APRIL ISSUE 5.01
INSURANCE BUSINESS UK PRESENTS…
THE UK INSURTECH SPECIAL REPORT Discover how insurtechs are transforming the insurance ecosystem
NOT IF, BUT HOW
The digital revolution starts here Transforming the way people buy insurance today Learn more at munichre.com/automation-solutions
SPECIAL REPORT
INSURTECH
FOREWORD Mia Wallace News editor Insurance Business WHILE THE insurance industry has traditionally been considered slower to respond to emerging technologies than other branches of the financial services sector, there can be no denying that digital transformation is having an impact. The rise and rise of the insurtech sector has been remarkable to watch, with investment reaching an all-time high at the end of 2019 with Willis Towers Watson reporting that funding commitments to the sector reached US$6.37 billion (approximately ÂŁ5.07 billion).
The evolution of the insurtech space As the level of understanding regarding how technology and innovation can lend efficiency, value and support across the insurance sector has accelerated so have the underlying principles that govern the insurtechs who bring these technologies to the marketplace. Recently insurtechs have moved from offering solutions which simply made processes faster or more accurate to offering brand new concepts aimed at revolutionising how insurance fundamentally functions. Digitisation and digital transformation have been embraced within the insurance sector with revenue and operational effectiveness driving end-to-end solutions within the market. Insurance companies are increasingly looking to form partnerships with insurtechs based upon building products together, or the purchase of technology solutions which a traditional insurer or broker may not have the operational agility or technical knowledge to build themselves. Such partnerships allow change to quickly and effectively take place in companies where evolution is often slow to occur and can enable more conventional insurance companies to focus on the areas where they lend genuine customer value.
The innovations insurance companies are looking to utilise A recent research report carried out by NTT Data surveyed 100 senior London Market syndicates, brokers and managing agents and found that the London market is upping investment in tech to maintain its status as a global insurance leader. This report revealed that investment in IT is set to double in the next three years and that two-thirds of the business leaders surveyed are concerned about being left behind by modernisation. The report further outlined how investment in IT is set to double in the next three years and that 70% of insurance leaders are looking to invest in robotic process automation (RPA) in the future. Over half of these industry leaders are focusing budget on AI/machine learning, the report stated, while 73% of insurance leaders believe that RPA could dramatically speed up the manual processes that still dominate back-office operations in insurance. In a recent interview with Insurance Business, senior vice president and global head of technology services at Sutherland, Srinivas Rao, outlined how a lack of automation and old-fashioned business
practices have not only cost the Lloyd’s market money but have also impacted the reputation and perception of the industry. However, he noted that the insurance sector’s digital transformation is rapidly occurring, with many insurance companies capitalising on the opportunities granted by data analytics, machine learning and automation.
The potential impact of coronavirus on the development of the insurtech sector The coronavirus (Covid-19) pandemic has impacted every element of the insurance proposition and the continued effects of this crisis will likely be felt by the sector and the wider economy for a long time to come. For CEO and co-founder of the insurtech Getsafe, Christian Wiens, the outbreak has highlighted the value proposition of the insurtech sector which is innately prepared for the operational changes necessitated by the global lockdown. Wiens also believes the pandemic may have long-term implications on the rate of adoption of digital innovation within the insurance sector. In a recent interview he outlined his belief that the fundamental
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INSURTECH characteristics intrinsic to many insurtechs make them well placed to offset the more severe impacts of the crisis and that the virus will accelerate digital transformation in all industries. The coronavirus has highlighted the capacity of technology to facilitate broking throughout the UK, according to Matt Jarman, client partner at NTT DATA, as it has prevented the face-to-face interactions so valued in the current broking model. Jarman outlined how brokers are undergoing a very rapid adoption of technology processes and that the outbreak may rapidly increase the rate of change throughout the insurance sector.
Understanding the insurtech sector Within the following report, Insurance Business has reached out to a panel of experts with intrinsic knowledge of the insurtech space to help create an overview of where the landscape sits. When it comes to examining the impact of insurtechs on the insurance industry there are six key questions which must be closely examined in order to generate an understanding of how this sector is developing and where this development will likely lead. These questions are: • Where is insurtech making the biggest waves in the insurance ecosystem? • Why is it important for brokers to engage with insurtech? • How is insurtech transforming the customer experience? • How are things like artificial intelligence (AI), machine learning, and robotics process automation (RPA) changing the insurance value chain? • What should brokers consider when deciding whether to partner with an insurtech firm / solution? • What’s next for insurtech? It is hoped that, considering the range of expertise of the panellists interviewed, they will be able to provide a broad overview of the intricacies and capabilities of this exciting new element of the insurance ecosystem.
