Marsh's Sentrisk platform, which is capable of processing billions of documents in real time, exemplifies how insurance is moving away from reactive, manual processes towards proactive, automated risk prevention.

The industry is also becoming more prescriptive in its risk prevention requirements. Schrijnen notes how armed guards, once simply a basis for insurance discounts, are now becoming “a condition of cover” in high-risk areas.

However, as part of this, the industry is seeing the emergence of new collaborative models between insurers, technology providers, and security firms. The integration of operational security data with insurance platforms, allowing for real-time threat alerts to both vessel operators and underwriters, represents a new paradigm in risk prevention. As Schrijnen explains, this enables “everybody to do all the things within their power, to mitigate and then actually deal with any events that do happen”.

Challenges remain, however. The rise in spoofing activities demonstrates how technological advancement is a double-edged sword – creating new risks even as it helps prevent existing ones. Insurwave's response – filtering out some 300 spoofed positions daily using algorithmic logic – shows how the industry must continuously innovate its preventative measures.

“Ten years ago, the insurance market would find out hours or even days after an event happened. But data is enabling them to be involved immediately, to unlock the funds quicker, and to ultimately resolve the situation faster”

^{Stefan Schrijnen
Insurwave}

Ultimately, the transition is one that will see insurers move from being a financial safety net to proactive partners for risk prevention. Schrijnen says this is welcome territory for many in the industry.

“Think about what happens if there’s a missile strike on a tanker. Crew are involved, you need to move operational infrastructure into the area to deal with the event, that needs to be financed... the insurance market is a key cog in the chain to get that process moving.”

He adds: “Ten years ago, the insurance market would find out hours or even days after an event happened. But data is enabling them to be involved immediately, to unlock the funds quicker, and to ultimately resolve the situation faster.”

This evolution mirrors a broader truth about our modern world: In an age of unprecedented complexity and interconnected risks, waiting to react is no longer enough. Perhaps, as Schrijnen and Stack hint, the future of insurance lies not in picking up the pieces after tragedy strikes, but in working tirelessly to ensure those pieces never fall apart in the first place.