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InsurTech and Insurance, a Match Made in Where?

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The relationship of insurance and technology has had its low moments in the past. However, the entree of ‘InsurTech’ is demonstrating that Insurance and Tech can work well together. Moreover, the relationship may be mandatory. Can we do this without starting a war?

What do insurTechs think about taking a position in insurance?

Noting that there have been “recent moves by some of the world’s biggest tech players in the insurance industry,” the good folks at InsurTechnews have started a series of articles intended to put some of the leading InsurTechs “under a microscope.”

The first question for a dozen InsurTech influencers was:

Do you think GAFA (Google, Apple, Facebook, Amazon) and BAT (Baidu, Alibaba, Tencent) will act in the insurance sector?  

Nine of the twelve participants gave an unqualified “Yes”, with the other three presenting some qualifiers.

One of the nay-sayers, Jim Marous, Publisher of the Digital Banking Report, said:

The tech giants don’t want to become insurance companies, but they will not hesitate to offer better customer experiences in insurance. Leveraging their data and analytics, they will create clearinghouses for best-in-class Solutions.

Referencing Google’s flame-out of their on-line comparison shopping experiment, our friend Matteo Carbone, Director, Insurance Connected Observatory, said, I think they will try to do something more serious on the sector in the future…but will be an experience not easy at all for them.”

That said, Matteo believes the big tech dogs will have an impact, but “will not be relevant enough to keep Insurance executives up at night.”

What do insurers think about partnering with InsurTechs

Let’s flip to another corner of insurTech: the insurers.

There are a number of surveys concerning the insurance industry’s view on the impact of technology on the business of insurance. In its 20th CEO Survey,   PWC found that technologies including robo-advice and usage-based insurance are in production now. Moreover, “Eighty six per cent of insurance CEOs believe technology will completely reshape competition in the industry or have a significant impact over the next five years.”

Closer to home, Martin Thompson, CEO at RSA Canada provided his views on InsurTech at a breakfast meeting organized by the Insurance Institute of Canada.

Reported in Canadian Underwriter, Thompson said:

While tech firms are more agile — we think that, certainly — it’s because they’ve got no customers. If you start from a position of not having any customers, then you can be agile as you want.

But the twain are meeting … quickly …

Thompson noted that insurers are seeing opportunities and are working with InsurTechs as partners, noting:

The partnership set-up enables Insurance companies to focus on what they do best, Insurance, and insurance technology companies to empower insurance companies to drive digital disruption.

That said, Thompson noted three InsurTechs who do have insurance customers: Lemonade and MetroMile (licensed insurers) and Slice Labs (MGA).

Where will this take us?

Over the years, insurers and brokers have been branded as technophobic luddites. Some regarded the moniker as a badge of honour.

This started to flip at the turn of the century, with a sharp acceleration in the last five years.

And there have been new insurance coverages that underwrite technology opportunities and risks. Think cyber risk or usage-based insurance

However, the existing insurance constructs for property and casualty are covering the majority of existing risks. Tech can contribute, but the fundamentals of insurance remain the same.

And the expertise required, including executive management, will be improved with advanced analytics, AI, and cetera. But not to the exclusion of experience, expertise, and intuition.

In short …

InsurTechs are already creating positions in insurance. At the same time, insurers (and re-insurers) are using and acquiring InsurTechs. The successful incumbents will be those the balance the core expertise of the partners.

I’d like your thoughts, especially if you are active in the scene.

 

Editor’s Note:

The 2018 Insurance-Canada Technology Conference – Insurance Vectors in Play: Risk, Technology, Engagement will address issues impacting insurers, brokers, and InsurTechs. Look forward to seeing you there.

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