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Robin Merttens, InsTech (guest contributor)
It’s natural for any new technology to be met with skepticism, perhaps even distrust. It’s seen as a threat, something to hold at bay lest it undermine a model that has worked historically. Over the last decade, society has become increasingly digital while Life insurance has stayed largely analogue. New technology has been introduced by providers at the vanguard of digital developments and many more will soon follow suit.
New digital business models provide clear benefits to consumers. A failure to adopt them leaves the door open for market disruption by new players. Between them, Netflix, Uber, Amazon and AirBnB have enhanced the value of their companies by USD1 trillion, essentially by developing new technology-led business models that are superior to what was there before.
New and often groundbreaking technologies are out there for the insurance sector, too. They will enable insurers to provide fundamental upgrades to products and services for customers. Although many people see merit in getting Life insurance, they can find the process complex and designed more for insurers’ needs than their own. Technologies help insurance consumers take control through access to digital platforms offering tailored products that evolve to meet their changing needs.
Insurers can look forward to gathering meaningful and actionable business intelligence found in data from customers’ connected devices. In return, customers would receive a wider range of personalized products and meaningful services. The focus shifts to helping policyholders live longer, healthier lives. By placing greater emphasis on prevention, cure and mitigation, insurers will derive better and more dynamic data, which all feeds back into the loop.
So, what’s not to like? Why is the industry not leaping headlong into creating and using these technologies, so it can provide better products and services, outwit the competition and be more efficient and reap the rewards on all those fronts? There are two hurdles that probably explain the slow adoption of these technologies. First, the industry model needs to shift to become customer-centric. Second, the industry model is not yet conversant with the technologies, which is all about the ways data is collected, managed and analysed. Fortunately, however, insurers do recognise there is work to do to win the battle to use data to understand customers better and with it the ability to deliver what they actually want.
The good news is that the challenging issues the industry faces will be resolved - one way or the other. The risk is that the insurance entities may not end up providing the solutions. Look, for example, at the Maersk, the biggest container shipper in the world, which partnered with businesses outside of insurance to build the next generation cargo insurance platform.1 Soon many retailers and other service providers could follow suit and offer customers insurance directly.
While insurers will probably provide the regulatory risk capital and pricing for new products, the direct customer relationship - and the data that goes with it - may be owned by someone else. This outcome could leave insurers playing only the risk transfer role; the highly regulated, capital intensive, commoditisable part that requires scale and will over time be increasingly threatened by other smarter more nimble sources of capital.
More great news is that it’s not too late to begin the change. But to effect any positive change means realising you have a problem and having a desire to fix it. John Gray, the English philosopher believed “The human mind is programmed for survival, not for truth.” While that may explain a personal reluctance to change, the truth for the insurance industry is that we need to be programmed to meet our customers’ needs to safeguard our own survival.
Robin Merttens is co-founder and partner of InsTech London, which has 3000 members as is the largest insurance innovation community in London. He also advises startups, occasionally invests and consults with insurers on all things insurtech.
