Thought leaders in the insurance industry have made a bold prediction: insurance is set to be disrupted by major technology players, such as Google, Facebook and Amazon. The data and technology available to these tech giants today may well give them an edge, while insurers are still figuring out where they can use technology in the value chain. Considering that Facebook and Google already know a lot about people, it won’t take much for them to start offering insurance.
Amazon already uses the data-driven approach to offer more tailored recommendations to better meet individual needs. The results of a recent survey conducted by Lendelu, showed that 44.5% of respondents would be open to using Amazon to buy auto insurance. And Amazon won’t make us wait for long. Recently, the company announced their latest joint venture, where Amazon, Berkshire Hathaway and JP Morgan are teaming up to create a non-profit healthcare group with mission to reduce the healthcare costs for their combined payroll of nearly a million employees. What’s more, Travelers insurance just announced that it had launched an Amazon storefront where its customers can buy discounted home security equipment.
Not wanting to be left behind, Google’s subsidiary company Verily is reported to be in talks with insurers about jointly bidding for contracts, this would involve taking on risk for thousands of health insurance clients. The footprint in health data seems to be expanding for Google. In a related development, health insurance startup Oscar Health secured $165 million in backing from Alphabet companies. With these bold moves, we should not be surprised if our next insurance provider comes from Silicon Valley, instead of the City of London.
If tech companies enter the insurance market in a wider sense, it could have a massive impact on the industry. We have already seen Zhong An, an Alibaba-led joint venture in China, go on to write billions of policies and go from zero to $15bn IPO hero in the scope of two year. As a result, there is now a new-found urgency for insurers to embrace technology, to retain their competitive advantage in the space and to catch up with rapidly evolving customer expectations. Traditional insurance will need to better address the common threats to a modern business, such as cyber attacks, business interruption, product recalls and reputation damage.
This is where insurtech companies can bring value to insurers and assist in the rapidly evolving insurance market. A collaboration for mutual benefit as well as the benefit of the customer must be the goal of insurers and InsurTechs alike.
PWC InsurTech Trends Report states that “two-thirds of insurers point to the potential impact of InsurTechs’ innovations in data and analytics. More than half point to new approaches to underwriting risk and predicting loss. So the awareness and the urgency is already present, which means that we will see many more cross-industry collaborations in the future. Partnering with InsurTech startups has gone from a “nice to have” to a “must have” in the eyes of industry leaders.
In light of this new development, some of the major insurance providers already started setting their own innovation labs to keep in line with the digitalisation of the industry. Zurich is a strong example of this with their innovation lab Foundry, which launched in January 2018. However, it takes considerable time and resources to create in-house innovation labs. Hence, most incumbent insurers have chosen to partner with or invest in insurtech startups, in order to increase their speed to market.
Insurers have the wealth of data available to them to be better than Amazon and Google but they are not fully aware how to access it and benefit from it.
What we call open data analytics has already been used in other industries, and insurance is the key use case for our technology. When used correctly, it can help insurers make more accurate assessments and translate it into better, more efficient service and consequently, a better customer experience. Thus, at Digital Fineprint we focus on leveraging open data sources and AI to create actionable insights for distribution and underwriting of SME insurance.
If innovative tech is adopted now, insurers can still benefit from improved efficiencies and remain competitive with the big tech companies who are starting to appear on the scene. This collaboration will also expose new insights from legacy data, which could also shed light on the need for updated product lines, all the while creating new revenue streams.
A few years ago, we would have never said that insurance was the world’s most innovative industry. But now, in 2018, we are in the middle of an exhilarating “perfect storm” of creativity and experimentation. There couldn’t be a better time to be active in innovation in the industry.
Written by Erik Abrahamsson