The CEO of a Lloyds insurer gave a provocative opinion at the Insurance Insider conference today: “When I look for technology solutions, I’m deliberately avoiding ALL the usual providers. Instead, I look for crazy tech people from other industries. I want to hear their ideas and get something new!”. When I heard this statement, two thoughts came to mind: the first is that a lot of technology providers (DXC, Salesforce, Applied etc) are doing an amazing job, so there are many exceptions to this fact. The second thought, I realized, is that I’m actually one of those “crazy tech people” who have gone into the insurance industry to try and help. Before founding DFP, I worked in Twitter’s strategy and operations team, so a lot of my thinking is more Silicon Valley and less Square Mile. As a result, I decided to write up my impressions from what was an intense and enlightening conference.
Insights from the top: views from the CEOs
During the conference, the CEOs from Hiscox, MS Amlin, AXA XL, Axis Capital and the London Market Group all presented their thoughts on the insurance market, and in many ways their sentiments were all similar: technology is advancing faster than ever, and the insurance industry as a whole is investing (and needs to invest more) to keep up. Machine learning, straight-through processing, integrating external data sources and robotic process automation (RPA) were just some of the most prominent technologies mentioned. Innovation in the SME space was another area seeing increased interest, as premiums are often too low at the smaller end of the spectrum to warrant brokers and underwriters spending their precious time getting the required information together. Therefore, solutions that surface accurate and decision-critical data on SMEs were being discussed as well, and it’s this problem that DFP is looking to solve.
The time to act is now
Jon Hancock, Head of Performance Management for Lloyds, received a standing ovation for his overview on the difficult work he and his team are doing driving profitable growth throughout the market, and for having to make unpopular decisions in order to do it. However, the fact remains that profitability in the market is at an almost all-time low. The solution, proposed by both Jon and other speakers, was to use technology to reduce costs. This type of “unsexy innovation” is critically important, since it will allow insurers, brokers, MGAs and others to stop spending money on arcane processes and instead engage in higher ‘value-add’ activities. Another area of interest was distribution, and a full panel was dedicated to discussing how distribution will change in 2019. On small commercial, cyber and other lines of business, the general sentiment was that we will likely see a data-driven direct channel. MGAs will have a crucial role to play here and will need the right analytical tools to succeed.
Let’s not forget the human element
Looking around the room, it was clear how much personal networks and the ‘in-person’ nature of the London insurance market matters. Replacing this dynamic, tight-knit community with pure-play online insurance is unrealistic in my view. The fact that so many CEOs and leaders of the industry gave up their time and spent a full day discussing these important issues shows that they value in-person contact, and I am sure that new partnerships were created throughout the day. It’s my firm belief that in-person networks like Insurance Insider, InsTech London, ITC and others will become increasingly important as the InsurTech community develops. Being a part of and contributing to these networks is the highest value activity I’ve found, as an entrepreneur from outside the industry, as it allows everyone to meet and share ideas at the same level.
So, what will happen next?
In many ways, the predictions we heard about 2019 were that it will be “like 2018 but bigger”. Investment rounds are increasing, transformation projects are becoming more ambitious, and insurers are daring to take bigger steps (as AXA recently did with the launch of AXA Next). One very well-connected participant shared his view that in 2019 we will see a market demarcation between insurers “stuck with 1990s technology” and the ones who are trailblazing a path to the future. If this starts impacting profitability, we could see an accelerated “tech arms race” (as the development was described by one of the participating CEOs). This dynamic makes it all the more exciting to be part of the ecosystem, and as an ex-technologist I am glad to be part of it.
Written by Erik Abrahamsson