After completing her first 5km run, Annette Ball was in floods of tears at the achievement.

It was the first milestone on a journey, starting in 2019, that has seen the 56-year-old music teacher from Coventry lose more than three stone in weight and establish a new regime of strenuous exercise nearly every day of the week.

Ball’s story is the kind of inspiring tale of self-improvement that flourishes on social media feeds, but what is more unusual is the company that she credits for getting her moving: her insurer.

A points-based scheme offered by life and health insurer Vitality, which uses a wearable device to track physical activity and offers financial benefits and vouchers for progress, was instrumental to her lifestyle shift.

“The bottom line is that it is insurance, but what it has enabled me to do is get healthier,” Ball says. “It’s certainly changed how I live now.”

It is just one example of a shift that is reshaping the centuries-old insurance sector, fuelled by new technologies and real-time data that insurers are increasingly gathering on their customers.

Vitality calls it “shared-value insurance”, others call it “active insurance”, but the core idea is the same — focusing more and more on preventing and mitigating claims. By working with consumers and businesses to change behaviour and reduce their risks, insurers hope to limit the likelihood and severity of payouts.

Prevention has been an element of the insurance industry for centuries. In the aftermath of the Great Fire of London, the property insurers of the 17th century operated their own emergency services, as they sought to protect themselves as well as their clients. From burglar alarms on houses to wheel locks in cars, insurers have long urged clients to take more measures to avoid thefts that would result in claims.

But smarter and widely available technology means insurers can now intervene earlier and in a greater variety of ways — an accelerating process that is starting to change large parts of the industry.

Companies have been experimenting with using these types of tools in health insurance for more than a decade. They are now increasingly prominent in areas ranging from floods to cyber attacks. Cyber insurance provider CFC has called its support services “digital fire trucks”.

“We’re investing heavily into risk prevention . . . in order to help turn insurance from just paying out to essentially helping people understand their risk and reduce their risk,” says Julian Teicke, co-founder of insurtech Wefox. The company raised $400mn from investors earlier this month in its latest funding round and has recently established a research team in Paris to drive its prevention efforts.



The growing focus on prevention has prompted some industry leaders to question what the insurance business will look like in the future. In particular, some question whether the provision of insurance coverage — the financial risk taken by the provider, which has been the backbone of the industry — will end up as just one element in a wider package of services.

“If prevention becomes really something mass market, the insurance product will be a smaller component [in] a broader suite of services,” said Raphaël Vullierme, chief executive of home insurtech Luko, earlier this year.

The winners, he predicted, would be technology-focused groups used to building those services.

Growing bill

Prevention is presented by insurers as a vital tool in dealing with the growing bill from threats such as the obesity crisis, cyber assaults and extreme weather.

For life and health insurers, the aim is to encourage fitter, longer-living customers; for cyber insurers, it is to ensure fewer cyber attacks break through clients’ defences; for motor insurers, safer drivers; for home insurers, it means reducing damage from floods, and catching leaks early.

Customers are incentivised by the promise of lower insurance premiums if they reduce their risks, and companies’ profit margins should be boosted if the fall in claims outweighs those discounts.

Zurich, one of Europe’s largest insurance companies, established a resilience services unit last year with 750 risk engineers working across 40 countries to help companies assess and mitigate their risks.

“We want to keep customers in business and we want to reduce [their] cost of risk,” says Sierra Signorelli, head of commercial insurance at Zurich. The intensifying frequency and severity of storms is a key driver of take-up of resilience measures among companies, she adds.

One of Zurich’s clients is automaker Audi, whose Neckarsulm factory in south-western Germany was hit by the torrential rain storms that hammered Europe in 2016, sending mud and water pouring into the plant, damaging equipment and halting production.

Audi then worked with Zurich’s risk engineers as well as local officials, the emergency services and other stakeholders to strengthen the plant’s defences and those of the surrounding area, including installing new retention basins.



