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Insurtech: appealing to the Data Generation

Paul Ridge, Banking & Insurance Specialist,  SAS UK & Ireland, discusses the new trend of insurtech and how incumbent players in the industry can make the most of these start-ups

A few weeks ago, colleagues of mine were members of a team that took part in a TEDx event in Glasgow that showcased what can be achieved when our limiting beliefs are put to one side.  British inventor Richard Browning demonstrated why he has become known as the real-life Iron Man.  Using his one of a kind jet suit, Richard gracefully took flight and navigated a lap of the arena in a display of what can be achieved when innovation and a reluctance to be bound by traditional beliefs come together.

Disruption is upon us

This prompted me to see relevance to the various examples of disruption and innovation taking place today.  If your work is related to the financial services industry, then you will no doubt be aware of the fintech movement that is challenging the status quo.  The insurance industry is not immune to its own wave of challengers and game changers, suitably tagged insurtech.

Without doubt, the entrepreneurial spirit shown by these insurtech innovators can be inspiring.  As SAS is a sponsor and supporter of the InsTech London community, I get to see first-hand the many forms that these disruptors come in.  Few are taking on the balance sheet risk of becoming a full-stack insurer, but these bold new entrants are emerging and challenging the traditional beliefs of the insurance business model.

Albeit at a varying speed, insurers are reacting to this movement.  Many have noted that they can’t go it alone, and are partnering, acquiring and investing in insurtech players in all guises.  Whether this is a defensive strategy, or just survival tactics, I expect the pace to continue as insurers look to drag themselves and their legacy technology platforms into the new world.

The established players

But, for me, this begs the question, what was stopping insurers from doing this themselves?

Could it be a generational force powering this new trend and the change in attitude? Our research shows that a new ‘Data Generation’ has emerged, which view their own personal information as “bargaining chips” to enhance their lives. Nearly three in five (57 per cent) are willing to share their own data to make their lives easier. Consumers have been led to expect more personalised and efficient services based on the influence of Netflix, Facebook and others – something only possible with data and insight led innovation.

But again, what was it that stopped the insurance industry recognising these trends and reacting before the insurtech disruptors came along?  All the technology and analytical capabilities that are central to many of these start-ups are equally available to insurers.  Was the only thing holding them back from innovation their own culture and inherent risk averse nature?  I’m sure when asked many will cite the constraints imposed by their legacy platforms, but those in the technology industry will know that these challenges can be overcome, and many insurers have technology budgets many times that of the start-ups I see today.

The challengers

Data centric challengers are now entering the insurance distribution landscape with companies like Brolly as a good example.  They are also bringing specific digital process improvements in claims and other high cost operational domains with a sprinkle of the Artificial Intelligence fairy dust.

Leading the trend of disruption as a full stack insurer is US company Lemonade.  Now infamous for their drive to change the insurance business model, they offer home insurance for urban dwellers. All interactions are done via mobile and it boasts speedy processes – cover within 90 seconds and pay-outs within three minutes. Even more notably for the industry is Lemonade’s approach to the ethics of insurance. Their fees are transparent and if there’s money left over after a pay-out, they donate it to charitable causes. This is about building an industry around honesty and ethics – and bringing customers together as like-minded people.  Of course, this is all wrapped up in a healthy dose of AI as is currently vogue in this and many other industries.

We also await the arrival of the healthily funded Gryphon to give us another example that we can explore in future blog posts.

Those start-ups not intending to become a full stack insurer are harnessing technology and an on-demand way of providing services, and forcing the insurance industry to rethink its strategy.

Is it over for the established players?

Is there still time for the big incumbents to learn from these new players and go it alone? Adopting the agile, start-up mentality could allow them to think digital first – using all available channels to engage customers. Mark Wilson, CEO of Aviva, has been one of the more vocal high profile insurance execs on the need for Aviva to become a 300-year-old start-up at the forefront of innovation.

Data and analytics is almost always at the heart of insurtech innovation, but for larger companies this isn’t easy to achieve. The cultural and behavioural change can be too much for many to overcome, leading to vastly different levels of adoption across an organisation – but this is one area where time is running out fast.  If insurers don’t drive this change in behaviour and think data and analytics first, then the competitive advantage of their scale and customer base will be lost.

The road ahead

Our research shows that the automotive insurance industry is one that is well positioned to disrupt the data landscape.  The Data Generation has shown willingness to share their data if it means they get a more flexible and bespoke experience. Overall, one in four would be prepared to have their driving behaviour monitored to receive lower premiums. Almost half (41 per cent) connected cars can provide benefits, such as geo-location services offering cheaper petrol or other special offers while on the road.

Now I am not proposing that insurers start building their own jet suits, but they need change their limiting beliefs, develop a data driven culture and exploit all data in an ethical way to deliver bespoke products and services. Only this shift can drive successful innovation in this new, hyper-personal, hyer-competitive and instant world.

Find out how insurers can modernise by using analytics to harness the internet of things.

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