What is the future of insurance?

2018 road with sunrise


Have we seen the future of insurance? No, unless you have conquered the whole space-time continuum thing, or yours is a parallax view of the insurance industry to come.  Is there good discussion and collaboration addressing what that future might be? Yes, if this week’s buffet of InsurTech news pieces is any indication, and if the efforts of energetic insurance development activities are a view of a potential insurance future. Carrier introspection, participants’ discussion, change examples, new tools, and supportive groups suggest with a little effort the future can be what the customers hope for.

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

The future of insurance was a front-line topic this week from three disparate sources- the UK, the US, and a setting in Bolivia.  Not the entire globe speaking but certainly diverse locales, the coverage touched on insurance prospects that have global reach, and the sources were uniform in the principal that innovation is important, but customer and risk changes are more so.

Consider insurance in the near future- more intangible risks, data sources that embrace forward-looking techniques and breadth of external data, customers that expect more than an annual ‘touch’ from their agents/carriers (if there are agents at all), and product/service evolution that is measured in days, not years.

Denise Garth of Majesco writes in a recent article, “Are Insurers Prepared to Meet Future Customer Needs?”, that today’s consumers are becoming accustomed to fluid transactions- order on an app, have delivery (and possible put away) within a day, track the purchase on one’s phone, tablet, television, smart watch, or computer.  Contrast that with changing your motor/auto carrier- phone calls, follow-up, and in some jurisdictions, extra cost for changing.  Sure, insurance is not a simple purchase like weekly groceries, but the insurance industry languishes in a world where admin status quo still rules.  Food purchases are not regulated in the manner of insurance, but how a firm does business is not either.  GloveBox is working to aggregate policies under one app, and One Insurance is working to aggregate multi-line cover within one carrier touchpoint, but in many ways the industry simply is “ducking the big problems”, as Anthony Hilton writes in the Evening Standard this week:

“Today the worth of a business needing to be insured is more intangible and much harder to value; the knowledge of the workforce; the quality of the supply chain; the uniqueness of the intellectual property; the proportion of IT, the strength of customer relations.”  Mr. Hilton continues, “Company executives say in the old days they used to be able to cover 90% of their risk because it was tangible. Now it is 30% tangible.” 

The balance has become a challenge for carriers to address.  The future is now in business.

Consider the SME market (valued at $200 Bn in the US alone) and the announcement November 20 of Aon PLC’s acquisition of CoverWallet.  Clearly CoverWallet’s  innovative approach to addressing the needs of commercial customers was a driving force for the acquisition, but just as clearly Aon is expressing awareness of the previously underserved SME market, and with new tools to craft insurance relationships the firm will be well-placed to capitalize on how businesses are recognizing the need and availability of cover.

The Evening Standard article aptly notes the intangible elephants in the room- cyber, fraud, or loss of reputation.  Noting the need for devising policies which meet client needs overlooks a significant unmentioned problem- these intangible risks can have frequency and probable maximum loss, a perfect unplanned storm for underwriting.  The easy course has been off the rack policies, or low cover limits, but that must change as businesses demand more.  I was reminded of a data breach that a large US carrier responded to well (see “State Farm Hit by Data Breach”), and outside of the reminder that even big companies are victims, cyber and insurance expert Mica Cooper of Aisus/InsureCrypt reminded me- the attack was founded in credentials obtained elsewhere by the perpetrators, and held until the seeming right moment.  There are no off- the- shelf policies that anticipate the cascading consequences of that cyber action, and if SF had not been prepared technically the potential financial and reputational damage would have been enormous for the firm.

As to customer expectations for insurance in the future, Juan Mazzini of Celent covered the topic well in a video recorded at Fides Conference in Bolivia, September 2019 (the peacock seen early in the video is NOT a Bolivian insurance regulator 😊 ).  Customers will expect more than just annual service, or service only when a claim occurs.  Prevention, value-added services, and easy access to insurance will need to become the rule rather than the exception. Multi-channel access must be the plan for insurers, with anticipation of risk and not just response to claims.

How insurance is provided needs to evolve in response to rising tides and rising premiums- is it now time to change insurance from an indemnity model to a hybrid parametric/indemnity approach?  I have written of this before within InsurTech360.com,  “Want Property Insurance to Really Change? The Straight Indemnity Policy Needs to Go”.

And, is it time for underwriting data tools to change?  Sure is, per Renu Ann Joseph of Luminant Analytics.  Her firm’s current project of building analysis tools for helping actuaries and product managers price, select and segment risks better using external data is a forward-looking approach, a total sea change from carriers’ approaches utilizing historic, in-house data.  Data availability and analysis tool innovations will alter the risk-prediction landscape once the carriers’ openness to change and available innovations synch.  The smart folks at Intellect SEEC are also setting the foundation for the next method of underwriting through aggregation and analysis of hundreds of billions of indicative data.

Will an unexpected outcome of fraud detection technology also result in reduction of what might be called ‘admin friction’ in the health insurance industry?  We didn’t fully flesh out the conversation but Shift Technology’s UK Sales Director, Jeff Manricks agrees that Shift’s fraud tools very well may benefit users in resulting enhanced efficiency through application of fraud analysis, and intuitively one might agree- fraud develops on the edges of inefficiency and taking advantage of holes in process and detection of fraud may detect those improvement opportunities.

How to ‘prime the pump’ for innovation efforts?  There are plenty of existing options (InsTech London, Plug N Play, accelerators like GIA, MBRIF Accelerator, Hartford InsurTechHub, or Digital Insurance LatAm), and newer initiatives like the Zurich Innovation Championship (ZIC).

The Zurich Innovation Championship is somewhat unique in that it is a global contest that provides startups opportunities to work with a global insurer to grow their business.  There are fine global innovation contests, e.g., Hugh Terry’s Digital Livefest; ZIC is differentiated in that there are winners, but there are also mentoring opportunities through the judging period, and Zurich has experienced internal changes from the effort that have fostered “a one of a kind innovation spirit across the company.”  (contest applications accepted through December 17,2019!)

Whether it was the expectation of the firm’s Group Head of Strategy, Giovanni Giuliani, or an unexpected additional benefit, the firm is pleased with the program’s success, including the progress of contest winners including Chisel AI and zesty aiMark Budd of Zurich UK has been working directly with several finalists, including Shepherd (working on property IoT applications.)  Shepherd’s CEO, Stephen Chadwick, considers the utility of the contest this way:

“Getting involved in the Innovation World Championships and our continued pilot with Zurich has allowed us to talk to other insurers and businesses in different sectors.  It’s almost served as a springboard allowing us to reach out to a broader audience about what we do. “ 

An incumbent carrier collaborating and mentoring an innovation company that has their eye on improving risk detection by customers?  That sounds like how the future of insurance will be.


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