2018 will be an interesting year.
As InsurTech matures, there are increased pressures to join the digital transformation movement. First movers are setting the course for this, but not all will be in a position to adapt quickly. Will this result in fundamentally different types of insurance providers?
The starting point may be earlier than you think …
At this point, most insurers have some curiosity about InsurTech and have set up informal or formal groups to understand and document implications for the organization. This could result in making recommendations for any next steps.
The experiments may seem to be harmless, but there are caveats. InsurTech is a big topic, with new technologies and implementations. In many cases, catching up may be a challenge.
Sven Roehl, facilitates The Cookhouse Lab, Toronto’s first insuretech open innovation lab. In a recent article in Canadian Underwriter, Roehl noted that many insurers will have to make basic changes to the internal infrastructure before any digital transformation can be viable.
Since data are the sine qua non for InsurTech functionality, Roehl recommends moving data storage to a cloud based solution to be able to develop linkages to the technologies. While this appears to be a step backwards, Roehl notes, “All of the work that the insurance companies are doing right now might not seem so significant or visible for the policyholder, but it’s the important steps you need to take to be ready for the future.”
Stand selection on its head …
Assuming the base architecture is sufficient, effective analysis and acquisition of technology for transformation projects needs a new approach. Thomas Siebel, chairman and CEO of C3, argues that previous strategies need to be reversed.
In the past, for large systems projects, the CIO would gather information on different suppliers, sit through presentations, and, ultimately, bring a recommendation to the CEO.
Siebel notes the process needs to be reversed, writing:
With the 21st-century digital transformation, the adoption cycle has inverted. What I’m seeing now is that, almost invariably, global corporate transformations are initiated and propelled by the CEO.
Why bring the CEO out first? Siebel references John Chambers, of Cisco Systems who predicts: “40 percent of today’s businesses will fail in the next ten years; 70 percent will attempt to transform themselves digitally, but only 30 percent will succeed.”
We are not in Kansas. Are we Toto?
Writing in InsuranceThoughtLeadership.com, Sam Evans, founder and general partner of Eos Venture Partners, not only agrees with the Seibel on the existential risk exposure, he has developed key trends that are the heart of the InsurTech evolution. These include the functional definitions of new products, data management, new risk avoidance opportunities, and more. This applies to the insurers and VCs.
In addition, Evans supplies three areas of initial focus:
- A digital Front Office Solution that leverages an open architecture platform;
- An end-to-end claims solution platform that achieves significant improvements in customer satisfaction while significantly reducing the cost of managing the claim; and
- Artificial Intelligence which initially has a life / health focus.
Where do we find the ‘Help’ button?
Being a leader, there are some portions of the road that are finished, but others that are a work in progress. Fortunately, these leaders can create areas of mutual support with friendly competitors.
There is an interesting consortium being formed in the US, to set up an accelerator program with six insurance partners in the lead. Described in Insurance Business, The Hartford was the prime mover which brought in Cigna, Travelers, USAA, White Mountain, and CTNext.
The insurers undertook a search for InsurTech providers. Starting with 4,000 startups, from 96 countries, the partners winnowed the participants down to eleven InsurTech companies which will re-locate to Hartford for 3 months, starting now (January 2018).
Erika Bothma, program director at Hartford InsurTech Hub, says, “The start-ups we are welcoming into the accelerator program in Hartford have working prototypes that can easily be tested in pilot roll-outs with our insurance partners,” she explained. “This makes for a quick turnaround from starting our program to developing true working relationships with insurance companies.”
Will we have different categories of Insurance?
InsurTech is creating new opportunities and challenges. Supporting the new offerings, we will be seeing new products, tailored distribution methods, and digital engagement. The availability for the latter will not be fully available without the technologies.
Will there be permanent bifurcation within the insurance community? Will other suppliers come in with a digital-only approach? It looks like it from here, but I would appreciate your comments.
Editor’s Note: The 2018 Insurance-Canada.ca Technology Conference will have a number of sessions focused on AI and Customer Experience.