Tag Archives: Gen Re

Behavioral Economics Show Details Matter

Small changes can sometimes have a big impact. This is particularly true in the realm of behavioral economics. At its core, behavioral economics (BE) challenge the traditional economic theory that individuals are sound and rational (“slow”) thinkers, by asserting that we instead rely more on heuristics — or mental shortcuts — to make quick judgments. Using comprehensive experiments, BE allows us to test ways to encourage individuals to “slow down” this fast processing through simple redesign and rewording.

When BE techniques are applied to insurance applications, small changes in the way that questions are designed and worded can lead to more thoughtful completion by the individual. This, in turn, encourages an increased disclosure of medical conditions, resulting in a more comprehensive view of the individual’s health. Ultimately, this additional information and clarity can help the underwriting process, mortality and morbidity results and company profitability.

Gen Re was at the forefront of this research for the insurance industry, conducting a BE study related to individual life insurance applications in 2016. This study successfully determined several BE approaches to enhance an application and increase disclosure rates simply through changes in question design and layout.

Traditionally, the insurance industry has relied on a more tried-and-true approach to application design. For individual life, companies widely use standardized application questions relating to medical conditions.

See also: Making Life Insurance Personal  

In 2018, Gen Re set up a new BE experiment to take another look at designs from the 2016 study and to assess the effectiveness of a standardized question design in encouraging medical condition disclosure. This study used standard questions as a control group, testing them against various “treatments,” or different ways of designing the application questions. A sampling of U.S. residents, ages 30-60, was asked to complete online life insurance application questions. Close to 2,500 online applications were completed. Overall, six different question designs (treatments) were tested across 12 medical conditions. The objectives of the study were:

    • Primary: Understand how we can apply insights from behavioral science to increase an applicant’s disclosure level for insurance
    • Secondary: Determine how long it takes an applicant to complete the various treatments, so we can better assess answers to the question, “What is the best combination of time and experience of completing, versus understanding and overload?”

The results strongly supported what was found to be most effective in Gen Re’s 2016 BE study: a five-point scale question design (see Exhibit A). The multiple-choice options on the five-point scale prompt respondents to think about each medical condition, increasing their chance of remembering whether they have ever been diagnosed. Moreover, the clear definitions for each option eliminate the uncertainty respondents may have about whether they qualify as “having” the medical condition.

Exhibit A: 5-Point Scale

Have you ever been diagnosed, treated, tested positive for or been given medical advice by a member of the medical profession for a disease or disorder such as:

In comparison, the standardized questions used as the control group were open-ended and asked individuals whether they had ever been diagnosed, treated, tested positive for or been given advice by a member of the medical profession for a particular medical condition (for example, “Any cancer, tumor, cyst or nodule” for cancer-related conditions). This may require a level of medical knowledge beyond what can reasonably be expected of someone who is not a medical professional and can create some uncertainty or difficulty in recollection for individuals completing the application.

In addition, although the five-point-scale questions were one of the longest in terms of respondent time to complete — averaging almost eight minutes – condition disclosure increased by four to eight times over the standardized (control) questions.

The standardized question format was the shortest for respondents to complete, averaging just 2.34 minutes, yet it was found to be the least effective question design in terms of increasing medical condition disclosure.

See also: Digital Distribution in Life Insurance  

By implementing a new design framework, insurance carriers can improve not only the clarity of the application questions but also the level of information that is disclosed by applicants. While companies have much to consider when making changes to their applications, the results of Gen Re’s BE experiments show that small changes can have a big impact.

In addition to our leading behavioral economics research, Gen Re also conducts numerous studies that benefit the U.S. Group and Individual Life/Health insurance industry. Our wide variety of industry studies, and our MarketChecks on key topics of interest, keep us at the forefront of insurance research.

If you are interested in learning more about our research capabilities, contact me.

You can find the article originally published here.

Reprinted with permission from Gen Re. ©2019 General Re Life Corporation

Will Blockchain End Up Like 3DTV?

When technology is baked into a device, we rarely give it much thought. We buy a smartphone for its utility – not its operating system. Sometimes a new technology dramatically changes how everyone does things; the internet is a good example. Some plausibly great innovations, such as 3D television, just never gain traction. Which of these outcomes will blockchain have?

