Global lessons in insurance disruption
More than 4,000 people attended this year’s Insurtech Connect conference in Las Vegas in October – now in its second year – indicating transformation in insurance is well underway.
Macquarie Bank hosted a delegation from Australia, including including broking and insurtech leaders, to meet prominent speakers and businesses in this sector and experience first hand the impact and future potential of technology.
Here are just a few things they shared.
1. Insurtech is facing an ‘innovation tsunami’
For AEI Group’s Tim Wedlock, defining insurtech was an important starting point. “I learned it’s the opportunity to provide new insurance platforms with digital technology to improve customer experience,” he explained.
“This is happening in a couple of ways. First, start ups are relying on digital technology for an end to end experience. But also, existing businesses are integrating technology for better customer service and business efficiency.”
Rick Post of Centrewest Insurance Brokers said; “we’re just seeing the tip of the iceberg, and innovation in broking is still some way off – but it’s coming.”
Right now, many insurtech start ups are concentrated in the health and life insurance, travel insurance, cyber insurance and domestic insurance spaces.
“It’s mainly focused on simple insurance products, opportunistic start ups and venture capital,” noted Gabriele McDonald of Protecsure.
Daniel Fogarty of insurtech Evari sees continued potential in the commercial insurance space. “The best potential is to leverage your own strengths in the market,” he said. “It’s still too early to determine what business models and technologies will be most successful.”
2. Insurtech is your friend, not the enemy
An important distinction between insurtech and fintech is that incumbent models are still needed: underwriting, claims processes, risk advice. For that reason, it’s seen as an enabler – rather than a replacement. “The most important idea is how insurtech can help rather than hinder our business,” said Post.
Don't see insurtech as your enemy: it is your friend.
“Insurtech is not being done to the industry, it is something the industry is doing,” commented Insurtech Australia founder Brenton Charnley. “That was great to see and be part of.”
“We recognise tech is a great enabler, and want to incorporate those great ideas for benefit to our partners,” said AUB’s Mark Searles. “No one thing will change the world, it’s an amalgam of great ideas to improve the overall outcome.”
3. Australia is further ahead than we think
“I was curious about where Australia sits in the insuretech world, and we’re more advanced than we give ourselves credit for,” commented Searles.
This was reassuring for the group as a whole.
“I feel more comfortable about how we adapt insurtech into existing business practices to keep ahead,” said Wedlock. Envest’s Rob Ellis added; “Australia is right up there when it comes to innovation, but IT platform legacy issues makes change difficult, costly and time-consuming.” Envest is developing a state of the art underwriting agency platform, which Ellis believes will be a step change in this area.
Fogarty said he leaned more about the complexity of the US insurance market. “It has a big enough market for specialists to be very successful, but it reinforced the challenges of managing in a highly regulated environment.”
4. The scale of venture capital funding is significant
The group agreed the amount of capital being invested in US insurtech was staggering – and there was some concerns about ‘silly money valuations’.
Searles described this as a “feeding frenzy of venture capital” and emphasised many ideas will take a long time to get to profit.
“Regardless of the technology, you need a profitable insurance model to underpin it,” noted Charnley, adding the conference session with American Family Ventures provided an “honest view of the investment landscape. It highlighted the shift from 2014, when there were 50 companies in this space. Today there are over 500.”
5. Commercial risk is complex
This investment is certainly more focused on ‘commoditised’ personal insurance than commercial lines. “Commercial is still put into a ‘too difficult box,’” noted Searles. “But there are still things we saw which could take friction out of our processes.”
Wedlock added; “work is being done on commercial insurance, but unless it’s aligned with specific product classes or occupation types, it’s proving more difficult.” Next insurance and Bunker are examples in this space. Rob Ellis expects this ‘niche product area’ will grow quickly, especially for small business insurance where the advice needed is minimal.
Cyber insurance is one exception to this complexity rule. Despite being challenging to price, technology can help insurers manage the growing risks of doing business in a digital age. In fact, cyber incidents are now the second biggest business risk globally.
“This is a good example of how products are evolving,” said Charnley. “The US is seeing huge amounts in premiums, but Australia currently only has about 30% coverage for cyber insurance.”
6. Data is the new oil
“We always knew the power of data capture in Australia, but what can be done with that information now is staggering,” says Ellis. Drone technology, satellite imaging and flood mapping all present new ways to price risk.
“It was interesting to learn the average age for a male to evaluate life insurance is 43,” said Honan Insurance Group’s Brad Tymmons. “Real-time data can help us move from reactive selling to proactively helping clients at the right time in their lifecycle.”
Data insights will also help insurers target consumers in the moments that matter – such as when buying a car or actively shopping around. And it’s also already impacting claims assessment, according to Ellis “The efficiencies and cost reductions achieved are massive. Australia’s Claims Central is already making its mark globally here.”
7. Brokers won’t be replaced by bots
“I firmly believe we are still a ‘people’ business: we offer professional advice on business and personal livelihoods,” said Wedlock.
While chatbot technology was featured at the conference, there was recognition of the broker’s role as a trusted advisor and owner of the client relationship.
McDonald said she believes the broker’s role as a professional risk adviser will endure. “Those brokers will use insurtech to enhance client interactions,” she said. Centrewest’s Post agrees, saying his firm plans to use AI to support its processes, “freeing up our people to better manage relationships, underwriting and claims. I still believe clients like to get advice from a person, and I was surprised by some brokers not wanting any client relationships – just online transactions.”
8. New-fashioned methods for old-fashioned broking
A visit to online broker Embroker in San Francisco also reassured the group they were on the right track. “We saw a replication of what we are already doing, just using tech as the distribution platform. The claims management and client engagement is still very human,” said Searles.
9. The number one rule for brokers: remove friction
While technology is already transforming insurance channels, models and products, for brokers the message is clear. Find the end client’s friction points, and use technology to fix them.
There is still scope for improvement. Business models need to be flexible to respond quickly, and insurtech is the key to creating frictionless client engagement.
“There is still so much scope for improvement,” said Tymmons. “Business models need to be flexible to respond quickly, and insurtech is the key to creating frictionless client engagement.”
“We certainly saw the significance of how the market will be disrupted – and the speed at which it will happen,” concluded Ellis. With this in mind, it’s certainly crucial to stay close to these developments, so you can identify opportunities before they impact your business.