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MEET OUR PANEL OF EXPERTS Martyn Mathews Senior director, personal lines, UK and Ireland, insurance Lexis Nexis Risk Solutions Martyn Mathews joined LexisNexis Risk Solutions in October 2016 through the acquisition of Insurance Initiatives Limited (IIL) and is currently tasked with developing and executing the sales, alliances and customer delivery strategy in the motor, connected car and home verticals. Prior to LexisNexis, he worked for Experian for 14 years in a variety of roles, most recently as head of vertical for insurance, life, pensions & investments. Mathews also spent time with Vodafone Corporate and the logistics company TNT Mail.
Paul Donnelly Executive VP EMEA Munich Re Automation Solutions Paul Donnelly has over 25 years’ experience in engineering, product management, marketing, sales and operations. He is responsible for managing all aspects of Munich Re Automation Solutions’ business operations, growth and profitability throughout the EMEA region. Paul is personally engaged with a number of Munich Re’s EMEA customers and focuses his whole organisation on the primary goal of continually delivering value to customers, helping them achieve their goals and revolutionise their business.
Paul Middlege Director of product Davies
Paul Middlege is a digital specialist who’s been delivering web applications & products for over 15 years. As director of product within Davies Technology Solutions, Paul leads the product management for a variety of CX/regtech/ insurtech propositions aimed at organisations that operate in highly regulated markets. Paul began his career as a front-end developer who soon pivoted to what is now known as UX design and later to product management. He has a wealth of experience within the insurance industry on both the client and agency side.
Sastry Durvasula Chief digital officer and chief data & analytics officer Marsh Sastry Durvasula is the chief digital officer (CDO) and chief data & analytics officer (CDAO) for Marsh. He leads the company’s digital, data, and analytics strategy and transformation, while building new digital-native businesses and growth opportunities. Sastry also serves on the Marsh Executive Committee. Prior to Marsh, he was the enterprise head of data & digital tech at American Express and worked as a technology consultant at Fortune Global 500 companies. Sastry is on the Board of Directors for Girls in Tech and launched an industrywide initiative called #ReWRITE focused on Women, Risk, Insurance, Technology & Empowerment.
Where is insurtech making the biggest waves in the insurance ecosystem? Sastry Durvasula, Marsh: It is generally agreed that insurance is ripe for disruption, and insurtechs are continuing to grow in number and make waves across the insurance ecosystem. Maybe more importantly, insurtechs are bringing the importance of technology and innovation to the forefront across the insurance industry. Insurance has traditionally been a stable and heavily regulated industry that makes incremental improvements; insurtechs as well as emerging risks and new technology are likely to cause the industry to innovate and change more in the coming decade than it has done since its inception.
The biggest waves have been in the areas of digital distribution and data & analytics. Most of the digital distribution startups specialise in specific insurance offerings (i.e. cyber, home, auto, gig, P2P) rather than broader product portfolios, and are focused on improving the customer experience mainly with the use of digital capabilities - to innovate the process of buying insurance. This is a mindset shift from business-first to customer-first. Some of the more advanced insurtechs that have found market acceptance and product-market fit are also transitioning from a broker or MGA distribution model to full-stack insurer (carrier). While it provides the flexibility to develop and sell their own products, as well as owning the entire chain, being a full-stack insurer brings in the additional complexity of underwriting,
regulatory compliance, capital requirements, responsibility for losses, and so on. We are also seeing many insurtech startups providing rich analytics in specialised areas and specific business domains. Innovations in data and analytics support improvements in predictive and risk management capabilities. Apart from these major areas, we are also observing smaller startups trying to get traction across all value chain segments from insurance marketing to claims management. Paul Donnelly, Munich Re Automation Solutions: The insurance industry is evolving, customer expectations have been transformed by technology in both their personal and professional lives. With convenience and speed now of supreme value, this places increasing pressure on the traditional insurance operations to respond
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INSURTECH and service their customers in a manner they have come to expect from other industries. Martyn Mathews, Lexis Nexis Risk Solutions: Without doubt it has to be the use of technology to deliver an improved customer experience, particularly when it comes to managing and even mitigating claims, if you consider the escape of water detectors for homes and young driver risks in telematics. Insurtechs bring a far more customercentric approach with niche propositions responding to our changing lifestyles and many enable a claim to be validated and settled in minutes, compared to days or weeks, through a few taps on a smartphone or tablet. The data platforms, use of video/ imaging and algorithms behind those decisions is where these businesses and propositions really excel. Consider that in some parts of the insurance sector, around 50% of an insurance provider’s full-time employees could be involved in the claims operation – the way in
