Insurers risk extinction if they do not change their business practices, warned Accenture global head of underwriting Steven Kauderer.

Kauderer argued that unless insurers begin to embrace risk and tackle tough risks head on, they will suffer dramatic deteriorations in performance, as the progressive companies reap the rewards.

"A few insurance companies, in both the US and the UK, have outperformed the market year in and year out and created real shareholder value," he said.

"They have three main things in common. First, they harvest information and make better decisions.

"Second, they are highly focused on their frontline operations. Employees take high-value decision and are given a lot of autonomy.

"Third, they micro-segment their markets. They identify the subsections of risk where the perception of risk is greater than the actual level. These companies truly understand the industries in which they operate."

These practices result in substantial tangible benefits.

"In six months a positive result can be seen in the combined ratio, and in 18 months we have seen improvements of more than 18%," Kauderer said.

He said that a few companies in the UK have already adopted these practices, and predicted that these will be successful. But he argued that, for the others, complacency is not an option.

"Those that are complacent will be adversely selected against. They will retain the wrong risks at the wrong price.

"I predict a massive escalation in the haves and have-nots," said Kauderer. "Those that are complacent will see a dramatic reduction in their combined ratio - more than 5%-10% in one year. And it will escalate.

"In such a situation a company will not be able to survive for long."