Recently, blockchain has emerged as a technology that will potentially transform industries in a way similar to what the Internet did a couple of decades ago. Still a nascent technology, its many uses have not yet been discovered or explored.

Most people know a little about blockchain:

    • It lets multiple parties agree on a common record of data and control who has access to it.
    • Its platform makes cryptocurrencies like bitcoin possible.
    • Movement of cryptocurrency verified by blockchain allows peer-to-peer cash transfers without involving banks.
    • Blockchain is a permanent, auditable record, so any tampering with it is obvious.

Some people think blockchain will transform security in financial services and fundamentally reshape how we deal with and trust complex transactions, though this could be a response to hype or a fear of missing out. Many other people ask why and how they should use blockchain.

On the face of it, using a shared (or distributed) ledger to process multiple transactions doesn’t seem so revolutionary. Blockchain is essentially a recordkeeping system. Perhaps its association with cryptocurrency – such as bitcoin – lends it a darker, more enigmatic edge than the software traditionally used for processing multiple transactions. One way or another, insurers face pressure to update antique systems with new ones that can compete with the demands of a digital world, and that means incorporating blockchain technology.

A distributed ledger of transactions

A blockchain can be seen as an ever-growing list of data records, or blocks, that can be easily verified because each block is linked to the previous one, forming a chain. This chain of transactions is stored on a network of computers. For a record to be added to the chain, it typically needs to be validated by a majority of the computers in the network. Importantly, no single entity runs the network or stores the data. Blockchain technology may be used in any form of asset registry, inventory and exchange. This includes transactions of finance, money, physical property and intangible assets, including health information.

Because blockchain networks consist of thousands of computers, they make any effort to add invalid records extremely difficult. Every transaction is secured using a random cryptographic hash, a digital fingerprint that prevents its being misused. Every participant has a complete history of the transactions, helping reduce the chance of transactions being corrupted. Simply put, a blockchain is a resilient, tamper-proof and decentralized store of transactions.

Complex processing and automation with smart contracts

Blockchain ecosystems enable a large number of organizations to join as peers to offer services, data or transactions that serve specific customers or complex transaction workflows transparently. These ecosystems can automatically process and settle transactions via smart contracts that encapsulate the logic for the terms and triggers that enable a transaction.

Smart contracts are created on the blockchain and are immutably recorded on the network to execute transactions based on the software-encoded logic. Transparency through workflows recorded on the blockchain facilitate auditing. Peers and partners within a blockchain ecosystem independently control their business models and the economics without the need to use intermediaries.

Self-executing smart contracts can be used to automate insurance policies, with the potential to reduce friction and fraud at claim stage. A policy could be coded to pay when the conditions are undeniably reached and decentralized data feeds verify that the event has certainly occurred. The blockchain offers enhanced transparency and measurable risk to this scenario.

Parametric insurance, which operates through smart contracts with triggers that are based on measurable events, can facilitate immediate payments while decreasing the administrative efforts and time. Effectively, the decision to pay a claim is taken out of the insurer’s hands. Other possible models are completely technology-based without the need for an actual insurance company. The decentralized blockchain model lends itself well to crowd-sourced types of insurance where premiums and claims are managed with smart contracts.

See also: Blockchain’s Future in Insurance  

Blockchain-based insurance

New insurers using blockchain are emerging and offering increased transparency and faster claims resolution. Here are some examples:

    • Peer-to-peer property and casualty insurer Lemonade uses an algorithm to pay claims when conditions in blockchain-based smart contracts are met.
    • Start-up Teambrella also leverages blockchain in a peer-to-peer concept that allows insured members to vote on claims and then settles amounts with bitcoin.
    • Dynamis provides unemployment insurance on a blockchain-based smart contract platform.
    • Travel delay insurer insurETH automatically pays claims when delays are detected and verified in a blockchain data ledger.
    • Etherisc is another new company building decentralized insurance applications on blockchain that can pay valid claims autonomously.

Traditional insurance companies, such as AXA and Generali, have also begun to invest in blockchain applications. Allianz has announced the successful pilot of a blockchain-based smart contract solution to simplify annual renewals, premium payments and claims submission and settlement.

Blockchain has the potential to improve premium, claim and policy processing among multiple parties. For example, in the last year the consultancy EY and data security firm Guardtime announced a blockchain platform to transact marine insurance. This platform pulls together the numerous transactional actions required within a highly complex global trade made up of shipping companies, brokers, insurers and other suppliers.

