Tag Archives: wearable devices

Is Insurtech a Game Changer? It Sure Is

Several years ago, property and casualty insurance executives were looking over their shoulders anxiously at a growing number of internet startups. Who were these scruffy people wearing black turtlenecks? Could they really “disintermediate” legacy providers that had been around for a century or more?

Since then, we’ve all evolved. By now, most brands know they have inherent strengths that are hard to dislodge. The startups have matured, too, and they clearly have something to offer the market. We’re now working with companies in both camps, helping them navigate this new normal, where collaboration, acquisition and competition are all plausible options.

Some insurers may think they’ve dodged a bullet. But insurtech’s threat is more stealthy, and no less powerful.

Insurtech: the new, new thing?

At this fall’s InsureTech Connect trade show, literally thousands of people descended on Las Vegas to show and examine the latest offerings, from core systems, predictive analytics tools and anything-as-a-service to pitches addressing distribution, pursuing unserved niche markets, offering comparative pricing and broker services and more.

In our recent report on the state of insurtech, we cautioned insurers to look beyond the many truly interesting offerings now coming to market. As impressive as these tools are, we urged decision makers to stay focused on the capabilities that make their companies unique.

See also: Has a New Insurtech Theme Emerged?  

What do insurers really do?

So, what are those capabilities? At holiday dinner tables, you may find yourself talking to a relative about what insurance is, and why it’s important. You may say something like, “We create products that help manage risk by sharing the possibility of individual loss with a larger pool of users.” This explanation held true for a long time, but,
with the rise of insurtech, it may not be the best way to look at your business.

That’s because many insurtech companies have emerged to manage the firehose of data that now shapes our world: the Internet of Things (IoT), wearable health devices, connected cars, artificial intelligence and more. Of course, there’s still a role for insurers when someone else captures and gets the insight from that data. But it’s a commodity role, driven by who is willing to write a policy to offset the risk at the lowest rate. There won’t be many winners, and the margins won’t be attractive.

Some insurers see their business as settling claims and handing out checks. But when someone else is using telematics to assess driving habits, or social media to understand lifestyle risks, who will be able to monetize this data? Increasingly, underwriting depends on getting deep into the data-driven weeds. If you’re not there, recognize that someone else will be.

The rise of outside money

There’s another factor shaping insurance today: the amount of private equity (PE) and venture capital (VC) money flooding into the industry. An industry as highly capitalized as insurance was bound to have external investors come knocking eventually. Now, they have.

To be blunt, many insurance systems are too costly and too slow. PE and VC firms have seen this, and they’ve said to themselves, “I don’t have to be perfect, and I know I can be more efficient than this. Even if I’m only a little bit better than the legacy players, I can make a very healthy profit.” It’s a form of arbitrage, and competition could soon get a lot tougher.

With the acceleration of insurtech and related technologies such as cloud and artificial intelligence, PE and VC firms have found a way in that doesn’t require them to show a century of stability. They can do very well developing an insurtech play for very specific aspects of the P&C value chain. Many traditional companies are finding themselves in a commoditized business, without the structure of a commodity manufacturer.

Finding your way to play

Some of the most exciting developments in technology are now reshaping the insurance industry. That spells new opportunities and new risks. With the rise of PE and VC funding, we now see competition emerging from companies with significant resources—and they’re privately held so they can be more patient investors.

See also: Advice for Aspiring Leaders in Insurtech  

Legacy insurance companies still have enormous advantages, and many opportunities to win. But most won’t be able to do it alone, and there are many examples of insurers that wasted time (and money) on the wrong insurtech acquisition or partnership. As the cycles of innovation and capital movement accelerate, you’ll need to be more focused than ever on the capabilities that make your company great. Insurtech is a game-changer.  Make sure you’re playing the right game.

A Better Question for Evaluating Tech

Earlier this month, my colleague Monique Hesseling wrote about the power of asking the right questions in product development. That is just as important with new technologies.

As we have seen with social media and smartphones, what were once “emerging” technologies can become widely available and widely used in a very short time. Insurers have developed ways to use both of these technologies in new products and services, although plenty of untapped opportunity remains in both areas. But as new technologies continue to emerge, how do we, as an industry, continue to incorporate them into products and services?

The conversations about using new technology in insurance have typically centered on two questions: Why? and Why not? The Whys, as we shall call them, are reluctant to adopt new technologies because the status quo works (or works well enough). The Why Nots, on the other hand, jump at the opportunity to use new technologies because of their novelty and the desire to be among the early adopters, even when the benefits are not necessarily clear.

