Increasingly in today’s society we want everything at the click of a button, at our fingertips, on our smartphones – so why shouldn’t we access and manage our insurance in the same way?
The traditional banking landscape has been given a facelift in recent years following the rapidly growing FinTech revolution; hot on its heels came RegTech, striving to find more efficient and effective ways of automating regulation in this new sphere of financial technology without restricting innovation. It is no surprise then that the latest industry to be given the ‘Tech’ treatment is insurance.
What is InsurTech?
Inspired by family members FinTech and RegTech, this reference merges both ‘insurance’ and ‘technology’ to sum up the use of technology innovation designed to automate efficiency in the current insurance industry model.
Long has this industry suffered, perhaps slightly unfairly, from a reputation of living in the dark ages with antiquated processes. It was price comparison websites that initiated insurance’s foray into the future, transferring the way personal lines insurance policies were purchased; now, with technologies such as blockchain, artificial intelligence (AI), roboadvisors, wearables, telematics and drone surveillance emerging in the market it was only a matter of time before InsurTech was the new buzzword on the block.
A changing landscape
Surprisingly, despite the UK being the birthplace of property and casualty insurance, it is the US which is edging ahead in the technological sprint. New players in the US market are causing some disruption, striving to put an end to that historical reputation and are paving the way for a brave new world. We are seeing the most innovation currently in the personal lines sector. In the US, fitness trackers are used to analyse lifestyle for health/life insurance and new start-ups like Lemonade boast that they are ‘different from that of a traditional insurance carrier’; administered completely online (access is only available for sign up via its mobile app or website), it made headlines in January 2017 after claiming a ‘new world record’ for the fastest claim payment made in just 3 seconds!
At over 300 years old, the UK’s insurance landscape has remained vastly unchanged for approximately the last 100 years, but a greater demand on management information leading to challenges in capturing, storing and analysing data has meant that even some of the largest players in the industry have had to rethink their place in the 21st Century.
Lloyds of London (Lloyds) is the oldest insurance institution in London; formed in a coffee house in the 17th Century, it is generally looked up to throughout the market as the forerunner for the implementation of new regulation, attitudes and products. Lloyds’ Strategy for 2017-2019 contains eight strategic priorities which are key to its ongoing successful performance in the market. Its ‘Ease of Doing Business’ priority acknowledges disruption on the horizon from InsurTech innovation.
‘Technological change and automation is disrupting the insurance industry, demanding that we adapt and transform the way we do business.’
At last month’s ALM Annual Conference, Jon Hancock, Lloyd’s Director of Performance Management, spoke of the challenges facing the UK Insurance market today: ‘New tech-based insurance companies are entering our market and challenging traditional business models: everything from price comparison websites and telematics-based services to sharing-economy and peer-to-peer insurance.’
How much disruption?
It is still unclear how much disruption InsurTech will actually cause in the market long term; but it is evident that the disruption has begun. In January 2017, Japanese life Insurer, Fukoku Mutual Life, made headlines when it replaced a number of employees with an AI system.
Will automation and robots threaten insurance jobs? Or will there be an opportunity to redistribute and free up employees and underwriters time? Parul Kaul-Green, Head of M&A & Innovation for AXA UK Group, said in the recent Tällt Ventures InsurTech Disruption Trends Report 2017: ‘Repetitive jobs with high data density, and solving familiar problems, are better performed by AI (e.g. claims processing, quote and buy process, elements of policy administration). When tasks are unique, and when data density is low, humans will have the upper hand (e.g. underwriting and negotiating syndicated deals and complex M&A). For all tasks in between a combination of human and AI is the optimal solution.’
Going forward existing insurers, managing general agents and brokers must consider their place in the value chain against the emergence of new start-ups. In order to compete in this new world, they will need to consider how they collect and analyse data efficiently whilst remaining adherent to industry regulations; currently it seems that automation in its many variances is the name of the game.
It looks as though the InsurTech ball will continue to roll. What the longer-term impacts will be are yet to be determined, but continued focus on innovation, customer experience and compliance frameworks means that change is the only certainty in this rapidly evolving space.
How can ICT help?
The evolution of the role of the compliance function has mirrored the evolution of regulation. Compliance is now viewed as an integral part of the business and positively influences many key decisions affecting firms as a whole, or even just a single customer.
View the full list of ICA qualifications in compliance here >