A consortium of insurers and reinsurers, the Blockchain Insurance Industry Initiative (B3i), has piloted distributed ledger technology to develop standards and procedures for risk transfer that are cross-market compatible. Whether or not the outcome is adopted industry-wide, it seems important for digital solutions to be created with this transparency and inclusiveness in mind.

There is clear potential for blockchain in reinsurance where large amounts of data are moved between reinsurers, brokers and clients, requiring multiple data entry and individual reconciliation. Evaluating alternative ways of conducting business is one reason for the collaboration of Gen Re with iXledger, which can explore ideas while remaining independent.

Handling of medical data and other private or sensitive information

Individuals will generate increasing amounts of personal data, actively and passively, from using phones and Internet of Things (IoT) devices, and processing digital healthcare solutions. Increasingly, consumers will want control of this scattered mass of digital data and share it with whomever they choose in exchange for services. This move aligns perfectly with the concept of a “personal data economy.” Think of information as currency and think about using blockchain to secure private data and reveal it in a secure and trusted manner to selected parties, in exchange for something.

Electronic health records are now common. Several countries use blockchain to secure patient data held digitally. This helps counter legitimate concerns about how sensitive personal data can be kept secure from theft or cyber-attack. Code representing each digital entry to the patient record is added to the blockchain, validated and time-stamped. A consortium of insurers in India is using blockchain to cut the costs of medical tests and evaluations, and to ensure the data collected is kept secure, along with other benefits including identification of potential claims fraud.

Looking to leverage the data economy, companies may employ innovative insurance propositions to engage people. Because the propositions will rely on shared data, people may be put off, fearing a loss of control over their personal information. While this fear poses a huge challenge for an industry seeking to improve its reputation for trust, blockchain technology may help insurers to reassure customers the digital data they share with them is safe.

Verification of documents

Verification of the existence and purpose documents in banks and insurance companies relies on storage, retrieval and access to data. A blockchain simplifies this process with its open ledger, cryptographic hash keys and date-stamped transactions. Actual hard copies of documents are not stored; instead, the hash represents the exact content in a form of scrambled letters and numbers. A change in a document will be exposed because it will not match the encoded one. The effect is an immutability that proves the status of the data at an exact moment and beyond doubt.

Blockchain technology is a “trustless” system because nobody has to trust anybody else for the system to function; the network of users acts together to vouch for the accuracy of the record. Examples of blockchain protecting patient records demonstrate its potential to implement other trusted and secure transactions with less bureaucracy.

There are other opportunities for insurers to move to a digitized paradigm and catalyze efficiency gains; blockchain need not be reserved for cross-industry platforms, and it’s not only useful in multiparty markets with high transaction volumes and significant levels of reconciliation; smaller-scale solutions can bring benefits, too.

Features that ensure privacy and data security

Beyond driving efficiencies, blockchain employs agreed standards for data care, which reduce the vulnerability of data that arises with the mass of sensitive data that digital connectivity creates. Other features that enhance privacy and data security include the contract process: Transactions are not directly associated with the individual, and personal information is not stored in a centralized database vulnerable to cyber-attack. Insurance companies, as well as technology companies, are accountable to their users for the security of their devices, services and software, and hackers are less likely to target enterprises with strong security.

Multiple participants and the removal of a central authority

Transparency, audit-ability and speed are standard requirements for any organization to successfully compete and transact in an increasingly complex global economy. Data is a valuable catalyst to that process and is complemented by blockchain’s ability to organize, access and transact efficiently and compliantly.

Trusted transactions require access to valuable data, and blockchain facilitates efficient access across multiple organizations. The economics for data usage will drive new business models fueled by micropayments, which will require efficiencies to scale. Business models based on data aggregation by third parties in centralized repositories with total control and limited transparency will be replaced by distributed blockchain-enabled data exchanges where data providers are peers within the ecosystem.

Decentralized peer organizations can use the blockchain for permission access, and for facilitating payments, to ensure total control of their economic models, without having a centralized authority. Data access and transactions are controlled directly by each member of the ecosystem, with complete transparency and immediate compensation.

