Let’s make insurers great again

The insurance of the future will be connected, fair and personalised, and it will engage policyholders in risk prevention. Insurtech will make the insurance sector stronger and more likely to achieve its strategic goal: protecting the way people’s lives and organisations work.

I wrote about this subject in Business Reporter’s Future of Insurance in 2017. Despite the industry’s progress over the past few years, today I feel the need to reconfirm my belief in insurers’ relevancy in the future of our society.

Insurtech has come of age in 2021. We currently have numerous listed firms and even a dedicated index (HSCM Public InsurTech Index), which monitors the performance of US players. Established insurance incumbents such as Swiss Re are presenting the results of their insurtech initiatives to the financial community and demanding an adequate valorisation of these assets.

Unfortunately, a large number of the people talking about insurance innovation are generalists – who barely distinguish a loss ratio from a combined ratio – or people who don’t like insurance and see it as a necessary evil. Both categories of people miss the old days when insurtech was supposed to be only a disruption.

It is more and more frequent to hear them predicting a future where insurance will be invisible. You can even read articles where it is said that people will be insured without even knowing it: one of the less customer-centric thoughts I’ve ever heard. This seems like an archetype of miss-selling, which I doubt will be allowed by regulators.

They frequently even add a recommendation to insurers: not to waste money and effort trying to interact with the policyholders, because nobody wants to interact with an insurer. This perspective directly descends from their dislike for insurers. Moreover – to complete their “memento mori” for the insurance sector – they typically highlight the risk mitigation potential of technology.

I’m recognised in the sector for being a non-conformist. I’ve dedicated my career to insurance innovation, and I love the insurance sector. I love the insurance incumbents: they are my clients, and I want to see them thrive. But I don’t like the scenario described above where insurers are destined for extinction like dinosaurs. Moreover, I don’t think it is going to happen.

My beliefs don’t come from a crystal ball; they are based on real initiatives and results that some insurance players have already achieved around the world. I’m in the privileged position of having advised insurers and reinsurers in more than 20 different insurance markets around the world. In the first four editions of my IoT Insurance Observatory, I served and learned from four of the top five reinsurers, 11 of the top 15 European insurance groups, eight of the top 15 US P&C insurance groups and over 40 major tech players. Moreover, I had the opportunity to exchange with more than 100 insurance professionals, tech executives and leading academics across all insurance business lines and geographies, collaborating with The Geneva Association on research about risk mitigation and prevention services for the past 12 months.

I believe the insurance of the future will be connected, fair and personalised, and will engage policyholders in risk prevention.

Insurance will be connected. In the future, downloading an app that tracks your driving behaviour will be the standard, just as today it’s normal to download an app to have food delivered at home. The IoT Insurance Observatory research shows that last year 21 million cars sent telematics data to an insurance company, and 35 per cent of those were through an app. In commercial lines, any company will share the real-time data from its equipment with the player insuring it. Axa XL has already introduced a Digital Risk Engineer programme, which provides clients with a gateway that retrofits the existing facility management system and allows the loss control team to deliver recommendations more efficiently.

Insurance will be fair and personalised. The fusion of IoT and contextual data will normally be used for a more accurate continuous underwriting – managing claims better – and tailored insurance proposals. The South African insurer Discovery has used dynamic pricing in life insurance for decades, with premiums accurately reflecting the policyholder’s risk level at each renewal. Italian insurers such as UnipolSai and Generali use auto telematics data in each phase of the claim: assuring a quicker settlement where only the right amount is paid and better protecting policyholders against any fraudulent third-party claims made against them. In commercial lines, Argo Risk Tech for the general liability portfolio helps supermarket owners in demonstrating reasonable care, so providing them with lawsuit-ready protection. The French digital broker My Risk Committee is providing risk managers with real-time personalised alerts about the evolution of their risk exposure and the gap due to the current insurance coverages.

Insurance will engage policyholders in risk prevention. All the insurance coverages will come with real-time risk mitigation solutions and behavioural change programmes that are able to reduce the probability of the occurrence of problems. Insurance solutions will be characterised by a constant but discrete presence of the insurer and proactive actions when needed. In personal auto, Tokio Marine introduced an AI-enhanced camera that provides real-time warnings to the driver. Auto insurers such as Allstate and Discovery have successfully introduced advanced telematics-based behavioural programmes with daily interactions with the policyholder and rewards for safe driving .

In commercial property, Church Mutual’s investment for equipping the insured property with an IoT solution – based on the detection of water leaks and frozen pipes, and real-time alerts to the insured to mitigate non-weather-related water losses – has shown the ability to protect the policyholders and a robust return for the insurance company. Moreover, in workers’ compensation, StrongArm Technologies’ wearables are already used by tens of thousands of employees to enable insurers to reduce expected losses, both directly with real-time alerts and indirectly with data-driven recommendations delivered by the loss control teams.

There are already some insurance best practices that have achieved a 40 per cent daily active users ratio in their IoT-based initiatives, which is not so far from the 60 per cent achieved by social media players. This demonstrates to the insurers that engagement is an achievable target, and they can evolve from the historical zero interaction (excluding the annual request to pay the premium) approach.

All the pioneers described in the article have already started creating the future of insurance. This is demonstrating to the sector the feasibility of this business transformation, and their achievements will push more and more players to invest in developing the necessary capabilities for innovating the way they are doing business. We have already seen this happening in the personal auto telematics in the US, with Warren Buffet acknowledging the relevancy of telematics and commenting on Geico’s investments in order to close the gap with competitors.

This should give a sense of urgency to all insurers. Although a competitor’s product can be replicated in a few months, capabilities require time to be built and internalised in the organisation. A capability gap will require years to be closed.

by Matteo Carbone, founder and director of the Connected Insurance Observatory and a global insurtech thought leader.