THE RISE OF THE INSURTECH – FAST FACTS
87%
of insurers agree that technology is advancing at an exponential rate
86%
of insurers believe they must innovate at an increasingly rapid pace to remain competitive
96%
of insurers think that digital ecosystems having an impact on the insurance industry Source: Accenture: The Rise of Insurtech 2017
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which insurtechs are changing that process, automating fraud identification, validating and settling claims, often via mobile devices, is compelling for consumers and traditional insurers alike. Indeed, some sectors have already improved claims processes through virtual claims handling and touchless claims handling. Here, image recognition technology is used to capture damage or invoices, run a system audit and if the claim meets the approved criteria, it is automatically paid without human involvement. This improves efficiency, cuts costs and smooths the customer journey. Paul Middlege, Davies: For the general public, insurtech often means providing a modern user experience and way of interacting with your insurance provider. Personalisation, in particular, has become less of a ‘want’ and more of a ‘need’ over the last decade. Providing modern interaction methods and personalised options offers a variety of benefits to providers and customers alike.
However, the automation of decision making/processes and the benefit that brings are causing bigger waves to those that work in insurance.
Why is it important for brokers to engage with insurtech? Paul Donnelly, Munich Re Automation Solutions: Insurtechs enable radical change to take place in traditionally un-radical institutions. They are uniquely separate from the everyday demands of the process-laden insurance industry, and thus have capacity to think more innovatively about how to meaningfully disrupt the market and improve customer service. This allows insurance companies and brokers to focus on day-to-day tasks – something especially significant for brokers within the insurance sector, as a traditional
SPECIAL REPORT
INSURTECH 5 WAYS INSURTECHS CAN COLLABORATE WITH BROKERS AND CARRIERS
1
Building products together through partnerships
2
The acquisition of insurtechs by insurers
3
The purchasing of technology from insurtechs
4
Investment into insurtechs
5
The incubation of insurtechs by larger insurers Source: Imaginea: InsurTech 2020
insurance broker’s day is made up of 70% admin and 20% business sales, with only 10% left for providing expertise to clients. Through the digitisation and automation of administration tasks, insurtechs allow brokers
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to focus on where they can really add value. Martyn Mathews, Lexis Nexis Risk Solutions: Customers today want quality, transparency, simplicity, affordability and fast decisions. Brokers know what makes great customer service, they understand the needs of their customers, they are on the ground offering advice and support. But they also recognise that the old broking model has to evolve – they need to find ways to create a ‘stickier’ relationship with customers that allows interaction beyond arranging the annual policy. They are also under pressure from insurer partners to deliver the right risks for their underwriting portfolio. Engaging with insurtechs on niche propositions and schemes has the potential to broaden their customer appeal and also improve their own efficiencies. However, in tandem, they should be applying new technology and data sources throughout the insurance continuum or lifecycle to help understand their customers to a much greater degree – at quote, at renewal, at claim - to offer services that will enable them to differentiate themselves from the rest of the market. Paul Middlege, Davies: Every industry has evolved through the use of technology
throughout history. Insurance technology is no different. If brokers don’t engage with insurtech, then they will be left behind. Sastry Durvasula, Marsh: Insurtechs are a source of opportunity for collaboration and digital innovation. Brokers can be assisted by insurtechs in multiple areas of their business, from improving customer experience to optimising operations to offering new products. Consumers are moving to transacting digitally as we have seen in travel, banking, e-commerce and many other areas of our lives. Insurance is also following the same trend. Brokers have helped customers buy insurance for centuries and engaging with insurtechs will be key to adapting the business model to digital channels in order to stay relevant in the value chain, and to keep and grow their customer base. Brokers are also starting to work with insurtechs to find insights based on advanced analytics and AI/ML on their existing data, often combined with new external data, to manage and grow their book-of-business, as well as to monitor and improve customer retention. For example, we collaborated with Concirrus, a startup specialising in real-time analytics and insights in marine and commercial auto. One use case we see with them allows better predictive modelling for cargo ships in relation to ambient temperature, sea conditions, geospatial and political factors, etc. We also collaborated with Metabiota that specialises in pandemic risk leveraging the power of data and AI/ML. Insurtechs are also helping brokers in the improvement of operational efficiency by automating many tasks that today are highly manual and repetitive. Managing the commercial submission process is another area where brokers are looking for assistance. In addition to this, brokers are also looking at insurtechs to create new risk products that can be introduced to manage emerging risks. The bottom line is that brokers will need to have a clear framework to understand, evaluate and engage with insurtechs to remain relevant and competitive.