The problem with framing the conversation around adopting new technologies as a question of “why” or “why not” is that it focuses on personal beliefs and opinions. The best questions to ask about new technologies start with “how.”

How can insurers take the technologies around us, whether they be established, maturing or emerging, and use them for competitive advantage? How can we get the most out of their use, and how can we use them to improve the customer (and employee) experience? How can new technologies be applied to products to make them better and to differentiate our company?

This year’s SMA Innovation in Action Award winners gave us some good examples. For instance, John Hancock’s Vitality Program is using mobile technology, “gamification” and wearable devices (a free Fitbit) to create a highly interactive relationship between life insurer and policyholder. Wallflower Labs is using the Internet of Things to provide brand new preventative services to a specific population of homeowners policyholders: those with aging relatives or young or special needs children, who face increased risk of house fires from the unsupervised use of ranges and cooktops.

Both of these initiatives gather data on policyholder behavior (fitness activities and cooking patterns) that insurers can use to offer premium discounts and leverage to create increasingly personalized life and homeowners products. Haven Life Insurance Agency has taken this thinking a step further by designing a term life product that uses big data and analytics to offer policies online with a 20-minute application process.

These award winners demonstrate just how much can be done toward creating products and modifying existing ones through the creative use of maturing and emerging technologies. John Hancock, for example, models effective decision-making with regard to incorporating new technologies into existing products by offering program members a free wearable device. Wearables can provide behavioral and physiological data that can be used to inform the calculation of life insurance premiums. The same wearables can provide policyholders with valuable feedback and the possibility of earning premium discounts. It’s a win-win for the customer and the insurer.

All insurers looking to incorporate new technologies into their product development should invest in idea-generating processes that are focused on how a given technology can be deployed before deciding whether to pursue that technology. Insurers excel at calculating risks and benefits, after all. Once the potential uses of a specific technology have been determined, insurers can apply that expertise to performing sophisticated cost-benefit analysis on those options.

The Whys and the Why Nots will never agree on everything, but they can unite behind the question of How. That shifts the discussions around new technologies to evaluation and problem-solving rather than opinion and persuasion. Ask “How?” and reap the benefits.

2014: The Future Is Coming at You Faster Than You Think

Without a doubt, 2014 will be a pivotal year for the insurance industry – a new future is dawning, reshaped more quickly than expected by powerful influences such as customer expectations, forces from outside the industry, and technology. We will see the acceleration of these influences. 

This pace of technology change, challenging decades of business traditions and assumptions, is unprecedented in the history of the insurance industry. The industry’s biggest technology disruptions and changes usually came along every decade or two, from the introduction of mainframe computers in the 1950s and ‘60s, to the personal computer in the ‘80s, to the Internet and e-business in the late ‘90s and early 2000s, and the first iPhone/smartphone in 2007. 

Now, changes are coming every month, with new technologies, the mash-up of technologies and new uses for these technologies. There are next-gen technologies such as mobile, cloud, data and analytics, telematics and collaboration tools. There are emerging technologies such as 3D printing, the Internet of Things (billions of devices that talk to each other without human intervention), drones, driverless cars, and wearable devices. The speed of experimentation, innovation and adoption will intensify. Insurance will begin to be redefined and reshaped, from the inside as well as from outside the industry.

As other industries have experienced, from retail to books, music and movies, the insurance industry is finding the very foundations of the business being challenged, requiring new thinking, experimentation, innovation and adoption of the new technologies. To respond to this continual disruption, insurance leaders will create a culture and model around continuing collaboration and ideation that extends outside their organizations. Legacy business assumptions, operations, systems and culture will begin to fall away. 

Increasingly, insurers will recognize that tracking and assessing the potential and use of next-gen and emerging technologies (both within and outside the industry) will be paramount to their competitive advantage and long-term survival. But insurers often lack the time, expertise and resources to track details of technology trends, follow outside industry perspectives, find and access research and case studies and stay current on trends outside the U.S. market. Insurers will increasingly look at creating and participating in an ecosystem of outside experts and resources to capture the potential, inspire their leadership and enable their journey of change, transformation and innovation. 

The journey toward reinventing insurance has started, whether you are on the road or not. No business, regardless of its size, can go it alone and expect to completely take hold of all the possibilities. It will be interesting to see the innovation ecosystems that emerge to help fully capture the potential, change legacy cultures and enable the ideas and technologies to be put into operation uniquely within each insurance organization.