Apart from the suggestion of an "InsurTech Royal Rumble" in Lime Street - as interesting an event that sounds - this is a balanced and thought provoking opinion piece by the Insider. With all the hype around technology within insurance, it is good to take a step back and challenge whether the InsurTech phenomenon has the potential to really deliver change in the market.
Of course I am going to be in the camp of InsurTech evangelist, but I accept that there are numerous examples across all sectors that prove leading with technology as the answer to all challenges is not a sound approach. However, specifically in the case of the Insurance industry, the amount of market pressure (customer needs changing, internal costs of operation increasing, more regulation etc.) and the fact that the industry is built upon legacy processes and infrastructure there is an ever increasing need for changing how things are done... in my opinion technology is a clear way to enable and accelerate aspects of this change.
That said, I feel it is important to acknowledge that there has been quite a lot of change achieved in the first wave of InsurTech. Arguably this has been a little pedestrian at times and has tended to focus on solving short-term problems... but it is progress nonetheless.
This first wave of InsureTech activity serves the industry in a few ways. Firstly, it educates the industry on the uses of technology and what is required to deliver technology projects. Secondly, during this first wave there has actually been quite a bit done in terms of digitising processes in order to optimise costs and productivity and/or helping businesses to be able to comply with increasing levels of regulation.
Although at times this first wave has maybe focussed on the more simple things, the initiatives have been able to demonstrate that tangible value can be realised through the effective use of technology within the Insurance industry. This is important to further build the case to secure further investment in future (maybe longer term) technology programmes that are typically more transformative in nature and providing businesses with the tools and capability to really do things differently across the insurance value chain (from the insured through to carrier).
Another positive outcome of the first phase of InsurTech, even if not revolutionary, is that it starts to create a platform upon which more digital data can be generated and stored. As technology is increasingly integrated with core business process, that technology can be used to ensure that data is captured and distributed more consistently across an insurer's business and ideally across the market.
In the short-term data optimisation and standardisation may only deliver discreet pockets of operational efficiency for the companies deploying such solutions, getting data structured and available will be key to enabling the more wholesale and strategic transformation programmes that utilise technology like AI, machine learning, IoT and robots. With these initiatives coupled with more strategic market programmes like the London Market Target Operating Model (TOM), there appears to be momentum and buy-in towards technology enablement of processes and leveraging (and sharing) data to enhance (or transform) services. This leads me to believe that there will be continued disruption in the market by the InsurTech phenomenon and that the first wave has set the foundations for the second wave to be even more disruptive and quicker in execution .
In my opinion, a second wave of InsurTech looks inevitable. It will however have to be more transformative, simply on the basis that all the quick-wins with relatively straight forward return on investment will have been exploited by organisations who strive to promote themselves as being tech-savvy, innovative and cooler than people may think.
As these first wave initiatives start to generate more data and that data is increasingly available in standard (more consumable) formats, the door is opened for more tech focussed companies to get into the market and to understand/analyse how it operates. This is likely to shake things up and provide the platform that the InsurTech companies need to be more relevant and demonstrate more clearly the potential value of their technology solutions to a market that has been burned by technology in the past and is at times a little sceptical about revolutionising the products and services through using new technology.
It is fair to say in retail/ general Insurance there has already been a greater level of digital disruption and transformation occurring – but arguably this is simply about bringing the insurance customer engagement and user experience in line with other sectors like Banking and Retail.
A lot of this is not necessarily cutting edge or what would in my mind be considered InsurTech/ FinTech stuff. It is just modern e-commerce and matching the retail insurance model to the buying demands of the modern on-tech population.
Some of the things to come in this space - hopefully as part of the next wave of InsurTech - will be more edgy and will be utilising AI, machine learning, IoT and image recognition for underwriting, risk prevention and claims management on standard products… It doesn't seem too far off with a clear trend at the moment of insurance companies running Proof of Concepts (PoC's) on new technologies but there appears to still be some hurdles that stand in the way of insurance companies taking the leap and makings these concepts real. My view is that this hesitation is as much due to the industry having concerns about the application of technology to replace or change products/services, as much as consumers not quite being fully comfortable with their insurance company changing the products, services and commercials they offer for a particular risk. I also imagine that in certain circumstances consumers may also question the effectiveness and reliability of such technology in making such decisions. I see this varying based on product, as although someone might be happy with a one-click gadget insurance or car insurance, consumers may not be 100% happy buying life insurance products based solely on their Social Media data and a selfie… (yet!)
Clearly, no clear answer or crystal ball but for me the response to AreYouSureTech? Is a resounding yes, but no doubt some challenging, disruptive and exciting times ahead in all segments of the insurance industry.
Is InsurTech going to fail miserably? Probably not. Everyone in the industry has something to gain from becoming more technologically savvy and attempting to drive innovation rather than run from it. Incumbent companies, the start-ups, investors and especially customers stand to gain from technology-backed change in the (re)insurance industry. But it is likely to be a panacea? Again, probably not. There are roles that InsurTech cannot (and does not want) to play, as well as things that it cannot do. These start-ups have no real desire to be balance sheet businesses with the attendant regulatory and capital requirements borne by the established players.