The 2017 World Insurance Report makes interesting reading for anyone following the new directions in which the insurance industry is being reinvented by new technologies. The report, prepared by an international consulting firm, Capgemini, and EFMA, the “European Financial Management Association,” has a special emphasis on Insurtech (“InsurTech” in the report) and how this technology will align, if not disrupt, the insurance space as we know it today.
The report is based upon the input of over 8,000 insurance customers and over 100 insurance leaders and experts.
While the report has a natural emphasis on European insurers and Insurtech startups based on its association sponsorship, the Insurtech developments discussed in the report, whether spawned in Germany, Italy, England or where else in Europe, seem easily transferable to the United States insurance market.
Focusing on Insurtech and technologies changing the insurance marketplace
The 36-page report has three basic sections entitled:
- The Introduction: Gazing into the Insurtech kaleidoscope;
- Chapter 1: Digital collaboration redefines insurance; and
- Chapter 2: Navigating the innovation conundrum.
The Introduction, the “Insurtech kaleidoscope” focuses on the phenomenon of Insurtech and the potential disruption that the insurance industry of today faces from the innovations occurring almost daily in the Insurtech space. The report seeks to offer a framework for the review of over 8,000 insureds and 100 global industry leaders and subject matters experts. The report focuses on what insurers can do to use this insight regarding:
- understand evolving customer preferences;
- navigate changing industry dynamics;
- identify key emerging technologies for investment;
- address the innovation conundrum by using data and analytics, digitization to improve efficiency and profitability and using “insurance-as-a-utility” to generate new income.
Digital collaboration between Insurtech companies and traditional insurers
Chapter 1, “Digital collaboration” focuses on Insurtech as redefining insurance. Some of the key findings were stated as:
- driven by the steady advance of consumer technology and evolving customer expectations, digital technology, once a peripheral enabler, is now central to insurers’ strategies;
- digital technology advancement is also altering the competitive landscape by raising the profile of Insurtech players and driving the industry down a path of disruptive innovation;
- however, traditional insurers hold an advantage regarding trust among consumers over Insurtech players;
- with strengths that do not overlap, collaboration between Insurtechs and traditional insurers is following a natural progression toward partnering.
This chart from the study entitled “Customer Value Perception for Insurance and Insurtech Firms” shows the relative strengths and weaknesses of Insurtech companies and insurers that could foster cooperative ventures.
The report suggests that Insurtechs would benefit from partnering with insurance carriers because Insurtechs have a “high customer-acquisition cost” and have little brand awareness among potential consumers of their services and perhaps some apprehension among consumers for the stability of the Insurtech offering. Although Insurtechs have the technical ability to bring new technology to market they do not also have ready access to capital to grow their businesses or the knowledge of the risks and regulations in the insurance marketplace.
The report’s basis conclusion in this chapter is that insurers and Insurtech companies have “much to gain and little to lose by working together.”
Some ways the report notes insurers are developing investments in or partnerships with Insurtech companies are:
- venture capital investments;
- strategic partnerships;
- in-house incubators; and
Chapter 2, the innovation conundrum for insurers
Chapter 2, the “innovation conundrum” focuses on the emerging Insurtech technologies reshaping insurance. Some of this chapter’s key findings were:
- the deployment of emerging technologies in insurance, or Insurtech, is transforming the whole insurance process to the benefit of insureds and insurers;
- insurers are focusing their Insurtech investments on enhancement that easily integrate with existing workflow and systems but which can enhance the whole value chain;
- innovations around digitization, data and analytics, and insurance-as-a-utility are expected to deliver the highly-prized goals of Convenience, Agility and Personalization.
Beyond Insurtech, the emerging technologies that the report explored with insurance executives comprised their companies’ possible development and usage of:
- advanced analytics;
- connected devices;
- artificial intelligence;
- robotic process automation;
- blockchain; and
The insurance executives surveyed overwhelmingly focused on the importance of advanced analytics. The advanced analytics described in the report comprises insurers basically data mining. Using the detailed consumer information commercially available on the Internet and through the connected economy, insurers can make sophisticated decisions relating to pricing, risk management and new customized products. Many of the Insurtech companies focusing on marketing insurance effectively use these data mining techniques already.
Connected devices follow in importance to executives. This is the Internet of things where for example in the home the monitoring devices are connected to the Internet and can transmit real-time information to insurers on the status of the home’s equipment.
Artificial intelligence is the buzz word of the day as computer advances allow for more complex algorithms to take over processing functions previously provided by professionals.
Robotic process automation is simply the use of either artificial intelligence or computer algorithms to perform processing functions in the insurance industry previously done by hand or semi-automatically.
RoboAdvisors provide algorithmic control over functions for the purchase of insurance. Roboadvisors are already operational in the investment industry and are offered by the major investment companies such as Fidelity and Schwab to control the investments for individuals under certain designated risk preferences.
Blockchain is another emerging technology that offers essentially the benefits of double entry bookkeeping for the Internet. The Blockchain is the basis of all the cryptocurrencies such as Bitcoin or Ethereum. The method of open ledgers was introduced by Bitcoin but is being introduced in other areas to provide so‑called smart contracts.
Drones, which have captured the imagination of many, is a technology of interest to claim and, possibly, underwriting departments but is of less interest to the Insurtech technologies affecting insurance marketing and processing insurance transactions.
This chart from the report entitled “Emerging technologies investment time frame” shows the consensus of the executives surveyed on when their companies might invest in the designated Insurtech technologies.
A free copy of the report
A copy of this highly recommended report can be obtained by setting up a free account at World Insurance Report 2017 from Capgemini and EFMA
About Capgemini and Capgemini’s Financial Services
With over 190,000 people, Capgemini is present in over 40 countries and celebrates its 50th anniversary in 2017. A global leader in consulting, technology and outsourcing services, the Group reported 2016 global revenues of EUR 12.5 billion. With its clients, Capgemini creates and delivers business, technology and digital solutions that fit their needs, enabling them to achieve innovation and competitiveness.
Capgemini’s Financial Services Business Unit offers global banks, capital markets firms, and insurers transformative business and IT solutions to help them nimbly respond to industry disruptions, to give their customers differentiated value, and to expand their revenue streams. A team of over 55,000 professionals collaboratively delivers a holistic framework across technologies and geographies, from infrastructure to applications, to provide tailored solutions to 1000+ clients, representing two-thirds of the world’s largest financial institutions.
A global non-profit organization, established in 1971 by banks and insurance companies, EFMA facilitates networking between decision-makers. It provides quality insights to help banks and insurance companies make the right decisions to foster innovation and drive their transformation. Over 3,300 brands in 130 countries are EFMA members. Headquarters in Paris. Offices in London, Brussels, Barcelona, Stockholm, Bratislava, Dubai, Mumbai and Singapore. Visit www.EFMA.com