When heavy rainfall hit last year, the factory was ready. Alerted by an early warning system, workers teamed up with emergency services to inflate long water-filled barriers around the facility. Thanks to the countermeasures, the final repair bill was lighter and production did not have to stop.

The cyber insurance market is increasingly a mixture of protection and cover: providers work with companies to patch holes in their digital defences, put in place extra security measures and offer emergency services to restore systems and recover data after attacks.

Cyber insurer Coalition is one of a growing number of companies in this segment of the market and places as much attention on its security services as its insurance policies.

“We look at our customers as if we were playing offence. We are looking for those nails that are sticking out,” says its chief executive Joshua Motta, a former CIA analyst.

Coalition says it scans more than 5bn IP addresses 400 times a month for vulnerabilities. That might be malware in a client’s system, or unpatched software that is vulnerable to hackers.

Some insurers now demand that companies must have basic protections such as multi-factor authentication in order to receive cover, as the sector responds to the surge in ransomware attacks.

Smarter tech

Home insurance is another frontier for prevention efforts. “The best claims experience is avoiding the claim entirely,” says Rick McCathron, chief executive at New York-listed home insurer Hippo, which supplies its customers with a range of detection systems including leak sensors, smoke alarms and motion detectors to try and stave off claims. Those who use the system can get a discount on their insurance — but only if they keep the system activated.

This makes for a fundamentally different business, argues McCathron. “We’re not a home insurance company,” he says. “We are a home protection company.” Last year, it announced a partnership model with US homebuilders to install automatic shut-off valves in new-builds that it said would “meaningfully” reduce insurance costs.

Insurers across the globe are investing in leak-detection systems to stem one of the most common sources of home insurance claims. Ondo, a London-listed provider specialising in this area of work, estimates its technology reduces water-damage claims by 70 per cent: equivalent to about £9bn of the industry’s annual water-leak payouts across the US and UK.



Ondo announced last week that Admiral, the FTSE 100 insurer with more than 1mn home insurance customers in the UK, had agreed to provide its technology to 20,000 policyholders in a pilot that could lead to a wider rollout.

Claims can also lead to better prevention by exposing blind spots and bring about solutions. Flood Re, the UK’s reinsurance scheme for flood risk, earlier this year launched a “build back better” scheme in partnership with insurers.

Customers with such policies who make a flood claim can receive up to £10,000 to make their home more resilient, such as installing flood doors and tile floors and moving electrical sockets higher.

Israel-based GeoX uses aerial imagery and other data to build a 3D image of a property that gauges risks such as roof condition, pointing customers towards preventive measures.

‘Data harvesting’

Motor insurtechs have developed a range of innovations to try and stave off claims. The use of real-time data in underwriting models has allowed start-ups such as the UK’s Zego and New York-listed Root, to reward people for safe driving, in the latest iteration of pay-how-you-drive-type policies. Increasingly, executives are talking about how they can provide feedback to customers and influence their behaviour.

By Miles, a UK car insurtech, has been developing processes to contact customers in the event of a weather warning, encouraging them to move their vehicle to high ground, says chief executive James Blackham.

In another recent episode, a customer in Sheffield in England managed to locate their stolen car to a local KFC car park using By Mile’s car-tracking tech.

In such cases, some customers end up not filing a claim at all, says Blackham. “Most people get the car back and [compared with] paying their excess, it doesn’t make any sense. It might need a bit of a vacuum round inside, or something like that.”

Life and health insurance offers perhaps the greatest hopes for such a proactive approach to risk, powered by the growing use of wearables as well as more sophisticated real-time underwriting models.

Insurers talk excitedly about the potential to use genetic data to manage health problems years in advance, though use of such data is highly controversial and usually tightly regulated.



China’s Ping An, one of the largest insurance groups by market value, offers health cover that gives those diagnosed with type-2 diabetes a diet and exercise plan to reduce their risk of complications. Compliance can mean an insurance discount.

