Some insurers should reinvent themselves as tech firms
The US re/insurance market is grappling with many complex challenges at the moment but consolidation and insurtech are the biggest, Alan Levin, vice chair at law firm Locke Lord, told PCI Today.
“We’re in a rapid period of consolidation right now,” Levin said. “That’s a real issue and I think it’s going to affect pricing. The other challenge the market has is the effect of technology and insurtech.”
He pointed out that the increasing availability of big data along with the development of algorithms around underwriting and claims handling is all converging to make companies ponder how they can best use these resources and their own knowledge.
But, he added, this problem is made more complex by the growing legislation around how data is used under rules such as the EU data protection regulation and some state regulations.
According to Rowe Snider, partner at Locke Lord, the trends that Levin refers to are so powerful that, especially for smaller to mid-market insurers, the real question becomes whether they see themselves as insurance companies or reinvent themselves as technology companies.
“In order to compete, they must become agile, and it’s a very traditional marketplace in terms of management styles. Suddenly they are faced with disruptive forces,” Snider said.
Levin disagrees that these forces are disruptive, classifying them instead as leading to opportunity and greater innovative. He said that medium-sized companies have to allocate resources to figure out what to bet to make and which new technology to back.
He also stressed that it remains uncertain what the timeline will be for how quickly technology can change the industry—if it is a three, five or 10-year period. The management of various companies will have to adapt and choose which ones to go with on this basis.
Levin concluded that the market is facing a challenging set of choices from additional technological issues, such as blockchain, which appears to be the ‘technology de jour’ for so many companies. But, he said, it is unclear what its role will be in the market—and that dealing with this kind of change is a real challenge.
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