How will InsurTech shape the future of insurance?
Insurance faces the most profound transformation it has ever had in its centuries-old history. Today’s transformation, occurring at an alarming speed, is beyond a simple technology refresh. Innovation is challenging the entire traditional insurance model.
More than 1,000 insurtech startups, like Trov, Metromile and Lemonade, have sprouted in the last few years, according to Venture Scanner map. They all deliver new business models that are changing the way we think about insurance.
And this is only the beginning.
“We expect plenty more insurtech players to come, particularly given the funds pouring into this space – £2 billion last year,” says Mark Andrews, director of general insurance at Altus Consulting.
InsurTech is redefining the customer’s insurance experience
How is the customer reacting to our industry disruption? By wanting more from their relationship with us.
This is how Insurance Age describes how the customer’s expectations are changing during this industry transformation: “Customer mentality is shifting toward consuming on-demand services, such as insurance for exactly six days of a skiing holiday or coverage for a favorite custom mountain bike. To become a digital insurer is to redefine the vision in terms of the kind of service, experience and a relationship the company is able to offer consumers.”
How traditional insurers must embrace InsurTech
I was curious how some insurers are dealing with all these disruptors, so I met with Allan Lubitz, CIO of a longtime OnBase customer. He provided great insight into the future of insurance.
He believes some product lines, like motor, are becoming heavily commoditized with very little to no return (108 Combined Ratio Average).
While venture capital investment will continue to cause disruption in the industry, many startups will eventually fail. Those that succeed will likely be VC-backed companies finding niches in the market.
Success for traditional insurance organizations means change, and Lubitz offers his ideas of where that change should occur:
- Data analytics – Companies need to embrace data to gain a better understanding of their customers.
- Operational efficiencies – Straight-thru-processing and going paperless via enterprise content management with workflow optimization will drive cost reduction, office consolidations and make way for platform updates.
- Customer centricity – “Consumers will hold us to the standard of their favorite retail buying experiences,” says Lubitz. Traditional insurers need to hear the voice of the customer to grow into the future.
Other changes traditional insurers need to prepare for:
- Motor is seriously threatened, OEM driven, commoditized and/or a loss leader
- Global climate change will have impact on home/renter
- More rewards/discounts for acting responsibly (e.g. alarm system discount)
- More focus on personal property, umbrella liability, etc.
- Continue to handle complex tasks (e.g. risk analysis, commercial U/W, injury claims, fraud detection/prevention)
- Still need efficient systems (e.g. Guidewire, OnBase) and new tech challenges will continue to arise (e.g. currently large object management – video files)
How will InsurTech impact the future of insurance? Weigh-in with your thoughts. We would love to hear your perspective.