But some industry observers worry about where the closer relationship between insurers and their customers will lead.

“No one ever talks about the negative side,” says Duncan Minty, an independent consultant on ethics in insurance. “Because risks do happen, there will be cases where things can go better for the consumer and cases where they go worse.” 

Insurers argue that getting a more specific picture of an individual customer’s risks could actually increase the amount of people who can get insurance — including those they had previously been unwilling to cover.

But Minty warns that wearables and real-time technology could lead to “data harvesting” — gaining granular and constantly updating detail about customers’ behaviour — that might be less about loss prevention and more about generating a closer risk profile of customers that is to the insurer’s advantage.

There is a “real chance”, he says, that customers might either be not offered a premium, or be offered one that is so high that it becomes unaffordable. Minty worries that insurers will ultimately use the data to create policy terms that demand compliance as a condition of remaining covered.

Death of coverage

There is potentially a self-defeating logic to prevention from the industry’s perspective. Claims are the lifeblood of insurance companies, the basis that allows companies to charge premiums, so meaningfully cutting them could reduce future revenues.

But many claims cannot be prevented. Andrew Scott, who heads up research and development at the UK arm of insurer Vitality, divides risks into modifiable and non-modifiable ones.

That also provides an answer to the fairness question, he says. “We argue that it is fairer for people to pay for the unique risks that they present, if they are able to change those risks,” Scott adds.



The reduced claims bill that comes from keeping customers healthier than they would be otherwise is “counterbalanced”, he adds, by the payouts for more advanced diagnosis and treatments.

Some industry experts think the pivot to more prevention and protection will reduce the primacy of the insurance coverage within the services that companies can offer.

That might put insurers in greater competition with other tech and services groups. Almost half of the people cyber insurer Coalition hires are software engineers. Ondo, which proclaimed itself the first UK insurtech to list after joining the London stock market earlier this year, was spun out of Home Serve, which provides emergency repair for items such as boilers.

Whether some of the new technologies do indeed lead to a lower loss ratio, a key profitability measure which shows claims as a proportion of premiums, remains an open question.

Some of the highest profile insurtechs, such as Root, have suffered big underwriting losses as they try and grow their businesses — partially due to the uptick in claims that comes with new customers. This obscures the view of whether the newer technologies and behavioural nudges are helping them to price risks more effectively.

Another more immediate prize could be a deeper relationship with the customer, who might not so easily jump ship to another insurer.

“I think I’ve got an awful lot out of it,” says Ball of her programme. “It’s certainly changed how I live now.”

Life has not been easy for reinsurers in the past few years. Claims for natural catastrophes and pandemic-related losses have wiped out a large part of their profits.

But the latest set of global problems — war in Ukraine, galloping inflation and the ever-increasing risks of climate change — have jolted them into action. In some areas, they are putting up the price of coverage, in others they are retreating altogether.

“What looked like . . . a gradual change is increasingly looking like a knee-jerk change,” said Stephen Catlin, an industry veteran and chief executive of insurer Convex.

Reinsurers play a vital role in trade and the global economy, offering insurance to insurers to reduce the risk that a big claim will wipe them out. This backstop against a whole range of financial risks — which is underpinned by $700bn in capital — gives insurers the confidence to provide cover to a much wider market.

Among the biggest reinsurance groups are the four major European players, Munich Re, Swiss Re, Hannover Re and Scor, as well as the Lloyd’s of London market and Warren Buffett’s Berkshire Hathaway.

Swiss Re’s chief executive Christian Mumenthaler told the Financial Times that “timid” price rises in natural catastrophe reinsurance in recent years had now accelerated after three years of higher costs from losses.

For contracts renewing in July, Swiss Re implemented a 12 per cent rise in premiums across its property and casualty business, which includes natural catastrophe cover and other types of insurance. “It’s very big, because it’s [across] everything . . . I can’t remember a rise like that,” said Mumenthaler.

