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InsurTech sets the stage for ‘Great Expectations’

But fundamental challenges remain as carriers seek new solutions

InsurTech may not have been around in Charles Dickens’ day, but the themes of some of his classic works resonated with what I heard from the international insurance community during my recent trip to London, where carriers characterized the accelerating pace of innovation and transformation as both a game-changing opportunity and existential challenge.

October 18, 2017

A blog post by Sam Friedman, Insurance Research leader, Deloitte Services LP.

Echoing the opening of Dickens’ A Tale of Two Cities, it can indeed be the best of times for companies with a well-formulated and executed InsurTech strategy, but could also turn out to be the worst of times for those that hesitate, stumble, and fall behind the pack. And in the spirit of “Great Expectations,” many of those attending the International Insurance Society’s Global Insurance Forum marveled at the gold rush mentality of the past few years in InsurTech, as carriers scramble to place their bets on what they think will be the next best solution to improve underwriting, loss control, claims, and customer experience.

At the same time, however, most forum speakers emphasized that as carriers catch their breath and assess their options, we seem to be entering a normalization phase when it comes to InsurTech. Carriers are more frequently building their own prototypes (or at least having one built specifically for them), while they continue to invest in or even acquire startups, both to learn more about the business from the inside, as well as to get a piece of the action.

Looking at the bigger picture, many of those at the forum pointed out that InsurTech represents so much more than just a way to bolster the status quo. InsurTech is forcing carriers to radically change not just how they do business, but the role they play in the risk management ecosystem as well. One speaker after another envisioned a tech-driven revolution turning traditional insurance companies into full-fledged “assurance” organizations going beyond mere risk transfer and generic loss control advice.

A big part of this transition is the way InsurTech is allowing carriers to stay connected with policyholders in real time, thus shifting their role from paying loss reimbursements if something bad happens, to adding value around the clock by keeping something bad from happening in the first place. They can accomplish this by incorporating a variety of InsurTech modifications into their operations, from telematic monitoring of vehicles, buildings, machinery, and people, to advanced analytics, predictive modeling, and artificial intelligence.

I believe this movement will take the industry in a very positive direction. If carriers can be more proactive than reactive, it should alleviate one of the biggest complaints about insurance—that most people don’t perceive the value of their policy unless they have a claim (one that gets paid with a minimum of stress, that is). Connectivity could change that dynamic, laying the groundwork for an ongoing, interactive relationship with policyholders.

If carriers can be more proactive than reactive, it should alleviate one of the biggest complaints about insurance—that most people don’t perceive the value of their policy unless they have a claim (one that gets paid with a minimum of stress, that is). Connectivity could change that dynamic, laying the groundwork for an ongoing, interactive relationship with policyholders.

Bridging the gap with InsurTech

InsurTech is also an avenue to bridge the gap for underserved policyholders who might not be able to afford a personal insurance and risk management specialist. The obvious example is robo advisors for those of more modest means looking for help in planning their retirement investments, as well as for millennials and others who prefer to do all their transactions virtually. But robo advisors might be a welcome option for personal lines buyers and small business owners as well. Since their premium dollars may not justify a lot of attention from a live agent, perhaps they could get more individual service and industry-specific advice through artificial intelligence and cognitive technologies.

Insurer “relationships” with property may also be revolutionized by technology. One speaker suggested that a smart car could become a “moving wallet,” able to pay for purchases of gas or electricity, tolls, or other goods and services (including insurance) via a chip in the vehicle. By the same token, connected cars can report to insurers directly when accidents occur and repairs are made, perhaps with copies of the bill emailed to the auto carrier. The damaged vehicle might even be automatically steered to a participating repair shop by the insurer’s chip.

There were also caveats raised, in terms of taking technology too far. One CEO at the forum warned insurers that becoming fixated on automation and adopting a more virtual model run by chat bots and artificial customer service reps could fatally distance them from consumers. Client disengagement, he noted, could quickly reach “epidemic proportions” as actual people working at insurance companies are squeezed out of the sales and service equation.

While automation may reduce costs and artificial intelligence could broaden the scope of people-free interactions, overreliance on InsurTech-driven disintermediation may also undermine the fundamental human connection with clients that adds value, personalizes b-to-c relationships, and helps avoid commoditization. Dealing with customers solely on an electronic basis could backfire if insurers totally lose touch with the individuals they cover. The required balancing act between InsurTech and people power will be tricky, but could pay dividends for carriers that manage to pull it off.

The required balancing act between InsurTech and people power will be tricky, but could pay dividends for carriers that manage to pull it off.

InsurTech: Challenging insurers’ traditional boundaries

This also doesn’t mean InsurTech is the sole driver of business model transformation, but the more holistic protection model it could spawn might challenge an insurer’s traditional boundaries. One personal lines carrier speaking at the forum reported an effort to expand into non-core but complementary businesses, such as home remodeling and nursing care. They are adopting what they characterized as a “theme park business model.” It is no longer just about the rides or the attractions, but the food, souvenirs, and other brand extensions as insurers cater to their customers’ health, security, and general well-being throughout their lives, not just when they buy or renew a policy or file a claim. InsurTech can help make that grand vision a reality by creating an ongoing link with consumers.

One CEO warned that the ultimate disruptor is not going to be InsurTech. It will be your customer, who wants insurers to standardize and streamline yet customize at the same time. This is not necessarily a mutually exclusive set of demands—not if your technology, platforms, and people are on the same page. The goal is to leverage InsurTech to create a level playing field for consumers while giving carriers the flexibility to make their products and experience unique to an individual buyer’s needs and preferences.

One CEO warned that the ultimate disruptor is not going to be InsurTech. It will be your customer, who wants insurers to standardize and streamline yet customize at the same time.

QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

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