SPECIAL REPORT
INSURTECH INSURTECH PROFILE
MUNICH RE AUTOMATION SOLUTIONS LTD. Founded: 1986 Headquarters: Dublin, Ireland Executive VP EMEA: Paul Donnelly
Tell us about Munich Re. Who are you, and what do you do? Munich Re Automation Solutions, a Munich Re subsidiary, is the world leading provider of digital new business, underwriting and analytics solutions to the insurance industry. Working with forward-thinking customers across the globe, we’re on a mission to revolutionise the way life insurance is bought and sold, using next-generation technology to give insurers the power to grow their businesses profitably. Munich Re Automation Solutions has been at the forefront of the digital revolution in insurance for over 30 years. We have a proven track record of working with forward-thinking customers to unlock new sources of revenue and greater customer satisfaction. In fact, we’ve made it our mission to continually reinvent the consumer’s experience of buying insurance. What’s your key area of focus in the insurance ecosystem? Munich Re Automation Solutions delivers digital new business, underwriting and data analytics solutions. How does your product work? With our suite of underwriting solutions, companies can automate the underwriting of many of the routine cases that currently take up so much of underwriters’ valuable time. Companies can price and offer cover for many customers immediately, reducing the risk of policies not being taken up and be able to get up and running in a fraction of the time of more traditional systems What problem are you solving in the insurance ecosystem? Munich Re Automation Solutions is passionate
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about transforming the end customer’s experience of purchasing insurance. To achieve this aim we bring innovation and speed to the underwriting function. Why should insurance brokers use your service / product? Munich Re Automation Solutions allows insurance companies and brokers to focus on day-to-day tasks – something especially significant for brokers within the insurance sector, as a traditional insurance broker’s day is made up of 70% admin and 20% business sales, with only 10% left for providing expertise to clients. Through the digitisation and automation of administration tasks, Munich Re Automation Solutions allows brokers to focus on where they can really add value.
What’s next for Munich Re Automation Solutions? Munich Re Automation Solutions will continue to bring innovation to the industry, within a broad set of capabilities. At the core of this innovation will be two things, the customer experience and data. The customer experience will continue to improve and match the expectations of the “always on” customer. Deep analysis of the vast amounts of available data within organisations will bring greater efficiencies to both back and front office insurance operations. Data will allow a deeper understanding of risks that are being presented, will enable the better understanding of fringe cases, and the possibility of new or enhanced product offerings being made available to the market.
How is insurtech transforming the customer experience? Martyn Mathews, Lexis Nexis Risk Solutions: What we’re seeing is data and technology used in new and different ways to provide a more individualised, streamlined, hassle-free experience. Insurtechs are not using data just to validate customers at the point of application, they are using data throughout the continuum, from application through to claim, reducing painful touchpoints, making the complex world of insurance simpler for customers. At quote, UK insurtechs are leveraging data to reduce or remove question sets altogether to ease the customer experience, improve the underwriting process and offer that personalised policy that busy customers want. In claims, insurtech propositions tend to offer a touchless experience, often through the use of a smartphone app to log and process the claim. One US insurtech is even using facial recognition technology to help validate claims, while, closer to home, a UK home insurtech is using digitised home contents inventories to reduce the risk of underinsurance and streamline claims. This unique perspective comes from a starting point of “what’s in it for the customer?” As insurtech propositions rely on leveraging their customer’s data, they need to build trust from the ground up through complete transparency in their processes. As part of this, they are also educating their customers, helping them understand why insurance is important and how they can add value to the customer’s life. They are helping to change the basic concept of insurance, from a grudge purchase to a precious commodity. Paul Middlege, Davies: Insurtech companies along with regular insurers, have a wealth of data about their customers. Insurtech companies have the advantage of having less dependencies on archaic legacy systems so easier access to the data they hold
– many will use ‘easy access’ cloud-based systems as their primary customer database / data set. Insurtechs can also take faster advantage of IOT technologies to integrate new data sources into their systems. The combined scenario of coupling easy access customer data, sources of new data from IOT with powerful analytics solutions means the data can be used in new and interesting ways. We see a number of common examples in the market today such as more targeted risk profiling when it comes to pricing decisions. If data tells us a particular house or a set of houses on a street is less prone to flooding versus other houses on the same street, damage cover could be offered where previously unavailable or premiums set at a different rate depending on the specific risks of individual properties – something unheard of with postal district and water table analysis. Or if IOT devices can be fitted to gather new data, the most prevalent use
case for this would be black box telematics in vehicles for young drivers, then again premiums can be personalised based on individual customer attributes. The analysis of unstructured data is now another growing data set being used in this space – e.g. being able to identify key customer or risk attributes in voice and text-based interactions. One area we are seeing evolution in, is using predictive analytics and process automation to improve business processes and improve the customer experience. One particular use case is the automation of low value, low risk claims. Data can be captured from FNOL interactions (voice calls, emails etc) and can be screened to identify a number of attributes – some examples include; detect reason for claim, identify if any third party involvement, identify any fraud indicators, identify any customer vulnerability triggers etc. Then if the claim is deemed ‘low risk’
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INSURTECH FOUR FUNDAMENTAL SHIFTS IN THE NEW INSURANCE ECOSYSTEM
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There has been a registered shift from product focus to customer experience.