Executives attribute the market tightening to robust demand — fuelled by inflation driving up the value of what is being insured — and a fall in supply after investor pressure caused some reinsurers to pull back, in particular from the natural catastrophe business.

There has also been reduced appetite, they say, from institutional investors to take on reinsurance risks through insurance-linked securities, partly after losses on these sorts of investments and partly because yields on bonds have increased.

“We think the [reinsurance] market is turning, we are now seeing momentum,” said Aki Hussain, chief executive of Hiscox, one of the biggest insurers on the London market, which has its own reinsurance unit.

“In the past five years [reinsurance] prices have lagged and now for the first time they are going up faster than they are for insurance.”

Another factor in rising prices today is big claims arising from Russia’s invasion of Ukraine. Insurers in areas such as aviation now expect billions of dollars of claims from the owners of the hundreds of planes left stranded by the war.



Reinsurers reducing capacity can create what is called a “hard market”, where demand substantially outstrips supply and prices surge.

Some executives are saying that those conditions are now present, citing recent exits by some reinsurers from the natural catastrophe business. Big Ukraine-related losses could persuade more providers to cut their exposure.

After years of volatility and growing claims, New York-listed reinsurer Axis Capital declared in June that it was getting out of the property reinsurance business, which includes natural catastrophe cover. Chief executive Albert Benchimol said the “significant and increasing effects of climate change and the challenges faced by the catastrophe reinsurance market” had forced its hand.

A month earlier, France’s Scor said it was on track to reduce its exposure to natural catastrophes by 15 per cent, while Axa said its reinsurance unit had cut its natural catastrophe exposure by 40 per cent at the start of the year.

Executives and brokers attribute some of these moves to investor pressure on reinsurers. “Investors have said we don’t want more catastrophe risk,” said Rod Fox, co-founder of reinsurance broker TigerRisk. “That has trickled down.”

Many see 2022 as a turning point. In recent years, an “abundance” of property catastrophe reinsurance outstripped demand and held down rates, said Lara Mowery, global head of distribution at reinsurance broker Guy Carpenter.

“Over the past five years elevated catastrophe losses resulted in poor underwriting results, which have now contributed to a reduction in the supply of reinsurance capacity,” she added. This, plus increased demand, has made it easier for reinsurers to push up prices, Mowery said.

A sign that things are changing came in June, a busy time for renewals of property catastrophe reinsurance policies focused on the Florida market. A lack of capacity was one factor that drove the cost of reinsurance up by 20 to 30 per cent on average, according to TigerRisk.

Broker Aon said in a report on policy renewals in June and July, that years of “above-average” natural catastrophe claims had reduced reinsurers’ appetite for taking catastrophe risk.

“For the first time since the US hurricanes of 2004 and 2005, property natural catastrophe capacity contracted materially, and some reinsurers would not write certain risks . . . at any price,” it said.

Those seeking reinsurance in speciality areas such as aviation and marine also had to contend with the “most challenging renewal in a generation, reflecting the potential for large losses from the Russia-Ukraine conflict”, Aon added.

Joe Monaghan, a senior executive in its reinsurance broking division, said the reinsurance sector “may be fast approaching a true hard market”.



The next key renewal season on January 1 — known as 1/1 — is being viewed as a litmus test of the market. A rush to reprice insurance and reinsurance for risks such as war and political violence is already under way, said several industry executives.

While some reinsurers step back, others may seek to fill the gap. At a recent investor event, Munich Re said it was prepared to take advantage of rising prices by writing more reinsurance business, according to a person familiar with the discussions.

Still, much of the industry predicts reinsurance cover will become more expensive and harder to find.

Going through the year, primary insurers will “realise they are going to have to run more risk, buy less reinsurance and it is going to be much more expensive”, said Catlin. “The [primary] market will be looking at life very differently at 1/1 than it does today.”