Token economies

Ecosystems supporting peer organizations that transact or share data will require an effective mechanism for micropayments. These business models require efficiency, with less overhead than traditional account payable and account receivable workflows.

Event triggers, cryptlets that enable secure communication between blockchain, and external verification sources (oracles) will execute based on predetermined criteria, and token payments will be made simultaneously. Counterparty agreements may initially define the relationships between parties on the network, but payments are executed within the smart contract transactions.

See also: How Insurance and Blockchain Fit  

The elimination of a time delay in payments acts as a stimulant for economies; tokens earned can immediately be spent, increasing the speed at which organizations will earn and spend. Traditional delays and fees that occur throughout accounting workflows and through intermediary banks that process payments can be eliminated.

Cross-border processing

Currently, global payments involving foreign exchange introduce complexities in addition to time delays. Economic indicators and political events dramatically affect the exchange rates and profitability of transactions. Cross-border payments require access to the required currencies by intermediary banks, which can cause additional delays beyond the internal accounting workflows.

With blockchain technology, using a token-enabled economic layer simplifies the payments to support micropayment efficiencies. Participants on the blockchain network will be able to efficiently use the preferred fiat currencies to acquire or sell tokens without using intermediaries, banks or currencies.

Merging blockchain and data

Today, there are more connected IoT devices than there are people on the planet, and the data generated is growing at an exponential rate. Various sources have predicted that the number of connected devices will grow to more than 70 billion by 2025; the numbers are almost irrelevant.

IoT devices are used in homes, transportation, communities, urban planning, environment, consumer packaged goods, services and soon in human bodies. A number of insurance companies use these devices to assess driver habits and usage. Autonomous cars and changing ownership and usage models are creating a generation of insurance products that can be facilitated through IoT-collected data. Home devices can detect leaks, theft and fire damage – capabilities that reduce risk. Shipping companies use the IoT for fuel and cargo management, which offers operating efficiencies, transparency and loss prevention.

Merging the mass of IoT data with the blockchain is not without challenges, but this combination can provide a completely new way of creating an insurance model that is far more efficient and faster, and where data flows directly from policyholders to the insurer.

Summary

Interest in the trinity of bitcoin, blockchain and distributed ledger technology has significant momentum. However, the technology is not magic or a panacea for every corporate woe. It has disadvantages and limitations, and there are situations where it would even be the wrong solution. There is enough about it, though, to merit continued closer investigation – the many emerging cases of its application bear testament to that – but in place of hype we still need answers.

Distribution: About To Get Personal

The buying of insurance is going to change. The “sold, not bought” view of insurance distribution has run its course for many lines of business. Customer expectations have changed, and the inside-out approach to building silo-ed, exclusion-filled,  fixed-term products just doesn’t cut it anymore.

For this month’s InsurTech Insightslet’s look at a new means of distribution that will fundamentally change the insurance supply chain, where insurance will be supplied through ecosystems as part of a wider proposition and not a solo purchase bought in isolation.

After all, people don’t set out to “buy” insurance per se. What they want is a safety net in case something untoward happens.

“Your fat margin is my opportunity”

The insurance supply chain is typically seen as a linear model. Insurance distribution starts with brokers, ARs and MGAs at the front end. Carriers underwrite risk and decide whether to pay a claim. And the buck stops with the reinsurers. Front to back, risk and premium move from one intermediary to another, each one taking its share. It’s a model that hasn’t really changed over the last century.

“Your fat margin is my opportunity” is the Jeff Bezos quote that defines the era of digital disruption. We now see tech-savvy entrepreneurs finding ways to “disrupt” established business models using digital and mobile to streamline out-of-date business models oozing with fat margin.

When you look at the world of insurance, it’s easy to imagine that Bezos was looking at the world’s largest industry when he made that quote. It’s no surprise that insurtech has become the new fintech.

The combination of many intermediaries in the supply chain, each one taking margin, together with the inefficient friction that goes with it has fueled the rise in insurtech. When you add in the shift in agency to the consumer (because of the likes of Bezos and how he built Amazon by putting the customer absolutely and unequivocally at the center), it is easy to see why insurance is a juicy target for digital disruptors.

See also: Taking the ‘I’ Out of Insurance Distribution  

Redefining the Insurance Supply Chain

As the insurance industry catches up and embraces the Fourth Industrial Revolution, we will see a redefining of the insurance supply chain. It’s started already.

