Digital insurance and InsurTechs are keys to the ‘new’ approaches, which will support customer centricity and improve the insurance product and its distribution. But is this a revolutionary shift, driven by technology, or the next generation of insurance professionals driving improved processes and products? I’d like your thoughts.
For the last 30 months or so, there has been a rising tide of digital technology generally and “InsurTech” specifically in our world of risk. And there is significant pressure to adopt the technology and learn new paradigms for realizing benefits.
But there are significant costs, from a direct expense standpoint to the training/shifting of staff to new roles and responsibilities. We have a new digital industry support structure, which comes with such titles as ‘Incubators,’ ‘Accelerators,’ ‘Hackathons,’ etc.
And all this is good ….
We need all this, and likely more. Consumers expect the same level of functionality from insurers as they are receiving from next generation banks, retailers, medicine, etc.
But make no mistake. The technology is critical to making this work. But this trend still requires human interaction and common sense.
Here are a couple of examples.
InsurTech Value Check
As the volume of investment in InsurTechs grows, there is a tendency to place bets as opposed to investing in proper business cases, which are managed by seasoned insurance and technology professionals.
To address this, Oliver Wyman undertook research to answer the question: Is InsurTech Hype or the Next Frontier. Using its global InsurTech database, the researchers developed “a practical and consistent framework combined with a strong assessment logic, which not only reports about the status quo but analyzes the drivers behind the phenomenon in order to make forward-looking statements.”
The research used insurance industry segments – Proposition, Distribution, and Operations – and identified19 distinct InsurTech business model categories. The researchers assessed each category based on needs and behaviours of customers, suppliers, and partners who interact with risk carriers.
With respect to the business model categories, the researchers found that:
- the categories varied significantly in startup activity and were not aligned with the relative attractiveness;
- even the most attractive categories were not guaranteed to “disrupt the industry and make the race;”
- some underdeveloped categories would not be successful unless InsurTechs got creative on the “demand side” thinking; viz., “change how risk coverage is presented and sold to customers.”
The authors suggest that InsurTechs may have a “blind spot for some of the most attractive opportunities, which require truly innovative engagement models.”
Significantly, the authors “expect a second wave of InsurTechs to emerge that are more industry-savvy and better prepared than their first wave peers” (emphasis supplied).
InsurTech is Claims, Too
In July, we reviewed two commentaries from InsurTech thought leaders: Karen Pauli from SMA and Tom King / Keith Gage from Pegasystems and Cap Gemini respectively.
Pauli notes that utilization of Telematics is poised to change the role and impact of claims professionals. She argues that Telematics can improve the client relationship and reduce claims and claims management costs.
King and Gage note that implementation of the Internet of Things (IoT) marks that advance of “Insurance 2.0″, which could lower claims costs by 20% to 40%. The authors argue that IoT ” is not an IT implementation — it is a change of business model.”
It all comes down to risk ….
Since the 1950s, insurance has adopted technology to assist professional practitioners. However, as an industry, we have been criticized for being laggards.
While we did downplay the capabilities of technology, we were often correct in betting on trained professionals for rating, underwriting, distribution, and claims.
That is changing, and new professionals are leaning on analytics and machine learning. However, the new coverages and processes required for our new digital world will still require human judgment and communications skills to properly assess new risks and opportunities.
What do you think: Will machines take over or will humans retain control of technology?