During October 22-25, 2017, approximately 200 insurance industry research professionals assembled in Milwaukee, WI for the 47th Annual Society of Insurance Research (SIR) Conference and Exhibit Fair. The conference theme of “moving past disruption to competitive advantage” is relevant to all companies operating in the insurance ecosystem. Dozens of presenters addressed different aspects of disruption and its influence on various parts of that ecosystem.
Impact of InsurTech
Disruption in the insurance space was discussed from the very first presentation, which explored how the rate of technology adoption has changed over the years. The core of the presentation focused on the role that InsurTech has on changing the market. The warning for the insurance ecosystem is that reaction times to disruptive forces are shrinking. This theory echoed throughout the rest of the conference, along with a key observation that the greatest disruptions will come from outside the industry.
One example of outside disruption is millennials’ preferences developed through interactions outside the insurance space, which change how insurance companies will engage customers. Millennials expect customer service to be as effortless as what they experience from companies such as Uber, Amazon, and OpenTable. A theme repeated in many sessions was that companies that do not adjust their customer service to these new market conditions would quickly lose customers.
Internet of Things Data Utilization
Another example of disruption from outside the insurance space is proliferation of Internet of Things (IoT) based sensors and the utilization of data from the sensors. Several presenters shared examples of how IoT can revolutionize both risk assessment and claim prevention. IoT is largely designed to provide usage information to the manufacturer for warranty issues. However, insurance carriers who access the sensor data can use it to give early warning to pending failures of household items, such as water heaters, and then alert homeowners to prevent failures before claims are filed. Increased emphasis on data collection and predicative modeling via telematics and home/business sensors can assess risk more accurately, and allow for push notifications between carriers and policy holders promoting safe behaviors.
(Source: Internet of Things/Telematics: Data Driven Claims Decisions, Dawn Mortimer, Verisk, SIR Annual Conference 2017)
Life Insurance Innovations
Even in the field of life insurance, outside technology is disrupting customer engagement. One presentation discussed how some life insurance carriers have tapped into facial recognition software for medical diagnosis and life underwriting. Similar to how thermal imaging and condition monitoring improved maintenance for machinery, the selfie-driven life insurance requires less invasive health profiling, and offers better medical monitoring to reduce claims for health insurance.
Evolving Sales Models
A disruption from within relates to the changing sales model. Several presentations discussed how new carriers have adopted the mobiles sales platform to sell insurance. Whether the change is based on leveraging sensors in mobile phones to issue auto insurance, or social changes to issue low coverage renter’s insurance, the emerging model combines millennials’ comfort with mobile platforms with their desire to use technology for interactions. This disruption replaces the traditional high-touch agent-based or direct sales models with artificial intelligence interfaces to guide the buyer towards a product solution.
While disruptions are unavoidable in the insurance space, the need to counter disruptions was also covered. Presenters discussed use of tools and opportunities already available, such as human and pet wearables, which offer accurate assessments of policy holder health. Coupling these with a rewards program can strengthen the insurer’s engagement with policy holders. Likewise, a willingness to branch beyond traditional markets with products that serve policy holders’ changing needs is opening new markets. One key example is the emergence of micro insurance with streamlined purchasing and instant claim processing. A leader in this is the Chinese insurer Zhongan, which offers flight delay insurance with real time claims processing, allowing for in-airport redemptions. Zhongan also offers low-cost package insurance for Alibaba purchases issued at time of purchase. These products have low premiums, high purchase frequencies, and low claims rates. This allows Zhongan to maintain high visibility with policyholders, and to leverage that visibility to generate sales of higher premium products and longer-term customer relationships.
Insurance carriers of all types need to anticipate how new technologies and business models are changing how the business of insurance is done. Since many of the change drivers are from outside the insurance space, this suggests a strong need for scenario planning to anticipate change and market monitoring to identify new trends before they enter the market. Carriers, who continually track technology and social trends, as well as changes in overall economic conditions, will be better positioned to lead rather than follow disruption.