2
Data has evolved as a critical asset.
3
There has been a transition from asset ownership to a shared economy.
4
Partnerships with specialists have taken precedence over the traditional “Build or Buy” approach Source: World InsurTech Report 2019 (WITR) by Capgemini and Efma
from the content of the interaction, automated processing can check against structured data, such as claim history, time since policy inception, further fraud indicators etc. If the process thresholds for automated approval are not breached, then the claim can be paid. If any trigger fails automated approval, it can be passed for manual review – depending on risk, it might be only a small part of the claims journey is manually reviewed, as opposed to a full claim review, therefore significantly reducing the cost to process an individual claim. Sastry Durvasula, Marsh: One of the most compelling features of many insurtechs is their ability to provide accessible, intuitive, easy-to-use and easy-to-understand digital customer experiences. In fact, a customerfirst approach is a key driver for their go-tomarket plans to build a distinguishable brand. For personal insurance lines, the insurtechs have transformed the traditional experience of visiting a brick-and-mortar
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insurance office and speaking to a human agent into an on-demand, remote transaction that allows the customer to receive a quote, purchase a policy, obtain proof of insurance and submit a claim with the push of a few buttons. Frequent interactions with the customer are encouraged through digital channels that provide on-demand insurance products, peer-to-peer insurance, social media selling channels and advice on insurance coverage and products. And when a customer does need to ‘speak’ to a customer service agent, it may be through a bot. Insurtechs are also targeting many of the new or untapped markets, such as usagebased and gig insurance, and helping to define the user experience for these products that by their nature are best served with digital solutions. Other insurtechs focus on specific parts of the value chain to collaborate with incumbents, such as providing realtime data for risk analysis or drones for
claims submission, rather than the retail end of insurance. Every part of the insurance value chain is seeing some impact from insurtechs. Not only is the customer experience changing, but the insurance ecosystem is evolving, as well. The expectation of a digital, seamless and omni-channel experience is rapidly becoming the norm for commercial lines, too. Incumbents in this space are taking cues from insurtechs and changing their customer experience model. Others are partnering or acquiring insurtechs for different parts of their value chain to innovate the end-to-end customer journey. Paul Donnelly, Munich Re Automation Solutions: The newest generation of insurtech has enabled insurers to break through traditional barriers and vastly improve speed-todecision. We hope 2020 and beyond will see insurtech continue to revolutionise not just how the industry functions, but also how it is perceived. At Munich Re Automation Solutions, our goal is for applying for insurance to one day seem as simple as buying something from Amazon. With rapid innovations in insurtech, we believe that day is well on the horizon.
business, renewals and mid-term adjustments. By offering one single point of entry onto the widest array of rating factors currently available, insurance providers can see greater efficiencies, better decision making and improved customer experiences with their brands. What problem are you solving in the insurance ecosystem? Increasing digitisation combined with the changing demands of customers is disrupting the insurance sector. LexisNexis Risk Solutions is enabling insurance providers to respond to these changing needs and leverage the growing volumes of data, through the delivery of data insights across the customer journey and insurance workflow.