It will evolve from the traditional linear model where risk and premium move front to back in a bi-directional flow. In its place, we see new supply chain models for insurance distribution at the front end with efficient management of risk capital at the back.

Of course, as a highly regulated industry, insurance faces a drag on change from the legislature. But just as regulators and lawmakers made adjustments to accommodate the fintech models for alternative finance, they will follow suit in insurtech. And why wouldn’t they?

In the new model for insurance distribution, the supply chain will co-exist with brands and within ecosystems unconnected to insurance.

Customers will be rated as individuals and not members of a risk pool. A greater share of premiums collected will be set aside to pay claims. Instead of sales commissions, there will be platform fees. Time to pay claims will become the KPI of choice for customers to rate their insurance experience.  And as convenience replaces price as the key buying criterion, the way that insurance is distributed will change.

Automation is key for insurance distribution

In the new insurance supply chain, there will be fewer handoffs, less friction, less premium erosion. Just like with Amazon, the customer will be absolutely and unequivocally at the center of the ecosystem.

Trusted brands will own the customer relationship. These brands know the meaning of loyalty and will value these relationships highly. They also understand how expensive it is to build them in the first place, and how easily that can be lost.

Amazon-like levels of service will become the norm for both insurance distribution and paying out claims. Automation is the key to making it very, very easy to do business.

Of course, someone will need to manage risk capital. This will be the domain of the reinsurers, with the role of the carrier becoming superfluous.

The reinsurers know better than anyone how to manage large pools of risk capital. They’ve been carrying the insurance industry for long enough. In the new insurance supply-chain, firms like Sherpa will own and manage the customer experience.

The Sherpa model is to charge a value-based annual fee to a customer in return for meeting all insurance needs. This removes sales commission from the equation.

The founder and CEO of Sherpa, Chris Kaye, explained to me, “Today, insurers pay sales commission for selling the insurance products that the insurers have created.

“We are turning that on its head and creating a membership organization that is unequivocally on the consumer’s side. No more commissions for products you don’t need, instead a flat fee to assure the risks that matter most are protected.”

How does this work in the Sherpa model?

On behalf of customers, Sherpa goes straight to Gen Re and buys insurance wholesale. Sherpa can distribute personalized insurance products to customers while packaging up parcels of risk at the back end.

This innovative approach is one example of how customer brands will be able to fine tune, personalise and price based on a whole set of new and different risk criteria.

So what? Well today, insurers create the products that they want to sell. Brokers do their best to find the best match of their customer’s needs to the fixed insurance products on offer. But customers end up paying for cover they don’t need. And they don’t always get the specific cover that they do want.

The new approach allows the brand, in this case Sherpa, to personalize the cover specific to the individual while packaging up modules of risk for the expert managers of risk capital.

Go west to see the future of insurance distribution

China’s ZhongAn epitomizes everything that is insurtech.

It is a 100% digital tech business with around 1,500 employees. More than half of them are developers, and none are in sales. The company also happen to provide insurance, and a lot of it!

In the first three years of trading, ZhongAn wrote more than 5 billion policies. It sold 200 million policies in one day alone last November during China’s annual online shopping fest!

The thing that makes ZhongAn the darling of insurtech is that 99% of all operations are automated. Quote, policy, premium collection and claims are all automated, which is why the company can process 18,000 policies a second.

But it’s ZhongAn’s approach to premium pricing and insurance distribution that really set it apart. First, the insurance business is built around retail ecosystems. The products are embedded in the customer buying process through retail sites. The company makes it super easy to buy insurance, simply by checking a box.

Next, the insurance is micro-priced, based on a personalized premium, unique to the individual customer.

ZhongAn does not use the law of large numbers to price risk premium. Instead, ZhongAn uses big data for dynamic and personalized pricing. There is no single price list for insurance products. Customers are risk-assessed individually and priced accordingly.

For ZhongAn, it is more important to build customer loyalty (aka stickiness) through speed and convenience.

See also: Distribution Debunked (Part 1)  

ZhongAn use ecosystems to distribute insurance

A question I get asked a lot is: “Are these insurtechs an insurance firm or a tech firm?” It’s a great question, just like asking if AirBnB is a hotel chain or if Uber is a taxi firm.