The natural conclusion would be that the cost of insurance, which has already been rising for years in some markets, has still further to climb.

Jérôme Haegeli, group chief economist at Swiss Re’s research arm, agreed that rising reinsurance prices are likely to be passed on: “I would expect a knock-on effect.”

When Anil Wadhwani takes over as chief executive of Prudential next February, the FTSE 100 group will be unrecognisable from the storied British insurer that has traded from London for 174 years.

Having spent much of the last century growing into a major global financial services conglomerate, in the past three years Prudential has shed its European business, spun off its US operations and slashed its UK headquarters, relocating all of its senior management and operations to Hong Kong.

Its listing on the London Stock Exchange and UK domicile are the only remnants of its once-sprawling UK business. Now the £24bn life insurer is gambling the farm on mainland China, Hong Kong and south-east Asia, plus a small but growing bet on Africa.

“They’re chasing after the shiny thing,” said Richard Harris, chief executive of Port Shelter Investment Management, an Asia investor. “Certain margins were better. But that can be a short-term impact.”

The culmination of Prudential’s more than decade-long Asia pivot silenced years of criticism, including from activist shareholder Third Point, that its business model had become too complicated and its share price had suffered because the value of its Asia businesses were being diluted by lower margins and slower growth in the US and Europe.

But it comes at a difficult time for the region, with an economic downturn, geopolitical instability and pandemic restrictions in Hong Kong and mainland China all weighing on prospects for Prudential’s core markets.

That also makes it a difficult time for a long transition to a new leadership. Industry watchers were surprised that a new chief executive had not been lined up when former boss Mike Wells announced in February that he would retire after seven years in the role.

When Wadhwani’s appointment was unveiled in May, analysts at Jefferies expressed disappointment at the long transition period. That was compounded by the departure of Prudential’s Asia and Africa chief executive Nic Nicandrou, who had been the internal frontrunner for the job, with the broker warning that the gaps at the top could “impair . . . institutional memory”.

A former Prudential executive said: “The optics aren’t great, with so many senior departures, you’d want it to be smoother,” adding they were “surprised . . . that it took quite some time” to find a replacement. The final announcement of the appointment, the day before the insurer’s annual shareholder meeting, seemed “rushed”, the person said.

A person familiar with Prudential’s view said the chief executive search was held up because of the need for Wells to complete the strategic changes, as well as the board’s desire to meet candidates face-to-face, which was complicated by the pandemic.

The risks of its new strategy became clear in August, when Prudential announced its financial results for its first six months as an entirely Asia and Africa-focused business. In Hong Kong, its largest market and responsible for a quarter of overall operating profit before the pandemic, new business profits — a measure of the future earnings from newly sold products — fell by almost a third.

The closed border between the city and mainland China has prevented Prudential’s army of agents from selling insurance products to Chinese people travelling to Hong Kong, a key business line worth profits of $694mn in 2019 before the pandemic.

Tensions over Taiwan are also a risk in its fastest-growing market, while coronavirus restrictions in Indonesia have hit the source of around 10 per cent of operating profits.

“As a pure-play Asia business, Prudential is a lot cleaner story than it has been historically,” said Andrew Baker, an equity analyst at Citi in London. “Unfortunately for them . . . this is the most difficult macro environment they’ve faced in a long time in Asia.”

Wadhwani, who has worked in Hong Kong for five years, will have to set out his plan for rescuing Prudential’s shares, which have lost more than 30 per cent of their value since the insurer began its transformation in 2019.

Its nearest rival, AIA, an Asia-focused insurer that spun out of AIG and listed in Hong Kong in 2010, is dealing with all of the same regional headwinds, but has a market capitalisation of HK$898bn ($114bn), compared with Prudential’s £24bn ($28bn).



