A shift in mindset is needed to revolutionise the industry and the construction of a truly digital business is what will save the traditional insurance company.
This is the finding of NuvaLaw, a legaltech startup with an interparty negotiation and adjudication platform.
NuvaLaw is one of more than 20 startups discussing the insurance market at the annual Intelligent InsurTECH conference on October 3 in London. Click here to find out more.
“There is good evidence that insurance companies are more willing to partner with insurtech companies to drive innovation,” said Stewart McCulloch, head of business development at the South Africa-based startup.
However, this has largely been in the last mile, focusing on new products which deal directly with the consumer.
It will be a big ask of insurance companies (“which face some of the toughest regulatory and compliance requirements”) to allow new technology into the heart of operation, according to McCulloch.
He added: “Financial realities are forcing insurance leaders to look inwards and drive efficiencies into their operations. It’s more a question of sustainability and a desire to remain relevant which is acting as motivator.”
Despite a “greater openness” to new technologies from the more progressive companies, there’s still a lack of “real understanding of the benefits of the platform economy and how ecosystems can help insurers rapidly innovate in a low-risk environment”.
NuvaLaw offers digital negotiation platform for inter-insurance claims, using new technology tools, processes and services to reduce the time and cost to settle disputes and improve the client experience.
What’s wrong with inter-party negotiation processes currently?
They’re unstructured, with no business rules or supporting information management tools, making negotiation inefficient and costly, explained McCulloch.
Additionally, unresolved disputes are currently settled through long and expensive litigation processes.
Willie Pienaar, chief executive of the startup, previously worked as a barrister in Cape Town.
While working, he noticed a disconnect: lawyers were obsessed with billable hours, but “time was also costs incurred for clients, and in the end, the economy of the law (as it was practised) was often exactly what was standing in the way of access to justice”.
For Pienaar, it was clear the problem was twofold: a lack of early exchange of information; and a lack of time management.
McCulloch explained: “What we were missing was the ability to make informed decisions, based on structured information exchange.”
This was later “amplified when mediation began to make its mark as a highly efficient means of settling disputes”.
“Successful mediation depends on an open exchange between parties. When information is shared early in the process, it allows the parties to reach consensus far more quickly and, as a result, far more cost-effectively,” he added.
This knowledge was taken into the insurance industry, giving the startup “fertile ground” in which to apply the new way of conducting business.
The litigious industry of insurance is characterised by high volume, low quantum, high cost, recurring disputes, and in many cases it doesn’t make sense to take the disputes through a complex and costly legal system.
“It was bad for the insurance business and worse for the customer who would, ultimately, bear the brunt of increased premiums,” said the business development head.
“At the heart of NuvaLaw’s ethos is the firm belief that access to justice should be accessible and affordable and that there is a more efficient way of ensuring everyone’s rights are protected.”
Motor recovery claims currently cost the industry £1.8 billion ($2.4 billion) to process 1.1 million claims each year, in the UK alone.
NuvaLaw has worked with the South African state-supported motor vehicle insurance fund which gave it more than 40,000 cases to prove the efficacy of the platform.
In the project 76% of the contested cases were settled (70% of which were settled in the conciliation [first] phase).
It also showed a reduction in settlement costs of 36%, with capital payouts 42% lower than the typical costs of litigated cases.
NuvaLaw is one of more than 20 startups attending Intelligent Insurer’s Intelligent InsurTECH conference on October 3 in London. Click here to find out more.
Insurtech, Insurance, Legaltech, Europe, NuvaLaw, Stewart McCulloch, London