Since its inception, insurance has been a data-driven industry. As the world changes, the way we consume, collect and manage data changes as well, which means constantly evolving how data and technology can be used to improve the way insurance is delivered.
The small business insurance market is just one part of this massive global conundrum, yet it is perhaps the ripest for data-driven disruption.
We know that the small business insurance customer increasingly expects to transact online. This means not only buying their insurance with ever more personalised and competitive quotes, but viewing their policies, changing their details, amending their coverage and checking the status of a claim without human interaction.
Yet insurers and brokers have been slow to react to the speed of change, leaving them vulnerable to the threat from new market entrants.
These potential new entrants include ‘alternative providers’, such as Google, Apple, Facebook and Amazon. In fact, over 30% of consumers have stated that they would purchase some form of insurance product from these technology-led providers (according to Global Data, a leading data and analytics company).
This suggests a potential £9bn in UK gross written premium is open to ‘disruption’ by technology.
How can Artificial Intelligence (AI) and Machine Learning (ML) address this?
The number of data sources available is expected to grow significantly over the next three years and insurers face a significant logistical challenge to integrate these in an impactful and insightful manner.
AI, particularly when augmented with ML, can help make sense of this data and equip the industry with the knowledge and insight it needs to implement solutions and bring products and services to the small business customer with increased agility and speed.
“65% of insurance carriers now regard the use of external data for modelling as a “must-have” to keep up with the competition.”
Use cases of technology and big data being applied to good effect include:
- Predicting market and customer behaviours to develop new products and services
- Optimising modular pricing options through ‘Add-ons’
- Enabling sophisticated underwriting and risk reduction using machine learning and cloud computing
- Remaining price-competitive on preferred risks
- Building and enhancing the online direct proposition, including virtual personal assistants or chatbot
- Achieving operational excellence through innovative technology for improved fraud detection and claims handling
- Minimising the costs of servicing SME lines
- Supporting data collection and protection challenges
From theory into practice
The SME market is a significant opportunity for insurers. The UK B2B insurance market had an estimated GWP of £16.2 billion in 2017 and it continues to grow, but it’s not going to sit and wait for the established industry to provide what it wants.
To reap the benefits of this fertile hunting ground, SME insurers and brokers must make investments in technology to modernise their operations.
But that’s easier said than done. IT infrastructure is often legacy-based and doesn’t lend itself to fast iteration.
The solution lies in being open-minded to outsourcing innovation and implementing solutions provided by InsurTechs to fast-track progress. We’re seeing it happen at pace in other parts of the financial services industry where fear of ceding ownership or control is being replaced with a pragmatism to deliver what the customer wants quickly.
Insurance needs to follow. For many, it’s not a matter of getting ahead, it’s simply about keeping up.