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Notes On the Path to Insurance 2.0

In our last post, we noted the impact of derisking on the current insurance model. As technology lowers the probability of risks (with an attendant reduction of rates and premiums), we see insurance seeking new exposures and developing more engagement with consumers. This post turns to different elements in the new world.

Going ‘Episodic’

Speaking at the Canadian Insurance Accountants Association, Mukul Ahuja, Senior Manager at Deloitte Canada, said he believes that insurers should consider the opportunities that exist in “episodic insurance.”

What is episodic insurance? “Think about being able to provide policies just in time or on-demand for the needs of the consumer,” Ahuja said. He provided examples that included ride-sharing, home-sharing, flight insurance, and coverage for valuable possessions when they are taken out of the home.

According to Ahuja, existing insurers may have challenges in turning to a new underwriting paradigm, noting that “incumbents are just not well-prepared to think about – or haven’t been able to – provide the necessary offerings and models to support that kind of model at this time.”

In addition, adoption of variable time frames for coverage could present challenges to traditional accounting methods.

Does this mean traditional insurers are ‘out’ of the game?

Only if they insist on playing the same game with the existing rules.

Back in January, we highlighted two incumbent insurers which were investing heavily in InsurTech developments – Aviva Canada and Economical Insurance (primarily through its subsidiary, Sonnet).

Since then, other insurers have been introducing more digital capabilities. Moreover, several InsurTech firms from outside Canada have taken interest in bringing in their offerings.

There has been one surprise – at least to some: intermediaries (brokers and MGAs) are setting up digital offerings.  Ahuja noted that this is filling the gap for the insurers: “What’s happened here is digital intermediaries or brokers or MGAs are taking on a greater role within this value chain.”

This will allow incumbent insurers to continue operating in the usual manner while getting a sense of the opportunities and challenges of adopting InsurTech approaches.

But this should be seen as an interim step, only. Not a long-term solution.

Insurance 2.0

Insurance 2.0 is still being defined, but two things are clear:

  • Technology is more strategic than operational, enabling new products as well as new processes, for example.
  • And this is not for the benefit of the insurer or broker; the focal point has shifted to the consumer.

At the CIAA conference, Andrew Lo, President and COO at Kanetix, Ltd. noted that we no longer can choose how to interact with the consumer: “Consumers will expect a zero friction purchase and service experience. Zero friction.”

What do you think?

If you are an insurer, are you preparing to support omni-channel? Are you preparing for episodic insurance?

If you are on the distribution side, are you preparing for 24×7 fulfillment as well as simple responses? Do you know the directions your insurers are taking on the product side? Are you sharing customer data?

Editor’s Note: The theme of the 2017 Insurance-Canada Executive Forum (ICEF2017) is “Insurance: Connected”.   We have developed a faculty which will address strategic issues in the world of Insurance 2.0. Information and registration is available here.

 

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