9 things we learned at Swiss Re Institute's technology and modern underwriting event
1. Technology is ‘on the bus’
It might be on its way or "on the bus" but technology hasn’t fully arrived in the insurance sector yet, said Jacqueline McNamee, founder and CEO C-Quence Insurance.
“Awareness is building just by having forums to discuss it. There’s a variety of attitudes out there. Some people thoroughly embrace it, some people are resisting it and some people dismiss it. But it’s coming because the opportunity has been quantified. There’s a real appetite for change out there, whether it’s in the distribution chain or partners or from customers.”
McNamee added: “Change has to move, and it has to move at pace because other industries are transforming around us.”
2. Laggards in tech? It’s not personal lines
Compared to other industries, insurance is at the start of the journey in its wider use of technology in underwriting, said Hayley Robinson, chief underwriting officer at Zurich Insurance. “Some parts are further forward. For example technology driven underwriting has been in personal lines for 20 years. You can get a quote online now without asking a single question.
“The real laggards in change are mid market, large and complex risks. Progress is coming but we’re behind other industries.”
3. Interests vested in the status quo
There are a lot of vested interests in the status quo, so is there really an appetite for change? Eric Schuh, global head P&C solutions at Swiss Re Group, emphasised that the world around us is quite a technological one already. “If we don’t tackle new ideas then somebody else will, some will do it better and some worse, with winners and losers. In a way, you don’t have to do anything, it will happen. But the question is where do you want to play on that curve? Behind or too far ahead is too risky, you will need the skill to judge this right.”
4. Legacy systems are a barrier to change
Culture, heritage and the legacy systems that come with them make rolling out new technology difficult in any large organisation, said Robinson. “When you have companies that have merged a number of times, you have companies with systems from 1979, and they don't talk to systems built in 2018.”
Implementing change is one of the biggest challenges for the insurance industry, she added. “How do you keep your current business going, because there’s a lot of value in that business and that drives the profit currently, at the same time as moving yourself forward and modernising. That’s the thing we’re all trying to work through. But you need a business case. The finance director wants to know ‘if I’m spending $5 million what am I getting in terms of increased revenue and profit or efficiency?’ And sometimes you have to say to people ‘it’s a leap of faith’.”
5. Digital ecosystems are modifying the landscape
Interconnectivity has created a new way of doing things: digital ecosystems. Internet connected products and services, from a number of different players, work together to provide complex added value. Your smartphone is part of that. The ecosystem orchestrator - two examples are Android and Apple - chooses who will ‘complement’ this ecosystem. Being an orchestrator is powerful, and firms leveraging these ecosystems include Google, Facebook, Apple and Amazon.
“The more services become interconnected, the more we want simple points of access. The more we are able to access unimaginable variety and depth of products, the more we see the importance of creating these ecosystems. That changes the competitive landscape from the traditional sectors onto areas that are mediated by these ecosystems. That also changes the landscape for the insurance firms themselves,” said Professor Michael G Jacobides, Sir Donald Gordon chair of entrepreneurship and innovation at London Business School.
6. Ride the wave of growth in smart home tech
Big tech players like Amazon and Google are driving the adoption of home tech with their interactive home assistants. But retailers like Ikea are going to do the heavy lifting, said Cecilia Sevillano, head smart homes solutions at Swiss Re. “Ikea has entered the market with connected lights. It’s cheap, it’s ‘do it yourself’, it takes away the boundaries and hindrances. What is powerful is that they have 900 million visitors coming through their stores, who they can educate about the benefits.”
She said that this rise in devices presents opportunities for insurers to bundle their products in with devices as a recent survey showed that 40 percent of people would be willing to switch insurer if they got a new device with it.
7. Retain customers with 'end to end connected services'
People might be happy to switch insurer as part of a deal to bag a shiny, new piece of tech but how will insurers retain them against another, even shinier gadget offer in the future? Sevillano said there is growing demand for services and safety features from insurers via smart devices.
“End to end solutions are one way to do this. For example, with a connected water sensor, insurers will know you have a frozen pipe. But with other sensors and data we also know you are on holiday, so the insurer will take responsibility for calling the plumber and stopping the water before there’s a leak.”
8. More data boosts ‘co-opetition’ possibilities
As digital ecosystems change the way we move around the world, how we live in our homes and what we consume, they are having fundamental impacts on what the landscape of risk is.
“They are shrinking or growing or reshaping risk pools dramatically,” said Michael Davies, founder and senior partner at Endeavour Partners.
“For underwriters, it will call into question a whole variety of the historical data they’ve been relying on. At the same time these ecosystems are creating a lot of new data. This new data offers the possibility of co-opetition, the strange balance in which you are both friend and foe.”
There is so much new data available that non-insurance companies with data scientists can move into the insurance business, he said. “However, this is an ecosystem, and nobody will be able to do this on their own. Partnerships will be key to delivering end to end solutions.”
9. Could insurance be the Iwo Jima of ecosystems?
The real danger for the insurance industry is it becomes the Iwo Jima of digital ecosystems, said Davies. Iwo Jima is an island in the pacific where the Japanese and Americans fought a particularly bloody battle. It didn’t end well for the people already living there.
“We haven’t yet seen the large-scale digital ecosystems enter insurance in any significant way. The reason is that they’ve had other battles to fight so far. [But] at some point they will arrive.”
He added: “These ecosystems are extremely aggressive because they have to compete with each other, they move extraordinarily quickly, they have deep capabilities in the things that you need to do underwriting and in particular they have asymmetric economics. This means they don’t need to make money out of insurance. So if it works for Apple in its battle with Google, in its battle with Amazon to trash the economics of the insurance industry they will do that.”