Until Wadhwani sets out his agenda, investors face uncertainty about what Prudential will do to try and close that gap. He will run the group with a new management team, after a layer of regional executives were cleared out in the restructuring. Because he does not speak Mandarin, he will rely heavily on senior executive Lilian Ng, who has responsibility for mainland China, Hong Kong and Taiwan.

“We are in all the markets we want to be in,” said Mark FitzPatrick, Prudential’s interim CEO and an ex-Deloitte consultant who stepped up from his role as chief financial officer in February. “We are not drifting, we are driving the business forward.”

Prudential’s pivot to Asia is an “emotional” as well as physical one, according to FitzPatrick, who opted out of taking on the permanent CEO role.

Prudential first signalled plans to focus on Asia under former chief executive Tidjane Thiam. In 2010, it listed its shares in Hong Kong and Singapore to help fund a $35bn attempt to take over AIA. The bid failed, but Thiam went on to oversee rapid growth in the region.

Central to that strategy was expanding Prudential’s life insurance joint venture with Chinese state-owned bank Citic, which launched in 2000, and has benefited from a vastly underserved insurance market and rising household incomes. China now generates around 7 per cent of Prudential’s profits.

Yet Prudential faces roadblocks to growth in the mainland. It owns a 50 per cent stake in the company and has laid out plans to increase that since Beijing lifted ownership restrictions on foreign financial services businesses in 2020. But it does not have the capital to do so, nor a willing seller. “We’d both like to own a greater share,” FitzPatrick said.

Citic Prudential Life is growing — gross premiums have grown almost fourfold to $2.4bn since 2016 — but the domestic market is increasingly competitive and its share is tiny, at around 1 per cent. It could also lose ground as foreign financial services groups invest in China’s insurance market. AIA, Allianz and AXA have all established wholly-owned insurance companies in China in the past few years.

The other big question for Prudential is whether a quintessential London-listed stock will sever ties with the UK completely. Its large UK investor base and low liquidity in Hong Kong both mean that dropping its premium London listing is not a foregone conclusion.

“We want investors to buy and hold our shares on the Hong Kong line,” said FitzPatrick, although he added that he did not want to “say goodbye” to Prudential’s UK investor base.

Since the business listed in Hong Kong, trading of its shares has been very thin there, averaging just 1 per cent of its global daily turnover. The bulk of the trading still happens in London.

The company is hoping to turn a corner when it is included in Hong Kong’s benchmark Hang Seng index from September, meaning it can be considered for inclusion in the Shenzhen-Hong Kong stock connect scheme and mainland Chinese investors would be able to trade its shares for the first time.

This, after a $2.4bn equity capital raise late last year, is intended to boost Prudential’s visibility and liquidity with Asian investors, who its executives courted in meetings in Hong Kong last month. Prudential has also expanded its analyst coverage in Asia from two to seven banks this year.

But straddling the UK and China is a complex job for large financial services groups. HSBC, which has also shifted focus from its UK base to prioritise Asia, has had to walk a geopolitical tightrope between the two, while its large Hong Kong and Chinese investor base has pressured it to split off its Asian operations entirely.

Like HSBC’s investment banking joint venture in China, Prudential’s CPL business has a Chinese Communist party committee within its ranks, which is a requirement under Beijing companies law. As a western organisation partnering with a major state-owned Chinese bank, there has been some investor scrutiny in the past, according to FitzPatrick. However, unlike HSBC, Prudential has been regulated only in Hong Kong since its UK business was spun off into M&G in 2019, providing it some shelter from geopolitical pressures.

For Prudential, the risks of its new strategy are more than worth the opportunity of attempting to win a larger share of Asia’s underserved insurance market. But with six months until its new chief executive takes over and no certainty on when the border between mainland China and Hong Kong will reopen, the catalyst that will supercharge its share price has been just around the corner for a while.

Some think, as a result of these short-term challenges, Prudential is undervalued by investors in London. “I kind of expect it to be [taken over] . . . and I’m surprised it hasn’t been,” said the former Prudential executive.