On Aon

20: On Aon's 2022 Predictions Featuring Global Risk Experts

Episode Summary

As we look ahead to 2022, we asked several colleagues at Aon what trends clients should be thinking about heading into the New Year. From the importance of Environmental, Social and Governance (ESG) considerations, to heightened climate change impacts and cybersecurity risk, the final episode of 2021 offers some predictions for the new year and guidance on how to prepare for what is to come.

Episode Notes

As we look ahead to 2022, we asked several colleagues at Aon what trends clients should be thinking about heading into the New Year. From the importance of Environmental, Social and Governance (ESG) considerations, to heightened climate change impacts and cybersecurity risk, the final episode of 2021 offers some predictions for the new year and guidance on how to prepare for what is to come. 

Additional Resources:

2021 Global Risk Management Survey

2021 Cyber Security Risk Report

The One Brief

Aon’s website

Tweetables:

“We do anticipate a more stable marketplace in 2022 for our clients, with the exception of cyber.” — Christine Williams

“ESG is presenting enormous challenges, as well as opportunities, for those who can get it right.” — Jennifer Richards

“I expect to continue to see runway in relevance as employers look at how to best shape the right programs, benefits and support options for their employees.” — Violetta Ostafin

“It’s really important to look at the holistic corporate portfolio, new and old, and make better decisions based on the information you have.” — Rory Moloney

“It’s highly likely that we’ll continue to see more of these very unusual types of weather events, which are leading to even greater levels of damage than we’ve seen before in the past.” — Steve Bowen

“The short answer is that for 2022, we expect an extension of the trend we saw in 2021, and that is that insurance continues to become more relevant to more individuals than it has in the recent past.” — Christina Hopper

Episode Transcription

Voiceover:

Welcome to a special episode of On Aon, a podcast featuring conversations between colleagues on well, Aon, where we'll be hearing from several voices at Aon. This week, we ask colleagues a simple question, what trends should clients be thinking about heading into 2022? First up, let's hear from Christine Williams, global financial lines and professional services leader for Aon’s Commercial Risk Solutions, on the importance of prioritizing cybersecurity in the new year.

Christine Williams:

Some of the trends that we're advising clients to think about as we head into 2022 are around making sure that they put in the time to meet with insurers. So in financial lines, we do anticipate a more stable marketplace in 2022 for our clients, with the exception of cyber. We do think it's going to be very important to set up meetings with insurers and continue to build relationships, whether it's via Zoom or WebEx, in person where they're able to do that. This building of relationships is going to help them obtain more favorable renewal results. We saw that through 2020 and through 2021. Some of the other trends that we are advising clients to think about are around cyber; cyber insurance has become very challenging, ransomware attacks are on the rise and capacity is becoming harder to come by.

Christine Williams:

So making sure that you're meeting with insurers and working with your broker to set up meetings is going to be critical as we head into a very challenged market for cyber insurance in 2022. Other trends that we're keeping an eye on are around ESG and how we can help our clients to be prepared around answering questions that are coming up in D&O and meetings and cyber meetings around how ready our clients are for ESG and how they're addressing it proactively within their own organizations. Aon could certainly help with the assessment and helping be proactive about assessing and addressing ESG.

Voiceover:

Thanks, Christine. I'm glad you brought up ESG. Next we turn to Jennifer Richards, head of Aon Australia, to hear how ESG positioning is crucial for companies in 2022.

Jennifer Richards:

Hi, I'm Jennifer Richards and I'm head of Aon Australia. One of the key trends that clients need to be thinking about heading into 2022 is how to best manage and communicate their ESG, or Environmental, Social, [and] Governance, position to the insurance market. This is particularly relevant in Australia where we're seeing energy transition from carbon and the associated ESG risks present enormous challenges as well as opportunities for those who can get it right. A host of stakeholders, including shareholders, regulatory bodies, employees, society and business partners, are increasingly attuned as to how well or how poorly material ESG issues are being managed. Proactive planning can influence not just access to insurance capital, but also access to capital more generally, talent pipelines and overall corporate resilience.

Jennifer Richards:

Coming out of the recent Glasgow climate conference, there's a new international sustainability standards board, which is being established to provide globally consistent sustainability disclosure standards. The first standard dealing with climate reporting is expected next year; if companies don't manage their risk proactively and disclose, it could result in significantly higher risk premium or assets simply not being able to be insured into the future. In fact, we're seeing clients being left behind in today's market as insurance capital providers closely scrutinize their ESG credentials. Aon has a critical role to play in helping both our clients as well as our carrier partners use ESG analytics to support their position in the market.

Voiceover:

Thanks, Jennifer, you talked a bit about how proactive planning can influence a company's talent pipelines and corporate resilience, which I know Violetta Ostafin, global chief operating officer, Health Solutions, has a few thoughts on.

Violetta Ostafin:

When looking at 2022 trends, there are two that stand out for me from an employee benefit standpoint. One is under the broader umbrella of workforce resilience and it's about employee wellbeing, which helps drive resilience. There are two pillars of wellbeing that have traditionally been less directly addressed from an employee benefit standpoint, and those are financial wellbeing and mental health. I'd expect to continue to see runway in relevance as employers look to how to best shape the right programs, benefits and support options for their employees overall for that topic and in particular for those two pillars.

Violetta Ostafin:

Another trend that stands out for me for 2022 is the continued evolution around the topic of benefits personalization, and this is speaking to employees' interests and engagement, and having a choice around their benefits and their benefits packages and in really shaping what is a better match toward their interests, their needs, their particular family life situation. This is interesting as well from an employer standpoint because it not only allows the employer to better address employee engagement, but also better address the optimization of resources that are dedicated to employee benefits by having a better understanding toward where the best return or where the best interest or match lies for their employee population.

