- Where Insurance & Technology Meet

Insurance Disruption: How Hard Can That Be?

For the last two years, ‘Disruption’ has been a clarion call to improve productivity, offer greater product choice, and put control into the customer’s hands.  In the category of ‘InsurTech’, insurers and brokers are expending significant dollars to improve customer engagement and solidify relationships.

Are InsurTechs improving customer satisfaction and define new protocols for the business of insurance?

What are the changes?

Insurers and intermediaries have had a technology love / no-love relationship since I started my insurance career, sometime after the Ice-age ended.

Prior to the 1980s, technology was not a strategic factor.  Time and Motion studies were common with insurers and brokers.  Technology was regarded as low end tools for recording information with rudimentary math functions.   Paper and files ruled.

With the introduction of personal computers in the 1980s, technology was promoted from underwriting / claims reporting to functional support for knowledge workers.  Insurers realized the value of internal system improvements and started to extend services to brokers.

Moving into the 1990s, there was even more capability delivered by integrated policy management systems (PMS). This included access to insurers’ PMS by brokers.

Beyond internal connectivity, however, the commercial internet also appeared as a platform that could extend beyond the broker systems, potentially to the end consumer.  This could  lower internal costs for insurers and, potentially, improve retention.

In addition, some insurers lowered commissions to brokers and, in some cases, set up direct writing services, cutting brokers out entirely. There was a significant erosion of broker market share.

So, is InsurTech the final nail? 

InsurTech has the potential to ratchet up the pressure on brokers by improving customer satisfaction and engagement.

Putting it simplistically, InsurTechs provide functionally which combines data, process, and ease of use.  Some early pioneers suggested that this could be the final nail in the broker’s coffin.

But there could be a disconnect.  Here’s a recent example from the UK.

According to Simon Allin, writing in FT Advisor in November 2017, “Customers and brokers remain disconnected from insurtech despite $1.8bn-worth (£1.35bn) of investment into the sector in 2017.”

Allin cites data found in a report by Consumer Intelligence, which surveyed 1,500 consumers and 100 insurance organizations.  The report noted that:

    • 20% of insurance brokers blame technology for difficulties with insurers
    • 70% of customers claim insurers are “no easier to deal with than two years ago” in spite of technology investments
    • 61 percent of customers say that insurers make claims transactions “deliberately confusing.”

In regard to ‘disruption’, the impact might be landing (negatively) on the consumer, not the brokers.

Whither goest InsurTech?

David Wright, a New York based actuary with 30+ years of experience, argues that insurance disruption is harder than it looks.  In respect to delivering disruption, Wright sums it up well: “Startups are trying to do this all the time and they are failing all the time.”

Does this mean that InsurTech is useless?  Hardly, but there needs to be intelligent implementations.  At a gross level, insurers are experts in insurance products, and  brokers are experts in consumers’ needs. And most InsurTechs need help from both.

As I look around the Canadian environment, leading brokers and insurers are seeking results coming from InsurTechs and are sourcing technology for their offices.

Leading insurers are realizing the brokers can be their best clearinghouse for InsurTechs and are working with their brokers to educate, and to be educated.

And, InsurTechs are realizing they need both insurers and brokers to vet products.  We have seen this at several of our events and will continue to do so.

And, in conclusion …

To his great credit, David Wright provides extensive detail on various scenarios with all of the actors – insurers, brokers, consumers, and Insurtechs.  At the end, Wright concludes:

“What’s a startup to do? I say don’t fight against the basics of insurance, use them to your advantage instead. There are times new entrants are allowed in.”

That’s pretty disruptive.  What do you think?

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