“Don’t Fear the InsurTech Start-ups, Fear Other Incumbents”
InsurTech Rising (FinTech Futures‘ sister company) ran a ‘Meet the InsurTech advisors’ series, and here Christopher Freese, Head of Digital Insurance at The Boston Consulting Group reveals why he thinks it’s an exciting time for the industry, and what hot topics you should know about.
What’s the most urgent challenge the insurance industry needs to tackle, and how can InsurTech help?
There are a number of relatively new questions that the industry is grappling with right now – not least, the increasing prominence of risks such as Cyber. However, there is one area that has been discussed for a number of years and remains a holdup for many insurers and that is the approach to digitising the customer journey. Companies throughout the industry have already invested heavily in creating digital offerings, building websites and mobile apps, and creating digital offerings. But the mistake too often made is attempting to just overlay digital technologies onto existing products and processes. The data and the technology necessary to support a truly digital customer journey in insurance already exists, but most insurers don’t put themselves in their customers’ shoes and consider the journeys that people need to take.
Customers expect a much more convenient and digital first service – they have had years of interacting with the likes of Google, Amazon, Zappos and have come to fully expect one-click buying, product recommendations based on purchase history, refill ordering etc.
Pursuing agile development with InsurTech using short time frames and high-frequency user/customer tests is one of the success factors in being able to make the transition relatively quickly from trying to digitize products and processes to delivering digital customer journeys.
What one piece of advice would you give to the industry’s leaders?
I actually think there are two key things to bear in mind right now:
Firstly, don’t fear the insurtech start-ups, fear other incumbents who are engaging with the start-ups in an innovative and revolutionary way. A scan of the new companies in the insurance space shows the vast majority entering the market to offer a smart, focused solution at one point in the value chain. What is more of a challenge for your business is a competitor who partners with that company to gain a march on you.
Secondly, engage with your full organisation. Many of the challenges driven by digital such as different competition and evolving customer expectations, are going to rely on input from parts of your business that may not previously have been at the forefront of strategy and planning, whether it is the youngsters who better understand the technologies and desires around the customer journey, or the IT folks who have a sense of how you can start to move at the speed that’s now required.
What were the hot topics of 2017 for innovation in insurance?
There’s no doubt that Artificial Intelligence was one topic that everyone wanted to discuss and learn more about. Critically, as an industry we need to keep focused on the very practical applications of robotics and machine learning in a way that will truly deliver process and efficiency improvements.
Looking at innovation that is coming out of different regions and the different market dynamics is interesting. Insurers in China, for example, are playing with a very different scale to any European insurer but the players are grappling with the same issues – such as how do you engage your customer, how do you develop a business with data analytics, how do you build speed into your product development? There’s a lot than can be shared and learned across regions.
The opportunity for insurers in the cyber insurance market is a really fertile ground as the industry establishes its approach to pricing this risk, and better understands the risk, the customer need, and the market opportunity.
Finally, new strategies that are emerging for example around reinsurers starting to go direct to the consumer and what this means for potential strategic partnership options is a less high profile topic, but a really important area to look at.
It’s 2027. How has insurance changed?
Ten (or maybe a few more) years from now of course the big name insurers will still be playing a major role, but there will be greater collaboration between these incumbents and the insurtechs. There will also likely be a fundamental change to how people buy insurance with a migration away from individual, discreet products, towards a place where insurers are using data and analytics to become a true risk partner for their customers. This will mean helping the individuals to understand what they need in terms of insurance and what suits them based on their own particular risk appetite and needs.
It’s an exciting time for the industry!