Traditionally slow at deploying technology, insurers and reinsurers are quickly realising that they need to respond to technological advances and innovate in order to remain relevant to clients, but not all are likely to succeed.
“The further spread and implementation of new technologies will continue to change our lives at a higher speed than ever—insurers who cannot adapt to the new risk landscape will be in deep trouble, and first fallouts can be expected,” said Frank Reichelt, market executive Germany & Nordic, Swiss Re.
Digitally-focused new players in the insurance industry are increasingly threatening the market dominance of traditional insurers in a dynamic that could ultimately force the incumbent players to become nothing more than risk carriers.
An example of a new entrant on the technical side is a company called The Climate Corporation. The San Francisco-based firm examines weather, soil and field data to help farmers determine potential yield-limiting factors in their fields.
The company’s proprietary Climate FieldView platform combines hyper-local weather monitoring, agronomic modelling, and high-resolution weather simulations to deliver Climate FieldView products. These are mobile SaaS solutions that help farmers improve profitability by making better informed operating and financing decisions, according to the firm’s website.
One of the companies trying to disrupt the client relationship side of the insurance business is Bought By Many, a free, members-only service that offers help to find insurance for the “out of the ordinary things” such as pet or gadget insurance.
The platform acts as an alternative to using comparison websites or directly contacting insurers, and it negotiates discounts and cashback offers for its members. It claims to help save its members 18.6 percent on average on the insurance cost. If successful it may contribute to a disintermediation between insurers and their clients.
“Historically our industry has been slow to embrace new technologies, but at least for some this is beginning to change and we will see a growing recognition that technology can act as a differentiator,” said Andy Wallin, group commercial director at broker Ed.
“This does not mean simply looking to update already obsolete systems. Rather there will be a greater acknowledgement of the benefits which disruptive technologies can have on our market,” Wallin said.
The industry stands at a crossroads, with its very existence, at least in its current form, threatened by newer, more dynamic business models, noted Julian Enoizi, chief executive of Pool Re.
For most of 2016, investment in “insurtech” – the innovative use of technology in insurance – outpaced investment in other areas of fintech, said Vikram Sidhu, partner at law firm Clyde & Co.
Examples of insurtech innovation in the United States have ranged from the launch of the peer-to-peer insurer Lemonade in New York, for home insurance, to the sale of drone insurance via a mobile app by Verifly.
In 2017, entrepreneurs, investors, existing insurers and other players in the insurance industry in the US will intensify their efforts to bring innovation and modernisation to the sector, Sidhu believes. “These developments will affect every part of the insurance industry – but especially in personal lines – from sales and marketing through underwriting to administration of claims,” he said.
One of the big fintech opportunities that will present itself in 2017 is realising the potential of big data, said Chris Waterman, EMEA head of insurance at Fitch.
“Big data could transform pricing across most insurance lines. Data on policyholder behaviour and circumstances is continually being created, often tagged in detail at an individual risk exposure level,” Waterman said.
He believes that this creates an opportunity for insurers to price risk more frequently, accurately and on a more individual level. But this is likely to challenge the sector’s technological capabilities.
“The challenge for insurers is whether they can access, process, interpret and utilise this new data quickly and accurately to price more profitably and competitively,” Waterman explained.
In total, senior executives from companies including Swiss Re, Argo, AM Best, Moody’s, Markel, Advent, Barbican, Brit, Ed, Fitch, S&P Global Ratings and Willis Re participated in the piece looking ahead to 2017. To read the full transcript of their thoughts and comments, please click here.
Insurtech, 2017, US, Europe, North America, Frank Reichelt, Andy Wallin, Julian Enoizi, Vikram Sidhu, Chris Waterman