Panel discussion at Future of General Insurance conference
20 November 2017Insurance

Insurance CEOs debate technological challenges

At the same time, insurers need to keep pace with new developments, and they are more likely to find appropriate technological solutions outside of the company rather than in-house, the executives noted.

Richard Rowney, CEO of LV= said that his biggest worry is that the industry may be still too complacent with respect to the change that the insurance business is undergoing. Traditional players may be busy with renewal pricing and rewarding loyalty, and may be giving new entrants opportunities to disrupt the market.

“It’s always difficult for the bigger players in the industry to say we won’t keep complacent, we’ll develop a culture of change,” Rowney said.

Ken Norgrove, CEO RSA Insurance Ireland believes that the main problem the industry faces is capacity.

“We are bursting at the seams with ideas and changes we want to make to our business,” Norgrove said, pointing to robotics, digitisation at the back end for the business to create efficiencies and cut expenses or at the front end to make the journey much more seamless for the consumer.

“Capacity is actually our biggest issue. We want to do so much and it’s trying to figure out what are the right things to do at any point in time [that is difficult],” he explained.

All businesses are going through a cycle focusing on the consumer, on intermediated partners. Some will opt for acquisitions, such as for example Allianz, which took a stake in Lemonade, Norgrove explained.

In April 2017 Lemonade, an artificial intelligence-focused insurtech company, revealed a strategic investment by Allianz.

Other players may try to change some of the back-end offer services to get them fit for the future, Norgrove added.

The industry still faces a lot of excess capital in a market with subdued growth and where companies are chasing the same customers, said François-Xavier Boisseau, CEO Insurance Ageas. Boisseau also pointed to the customers’ obsession with price.

Many of the new insurtech initiatives are trying to disrupt the distribution model, which could represent a potential threat for direct writers, Boisseau noted.

Insurers may lose contact to customers

“Ultimately, the biggest risk for the industry is that we are pushed even further down the value chain. Insurance might become part of a global service,” Boisseau warned. He pointed to Neos, an insurtech company which offers a connected home insurance service designed to prevent the damage that would lead to a home insurance claim. “They are trying to broaden the scope of insurance,” he said.

“We will still exist in future,” Boisseau said. “I have no doubt about the value of our industry, but we may be wrapped into a global service proposition and that will dilute our margins as a standalone insurance provider,” he explained.

There is the possibility that insurers may in future only underwrite the risks but have no contact with the customer anymore, Boisseau noted.

Another issue the industry faces is that insurance products are not particularly attractive, making them harder to sell than for example an iphone, Boisseau said.

To make insurance as appealing as an iphone is a lost cause, Boisseau said. Only a minority of insurance customers experience the value of the product at all through claims. The huge majority does never make use of it, Boisseau noted.

“We sell peace of mind but it is experienced only in a very small portion of cases,” he said.

Rowney noted that there are examples of new products that are changing the way customers interact with insurers. “I really admire what Vitality have done,” he said.

Health insurance provider Vitality uses behavioural economics and encourages clients to develop healthy long-term habits by offering rewards to clients that engage in a healthy lifestyle, according to the company.

“They’ve used technology with wearables and fitbits, tapped into the consumer demand,” Rowney said. It has changed the engagement model beyond a claims event which may never take place to enable regular communication with customers through vouchers, cinema tickets and incentivising customers to stay fit, Rowney noted. While a great marketing tool, it is also giving the customer back something useful, he explained. “There is so much more we can learn from that,” he added.

But Norgrove noted that insurance remains a low-touch, a low interaction product. Innovation may even put the industry further into the background because the changes relate to the consumer products that are being purchased and not necessarily the services that sit behind them, Norgrove noted.

Insurance products are likely to be immersed into a range of other services that are more palatable for the consumer, Boisseau explained.

Nevertheless, Ageas has started to explore the use of artificial intelligence (AI) in the claims space which will allow employees to concentrated on areas where their skills matter most, Boisseau said.

As a result, there will be far fewer people in a call centre environment in future, Rowney said. Instead of phoning in, clients will interact via apps and bots.

Innovation is the only way forward

Both RSA and LV= are looking for product development opportunities externally as they aim to keep up with innovation.

“Innovation is best done outside,” Rowney said. Internal innovation is about customer insight and is followed by scanning the outside world for suppliers that have smart technology to help acting on the challenges or opportunities, he explained.

But instead of partnering with an insurtech company, LV= in August entered into a joint venture with Germany’s Allianz in what is said to become the third biggest personal lines insurer in the UK. The two companies have agreed on a detailed long-term strategic partnership in the UK, creating a general insurance business with over 6 million customers and gross premiums written in excess of £1.7 billion.

LV= partnered with Allianz because of their superior digital and data capabilities, Rowney explained.

Jens Henriksson, CEO of Sweden-based insurer Folksam, noted that he no longer believes that collecting as much data as possible is beneficial for the company. While customer data may allow to gain new insights, and allow for the development of more targeted customer propositions, this is also creating more bureaucracy and duties, not least due to the new General Data Protection Regulation (GDPR). The new regulation includes fines of 4 percent of the company's global turnover or €20 million, whichever is greater, in case of mishandling of personal data.

“When you gather data, you become responsible for it,” Henriksson said. Keeping data will be very expensive in the future, he added.

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