Style over substance?

One of the major recent developments in the world of FinTech has been the emergence of the burgeoning and vibrant InsurTech sector, as evidenced by the number of panels and discussions on the topic at this year’s Innovate Finance Global Summit. A plethora of innovative new firms have entered the market, looking to, for example, offer an improved customer experience or make segments of the value chain more efficient.

However, observers are beginning to ask some familiar questions: can start-up InsurTechs genuinely compete with large, multinational incumbents with large customer bases and decades, if not centuries, of expertise? Is there any way to eliminate customer inertia when it comes to insurance? Is anyone doing anything truly disruptive to insurance business models? And ultimately, is InsurTech just an example of style over substance?

David Rush, Deloitte’s UK and EMEA Insurance leader, chaired a panel entitled InsurTech: Hype or Hyperdrive?, which looked to canvas opinion to answer this question. He began by offering the provocation that, according to some people he had spoken to over the course of the two days, “the processes and the approach to insurance has changed very little in the 300 years since Lloyd’s of London was founded”.

However, Phoebe Hugh, CEO and Co-founder of Brolly, believes that “there are real structural issues with the way the industry is set up right now”. She cited the statistic that “customers are overspending every year in the UK by over £10 billion because they’re not switching”, and called for the industry to educate customers and address customer inertia. She expressed her opinion that through the use of “smart insurance aggregators” such as Brolly, InsurTechs can “make sure consumers are buying the right products at the right price”.

In David’s opinion, “most of what we’re seeing is collaboration, to improve distribution, customer experience, risk decisions… not disruption”. Sabine VanderLinden, InsurTech lead at Startupbootcamp, agreed that this was currently the case as “it’s all about solving immediate problems”, giving examples of the use of chatbots in the service environment, or artificial intelligence (AI) to improve risk decisioning. In the longer term, she believes InsurTechs and insurers alike will begin to “look at capabilities in the ecosystem to solve major business problems”. In her opinion, there are four key factors behind the future success of individual InsurTechs: “people, money, ideas, and timing”.

Christopher McDaniel, President at RiskBlock Alliance, gave examples of blockchain use cases within insurance. He highlighted the potential for blockchain-enabled ‘proof of insurance’ solutions to allow, for example, two drivers involved in a car accident to “tap their phones together and immediately know whether the other driver has coverage, and what coverage they have”. He also believes that blockchain solutions could help streamline and automate the subrogation process. In his own words, “there are more solutions out there than you can get your head around”.

David asked about the potential for ‘big tech’ to enter the insurance market, citing their competitive advantages of their vast amounts of both money and data. Sam Evans, Founder and General Partner at Eos Venture Partners, added a third: they already have the customer relationship. He believes the entry of ‘big tech’ into the space will lead to “game-changing partnerships which are going to transform the industry”.

David ended the discussion by asking the panellists where they thought insurance would be in 20 years’ time. Christopher and Sam agreed that the future would see much more collaboration, strategic partnerships and the sharing of information between players.

Phoebe believed that artificial intelligence (AI) would transform insurance and the way we interact with insurers, by automating insurance to the point where “insurance just becomes a default part of your life”. Both Sabine and Sam stressed that new technologies such as the Internet of Things and AI would transform insurance from a risk mitigation business to a risk prevention and prediction business.

It is unclear who will be the real ‘winners’ in insurance in 20 years’ time; incumbents, InsurTechs, or tech giants. What is clear, however, is that insurance is undergoing a period of unprecedented innovation, which while currently focused on solving immediate problems, could ultimately transform business models and insurance as we know it.