Voiceover:

It will definitely be really interesting to see how benefits personalization evolves in 2022. Thanks for your thoughts, Violetta. I want to pass it over now to Rory Moloney, chief operating officer and head of strategic client advisory for Aon’s large account segment, to hear how this year's Global Risk Management Survey is impacting the trends that he's keeping an eye out for in 2022.

Rory Moloney:

I think the key thing that I'd call out in terms of emerging trends, and it has emerged as a trend in the Global Risk Management Survey which we've recently released, has been the breadth of exposure that now sits within [a] corporate risk portfolio. It is truly distributed risk across the firm, and many of those exposures would be things that we call traditionally insurable or well-managed risk, such as property casualty and marine, but increasingly we're seeing increased materiality of exposure from what we call new forms of volatility, risks such as cyber intellectual property, damage to brand and reputation, complex supply chain, climate transition risk, et cetera. And I think what's really important in approaching risk management for a corporate portfolio is to take a truly holistic approach at an enterprise level. And that involves really gaining that insight across all those exposures.

Rory Moloney:

For some, you will have a lot of data and information and expertise, and for others, it's about starting that journey in terms of understanding the exposures, how it impacts the business, in particular how it may impact the business quantitatively and starting to think about that. That in turn informs materiality, which can then be the foundation for an enterprise-wide risk management approach. I think it's really about looking at that holistic corporate portfolio, both new and old and making better decisions based on the information you have about that portfolio, not just individual risk.

Voiceover:

Thanks, Rory. Last up, let's hear how Steve Bowen, managing director and head of catastrophe insight, and Christina Hopper, president of Aon Affinity, consumer solutions group, are helping clients brace for impacts of climate change in 2022. Steve, why don't you go first?

Steve Bowen:

When it comes to predicting the future, especially for weather and climate events in 2022, I would say that I wish I had a crystal ball to be able to give you an absolute answer, but unfortunately I don't have the letters G-O-D at the end of my name to be able to say anything with any sort of confidence. Though what I will say is that it's highly likely that we'll continue to see more of these very unusual types of weather events, which are leading to even greater levels of damage than we've seen before in the past. Now, of course, more and more people are moving into these highly vulnerable areas, but the fact that weather events are acting much more unusually than they have in the past, the behavior is evolving, those fingerprints of climate change have become even more evident on each individual event.

Steve Bowen:

We really do need to start focusing more and more on how we're going to be preparing for these events in the future. So the hope is [in] 2022, we will continue to see more positive momentum around governmental bodies, working with the private sector to figure out ways to really help people start to figure out the best means of investment and many other things in terms of helping people prepare for what we see is becoming more and more inevitable by the day. Now, one final piece of this, I'm also optimistic that we'll continue to see more and more in the way of lowering what we call the protection gap. That is the portion of the economic damage, which is not covered by insurance. So as more and more countries are starting to see continued capital investment, more parametric-based approaches, to really start to set up insurance schemes in areas where there's not much insurance take up, I really do think that this is going to be a really critical next step. As we really try to get the world more and more prepared for the bigger challenges we continue to see.

Voiceover:

Christina, let's hear from you for your thoughts.

Christina Hopper:

Well, for individuals in their personal life, they're coming away from the past 18 months and they're looking forward to the next 12 with an entirely different level of appreciation for volatility that they just never had to manage before. They have reassessed, in some cases they've become acquainted for the first time, with levels of risk that they just didn't perceive before. And they're increasingly turning to insurance to hedge against occurrences that hadn't factored into their thinking. So some easy examples, we clearly see a trend toward consumers booking leisure travel. They want to get out in the world, the so-called revenge travel. Yet at the same time, there's wider recognition that events may require them not only to cancel their arrangements, but to stay longer in a destination, require help getting home, or even medical assistance while they're there.

Christina Hopper:

As a result, we've seen a 30% to 50% increase in those travel bookings that are adding travel protection to their plan and we expect that the same trend will continue through 2022. At home, pet parents are assessing their household budgets in a very dynamic economic environment. And they're exploring pet insurance as a really cost-effective way to ensure against large unexpected expenses that would disrupt their now much tighter household budgets. Individuals in the caring professions, like nursing and pharmacists, may have recently come out of retirement or they're working for new and varied employers as they address the needs of the pandemic and even the staffing challenges in the economy and the healthcare sector. Many of them are now working for new organizations or in new ways, such as part-time or as traveling professionals. And those shifts in their career have introduced volatility and higher perceived risks because they're moving away from established norms and relationships.

Christina Hopper:

No surprise then that professionals are becoming a lot more thoughtful about [how] to protect their finances and their career through personal liability insurance. Even in the more traditional personal lines coverage, there's increased awareness of the impact of things like climate change. Consumers in coastal or fire zones perceived risks as infrequent, but they are now also more educated about the higher likelihood of damage to their homes, to their autos and to their collections. They're turning to brokers like Aon to ensure they've evaluated and fortified their protection. They've come to acknowledge that there is an increasing frequency that can be expected for climate-driven events in 2022 and the coming years. So the short answer is that for 2022, we expect an extension of the trend we saw in 2021. And that is that insurance continues to become more relevant to more individuals than it has in the recent past.

Voiceover:

This has been a conversation On Aon around what trends clients should be thinking about heading into 2022. Thank you for listening. If you enjoyed this week's episode, tune in in two weeks for our first episode of 2022. To learn more about Aon, its colleagues, solutions and news, check out our show notes and visit our website at Aon.com.