Of course, there are many old diehards of the insurance industry who rail against that question and revert back the old mantra of “an insurance company is an insurance company.”

But the reality is that, in this rapidly changing digital world, the fundamental nature of providing a financial safety net is changing, too.

The old “insurance product,” designed by insurance companies to suit their own needs and aimed at customer segments that never claim, is on its way out.

In ZhongAn’s case, it is a tech company first, which is why it can take a fresh approach to insurance, unhampered by old ways of thinking.

When it comes to insurance distribution, ZhongAn’s business model is based on supplying insurance cover through an ecosystem partnership model. The company doesn’t pay broker fees or have to support a huge cost of sale. Instead, it has partnered with leading players that already have a customer base across many different market sectors.

This allows ZhongAn to directly embed insurance products into an online experience, making it really easy for the customer. Customers simply check a box to include the insurance cover. The premium is dynamically, real-time, micro-priced, unique to the customer at that moment. This is all about improving customer experience.

Insurance distribution is going to change, it’s just a matter of time

For many, it is hard to imagine a world where insurance could be any different than how it has been for the past 100 years. To them I say, cast your mind back to 1995.

It was only 20 odd years ago that people were talking about this thing called the World Wide Web and about how everything could change. A lot of it sounded science fiction and the stuff of fantasists at the time. Even so, nobody could have possibly imagined the full extent to which the world would change. And, over such a short span. All because of this thing called the internet.

Just as the supply chains of many industries have changed in the internet era, so will that of the insurance industry. It’s no long a question of “if,” but “when.”

Insurers Must Adapt to Digital Demands

New, technology-driven changes in the ways people live their lives are prompting revolutions across industries. The insurance sector must adapt to these changing needs if it is to remain relevant to customers.

The power and popularity of wearable technology as a generator of health data and the developing potential of genomics are well-discussed issues in the insurance industry. The sharing economy and shifting social factors also mean people visualize risk in new ways.

Insurers want to offer security in ways that appeal to these emerging customer demands. But they are faced with myriad potential practical steps they could take.

The idea of having individuals generate useful health and activity-related data, through wearable technology, is already established in insurance. However, the scale at which highly personalized data is being generated by consumers, whether deliberately or unwittingly, has been growing at a remarkable pace.

Deciding how best to handle issues around data privacy is among the industry’s key questions. Some people will not wish their personalized data to be put in the hands of insurers making decisions about policies, while others will want their data to be used to drive down insurance costs.

See also: ‘AI’ or Just ‘I’? Most Adaptable Will Win!  

To understand how the insurance industry, “insurtech” startups, innovation labs and accelerators view these challenges, we spoke to some 75 thought leaders from around the world in a project we called the Incredibly Curious Adventure.

The results of the research are fascinating. Many of those interviewed saw a real opportunity for the insurance industry to evolve from life protection to life enrichment, firstly through more consumer-centric product design, and secondly through the dynamic use of predictive data that wearables, supercomputing power and artificial intelligence make possible.

However, legacy systems present a real challenge to insurers in the adoption and integration of these new technologies. Many insurers underestimate the readiness of the market to embrace the new opportunities and even to take advice from machines.

Another essential issue for the insurance industry is genomics, particularly with regard to its relevance in creating life insurance policies. In spite of early discussions on the subject, in the last couple of years it has been parked mainly out of view, and the insurance industry has voluntarily agreed not to use much of the data that is available.

But our collective understanding of genomics and its potential relevance to risk assessments has been expanded very significantly in recent years, and it offers the opportunity to do things better with individuals’ consent. Personal genomic information is increasingly being taken into consideration by doctors as they prescribe medications and by the pharmaceutical companies who create those products.

For individuals, the deepening of the information about their own bodies, which they can now access and refer to, is radically different from what it once was. People are increasingly engaged with the details of how best to manage their health, with the help of the digital data they create. There is no doubt that a time is coming when consumers will wish to see this information made relevant to their insurance.

Given these changes, there must be genomic-themed conversations across a full spectrum of stakeholders around what kind of information should be made accessible to and deemed relevant for insurers.

The rich intelligence on everyday health knowledge gained from consumer genetic tests and much wider use of genomics in medicine could mean people are much better equipped to make personal decisions about their insurability than insurers can. While recognizing the ethical responsibility of getting it right, this potential asymmetry of information is especially relevant in a voluntary insurance setting.

