The Insurance industry, which for generations has relied on long-established methods and processes (e.g. actuarial tables) to price policies and create a vast store of historic wealth for the providers, is coming under siege.
As we have seen with the banks, it is now the turn of the insurance industry to face competition from so-called ‘disrupters’ – new outfits that shun traditional analysis and use new streams of data to assess risk, cut costs, save time and create innovative pricing models.
Like FinTech for the banks, InsurTech is billed as the equivalent nemesis for the insurance industry; it is international, vast amounts of institutional money are being poured into InsurTech start-ups and it is not going to go away any time soon. Indeed, the revolution is only just getting under way and is gathering pace.
If you doubt that, you only need look at the two-day InsurTech Asia Conference that took place in Singapore last week and which attracted 170 delegates from 22 countries. Make no mistake, the insurance industry is at a crossroads and, to use a phrase used in one of the conference’s opening speeches, it is facing a ‘Kodak moment'. But whatever the term, big money is chasing the belief that the insurance sector is now ripe for disruption and innovation.
Many of the various speakers’ topics tell the story: for example, ‘InsurTech: the Next Barbarians at the Gate?’; ‘Imagining Insurance of the Future’; ‘Machine Learning in Digital Health and what it means for Insurance’; ‘The Customer Connection – Disruptive Payments in the Insurance Digital World’. I’m sure you get the idea.
However, what is equally certain is that, with all this big money piling in to exploit the situation, there will doubtless be ‘winners’ and ‘losers’. A bit like the ‘dot.com bubble’ in 1999-2001, it will end in tears for those who do not invest wisely. One of the speakers at the conference – Jeffrey Worthington, Senior Solutions Architect of Digital Customer Engagement at ConVista Consulting – told the delegates:
“Right now, there are millions of dollars being invested in InsurTech start-ups all around the world. With that much money involved, there will be losers. Those losers are the companies who only dabble in technology, or those who only execute a low-hanging business plan, or worse, those who refuse to engage in digital at all, believing it all just to be a fad.”
The fact is, for all their bravado, InsurTech start-ups require the support of traditional insurers to handle such things as underwriting and managing risk, so working in partnership and having a contingency plan seems to be a sensible precaution.
But perhaps the best way to navigate the uncertainties of the future is not to man the barricades to repulse the invaders, but to take control of the evolution process by forging strategic partnerships to marry the best of the old with the best of the new. As the banks are finding with Fintech, the new kids on the block should be seen as complementary rather than the enemy.
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