Despite traditionally moving forward at a slow pace, in a highly regulated space, there’s a sense that insurance innovation has accelerated recently and that things are changing.
The insurtech concept has emerged within just over one year and looking at insurance magazine headlines of two years ago, there was talk of “innovation”, “digital” and “the cloud”. However now the buzz has moved onto specific technologies and challenges such as “blockchain”, “usage-based insurance”, “insurance-as-a-service” or “micro-products”.
For the insurer, with so much changing, there is a need to know, what to focus on first? Considering new products such as smart home protection, telematics and automation for claims, where are we headed in terms of specific new propositions? Which of the new models will become the norm? How to build the new propositions, and the new apps, whilst keeping the lights on in the existing business?
These questions were the theme of the recent ‘Lost in Innovation?’ conference, hosted by Celent Research. Looking at some new, purely online propositions like Lemonade (transparent renters’ and homeowners’ insurance giving back to good causes) or ZhongAn Insurance in China (with cumulative sales of over 4 billion micro-insurance policies) we see some very innovative insurance companies, moving fast from a small base. But will these really be examples of the future model?
Celent Research asked insurers about their attitudes to innovation and the customer experience in its 2017 survey ‘Finding Value in Innovation’. In life insurance and wealth management, 91% of insurers said innovation is critical to a good customer experience, compared to 84% of personal lines insurers, 75% of health insurers and 65% of commercial lines insurers.
When asked about whether innovation was already critical to their strategy, only 55% of life insurers agreed that it was, compared to 42% of personal lines insurers, 13% of health insurers and 48% of commercial lines insurers.
Insurance innovation risen to the top of the industry agenda
Other research by Celent into current business and IT priorities for insurers in the current year, found that areas such as digitisation, artificial intelligence and analytics have risen to the top of the agenda, compared to two years ago when modernisation of legacy systems and regulatory issues were considered more significant.
So if you are an insurer feeling ‘lost in innovation’ and dazzled by an array of decisions when it comes to systems and digital delivery, it seems you are not alone.
Certainly we can now see the rise and rise of insurtech, more personalised products and new patterns of consumer engagement. In the UK we are fortunate to have an excellent, pro-innovation regulator, considering the FCA’s work with the regulatory sandbox and Project Innovate. It is good to see the regulator really getting onboard with innovation for when it really works in the consumers’ interests.
In working with start-ups, we can see much more of a partnership approach maturing (although in several different forms) between the large insurers and what would previously have been called the “disruptors”.
As CEO and founder of NEOS connected home insurance, Matt Poll, described at the Celent meeting: “It is not about pure disruption…Investment works best when it has C-level support from the insurer. Both parties [the start-up and the underwriting partner] need to be willing to go on a voyage of discovery.”
He added that the large insurers need to become more comfortable with a sense of ambiguity, when it comes to product testing and the agile approach. Overall, insurers almost certainly don’t spend enough time focusing on their customer touchpoints, seeing the business through the eyes of the consumer.
In many ways, insurance innovation and partnerships come down to how we define value in the workflow, which is primarily about creating a common vision, assessing and adopting the transformation requirements together, defining the business and technical road map.
Looking at the work being done by companies like NEOS with Hiscox, and other innovations like motor telematics, real time data is fast becoming the holy grail of underwriting. It is replacing historical or proxy data.
For most consumers the insurance product is not something they love, nor their insurer. Rather they feel it is something they have to have. But technology could be the enabler to changing all that.
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