There are certainly moral questions that need to be asked before insurers are given a full regulatory go-ahead in this context. But it is clear there are significant potential benefits for consumers who open up access to data on their lifestyles, activity patterns, medical history and their genetic make-up. Importantly, insurers would be able to offer much more personalized insurance policies.

Making the most of data and genomics poses a serious technological challenge. To stay ahead of the competition, insurers must look toward startups to provide support and technical expertise.

Some insurers are in a position to acquire and absorb startups. Many others are not. The chief executives we interviewed said it is collaboration with startups that offers the potential to add value through insight and connection.

At Gen Re, our focus is now on nurturing relationships with startups whose innovations have real potential. We partner with those whose ideas can help insurers be more responsive to the changing dynamics within their industry, whether that is in relation to data analytics, mobile health, artificial intelligence or wearable technology.

Large-scale insurance companies are typically enthusiastic to adapt to change, but are operationally less agile. Insurtech startup companies are helping to change fundamentally the insurance industry and enabling it to meet emerging demand among consumers for greater personalization.

See also: It’s Time to Accelerate Digital Change  

It is our view that insurers must embrace the changes happening and be part of the conversations going on around these fundamental issues. Now, more than ever, the future is wide open. Our aim as a reinsurer is to be part of that global discussion about what the insurance industry can be and what it should offer.

As originally seen in “Future of Insurance” published by Raconteur Media on June 14, 2017, in The Times.

To Predict the Future, Try Creating It

Backed with new capital, powered by digital technology and using decentralized administration, a new model for transparent, simple and customer-focused life insurance couldn’t be easier to visualize. And competition from newcomers means existing providers must innovate. But what can traditional insurers do specifically to — to paraphrase management theorist Peter Drucker — predict the future by creating it?

Today’s insurance market is a customer-centric, buyer’s arena that reflects a palpable shift in power from the producer to the consumer. Insurers’ service offerings need enhancement. If it is felt little value is added to consumers’ daily lives, customers often fail to see the relevance of the importance of cover. Technology can help insurers to innovate and address this gap and deliver enhanced services.

By striving for simplicity, insurers can also increase transparency. That said, no matter how simple the front end is made for the customer, acquiring cover remains an intricate process. Advice, compliance and regulation can clog the process but offer important protection to consumers. There is a delicate balance to achieve.

See also: 7 Steps for Inventing the Future  

Letting people engage in the ways they want is crucial. Trust and advice seem somehow less important to people than before. Today, people make emotional decisions with far fewer facts, and for many a community-based recommendation will do. This combination suggests that social brokering will only grow in importance and that demand for automation with robo-advice will increase.

Consider the disintermediation — the reduction in intermediaries – that transformed High Street banking. An appointment with the manager is no longer needed to set straight one’s personal financial affairs. We fend for ourselves by banking online and using mobile-first apps to view statements, to set up transactions and to move money about. Customers now have similar expectations of life insurance.

To provide more flexibility, insurers can offer products that work in a completely modular way — products that can be built up or down and switched on and off to reflect much better how life’s risks ebb and flow. It’s likely the silo-based approach to the design and sale of line-of-business products is not sustainable. Product fragmentation with more diverse offerings will offer tailored products that fit with the way people live their lives.

Personalization gives insurers the opportunity to transform the services they offer and take a real stake in the future health of their policyholders. One way is to shift from risk identification to risk prevention that is based on knowledge of behavioral change. While using data from wearables is a start, more support can be provided — not just to the fittest customers — by developing apps and technology that engage their unique health needs.

Data from health apps, for example, is just one source that will give insurers access to a real-time view from which to assess risk, instead of relying on past data. However, continual engagement requires transformational change in the industry. To achieve this, insurers can — and are — engaging with experts and companies outside the sector. As the boundaries between insurance and adjacent businesses fade, roles and skill sets within insurance will also change, resulting in a need for more diverse recruitment.

See also: How to Build ‘Cities of the Future’  

Much is being said about big data, in particular how better use of the insights can make insurers’ operations leaner. But analysis of large datasets gives established corporates and newcomers to the industry identical insight. While agility of execution may favor startups, it’s industry knowledge that puts insurers in a strong position to turn data into actionable insights.

For more perspective on how technology is changing life insurance, click here.