- Where Insurance & Technology Meet

Aligning Insurance and Emerging Technologies: Existential Requirement or A Step Too Far?

A recent report from SMA, “Emerging Technologies: Reshaping the Next-Gen Insurer,” has an ambitious scope, on which it delivers. Moreover, it contains a surplus of well-supported recommendations for aligning threats and opportunities driven by the technologies with changes in insurance purpose and process.

The challenge we see for some insurers – especially one segment  of insurers – is how to select strategies that are comprehensive enough to address the opportunities and risks in a meaningful fashion without committing an unsustainable amount of resources.

We recommend the report as a discussion document. We would also welcome comment on how to achieve the objectives of the report, within resource constraints.

Scope and focus: There are nine heads growing on this hydra

For the report, SMA collected data from two major sources: 88 insurers and 20 companies outside the industry.  The latter, SMA refers to as its Innovation Ecosystem.

The scope of the report is well stated:   “This research brief provides unique insight into emerging technologies adoption, investment plans, and opportunities for business areas, as well as the greatest risk and potential for disrupting or transforming insurance.”

SMA’s research shows that there are nine technologies, which have the potential to “transform and innovate insurance” over the next five years.  The insurers surveyed believe that five of these will cross the 30% penetration rate, considered the tipping point, within three years.

These technologies are:

  • 3D Printing
  • Internet of Things (IoT)
  • Drones/Aerial Imagery
  • Driverless Vehicles
  • Wearable Devices
  • Gamification
  • Artificial Intelligence
  • Semantic Technologies
  • Biotechnology.

(Bolded items predicted  to hit the tipping point within 3 years.)



Insurance implications …

SMA says that these technologies offer risk and potential: “Some of these emerging technologies will likely destroy existing businesses and product and revenue models, while others will offer new, innovative ways to create new products and services and decrease operational costs.“

But to take advantage, time is of the essence: “Because of the rapid pace of introduction and adoption, the previous business practice of being a fast follower may become devastating, because the gap is becoming exponentially larger. “

The ranges of impacts for an insurer are extensive.  Some of the technologies offer finer granularity in underwriting (IoT, e.g.).  Others provide vehicles to assist in risk /claims tracking (e.g., drones, wearables).  Some define new, different risk elements themselves (e.g. driverless cars).

What to do?

SMA provides its call to action, consisting of the following:

  • Create a vision and strategy based on the impacts of these technologies
  • Commit to innovation and R&D, which will include roadmaps for the most impactful and early pilots
  • If not completed already, Modernized core systems to take advantage of new processes and data collection
  • Achieve mastery of data and analytics
  • Develop an ecosystem which will include partnerships to supplement internal actions, and
  • Redirect capital investment to accelerate transformation.

So, where to start?

We commend SMA for excellent research and a loud, clear call-to-arms.  And, we certainly see two sets of organizations capable of moving in this direction:

  1. New, disruptive start ups with a targeted business model which includes a clear vision of tightly integrated technology; and
  2. Large carriers which can direct, and manage,  capital investments to achieve the same agility as the start-ups.

But for a great swath of the insurer community, which provides the bread and butter personal and commercial lines products through a mix of distribution channels, execution  of this revolutionary approach is likely out of reach.  There simply aren’t the resources to undertake a comprehensive approach outlined in the report while running a business that pays the bills and maintains the relationships.

Which is not to say that emerging technologies can safely be ignored.  But there likely needs to be a different different approach.

 And this is where you come in …

We know there are mid-tier insurers that are keenly ware of emerging technologies and are initiating projects/programmes to take advantage/defend against the entrance of these technologies.

We think that you have experience here, which can help us understand the value points of the report, as well as possible limitations.

Please let us know how you are approaching what certainly looks like an existential challenge.