INSURTECH PROFILE
LEXIS NEXIS RISK SOLUTIONS, INSURANCE, UK AND IRELAND Founded: 2000 in US, UK market entrance in 2011 Headquarters: London, UK Managing Director: Jeffrey Skelton
Tell us about LexisNexis Risk Solutions. Who are you, and what do you do? LexisNexis Risk Solutions is a global data and advanced analytics provider with a 40-year history in the insurance sector. In the UK and Ireland, we work with more than 90% of the insurance market. In essence, we find the insights that help our customers better predict risk and deliver them directly into their workflows. There is no shortage of data out there; the skill is finding the right data points that can lead to better decisions and outcomes for customers throughout the insurance continuum. Fundamental to what we do is enabling the industry to benefit from contributory data. This means the market is able to gain a wide
view of the market’s experience of a customer – their policy history, their No Claims Discount (NCD), their quoting behaviour, their driving behaviour and soon their claims experience – at the point of quote. What’s your key area of focus in the insurance ecosystem? We help insurance providers create a data strategy that improves the customer experience and delivers more streamlined and faster decisions at point of quote through quality data enrichment, which helps to reduce application fraud, creates more informed underwriting and improves pricing accuracy. How do you deliver data into the market? LexisNexis has integration with all major software houses and direct into insurance workflows, which means insurance providers have one gateway to high volume, real-time risk data to help inform pricing and underwriting decisions. This means they can gain the clearest picture possible of risk for right first-time quotes on new
Why should insurance brokers use your service / product? Brokers know their customer best, but with margins now being squeezed from all sides, it is more important than ever for them to gain deeper insights about their customers and prospective customers to better their ability to pass on the right risks to their insurer partners. Data-driven insights offer brokers the ability to identify, for example, whether a customer is likely to cancel, whether the named driver added to a policy is genuine and the likelihood of a customer to renew. Understanding these risk factors puts them in a far more powerful position at new business, MTA and renewal. What’s next for LexisNexis Risk Solutions? Two ground-breaking initiatives. The first is enabling the insurance sector to price and underwrite for the presence of ADAS features. This has the potential to lower claims volumes and lower insurance costs. The second initiative is to add a new dimension to the understanding of risk through industry-contributed claims data. This will create much more knowledge around the circumstances of claims to support pricing decisions. We are starting with home claims, and motor and commercial won’t be far behind.
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INSURTECH How are things like artificial intelligence (AI), machine learning, and robotics process automation (RPA) changing the insurance value chain? Paul Middlege, Davies: AI and machine learning is now often a core part of any automated process. By educating the predictive analytics on a comprehensive
100 SENIOR LONDON MARKETS SYNDICATES, BROKERS AND MANAGING AGENTS REVEALED THEIR THOUGHTS ON DIGITAL INNOVATION
67%
agreed innovation is the key to success
69%
said they were concerned at being left behind by innovation
70%
iidentified RPA has having a significant potential impact
51%
are focusing budget on AI/machine learning Source: NTT DATA: History Made Faster: Preparing for the Wave of Change
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dataset as is available from previous claims, whether they were approved or declined, the system can learn and make decisions on future claims. There is always a need to have some manual checks to ensure the robotics is performing as expected and the ongoing review of rules and triggers, but having the machine perform multiple ‘what if ’ scenarios can help you optimise the process – this could be to run hundreds of thousands of different scenarios, something not possible with a manual process. So, from a customer’s perspective, the two biggest drivers of the customer experience related to insurance comes down to ‘price/ value for money’ and ‘claims experience’. Having analytics address these two areas as described above, means you are ahead of the pack and insurtech companies are leading the way here due to the accessibility of data and new methods of working. Sastry Durvasula, Marsh: We are in the early stages where technologies such as AI, ML and RPA are making a major impact on the insurance value chain and touch every step in the insurance process, from distribution to underwriting to claims management. Today, insurance processes in most parts of the value chain are manual with repetitive critical tasks, and these can be improved with technological innovation. For example, checking a policy for E&O is a workflow process that can be automated by using AI/ML technology, such as natural language processing, and provide greater accuracy and higher throughput. In the same way, combining RPA with AI will allow insurance companies to optimise operations and automate workflows by providing the capability to understand, interpret and trigger actions without any human intervention. Underwriting is another area where the huge amounts of external and sensor IoT data will enable insurers to utilise advanced big data and AI/ML technologies to model and price risks better, as well as advise on risk management strategies. For example, we collaborated with Modjul and select clients to leverage IoT data from smart belts to help improve worker-safety and claims
management. Similarly, automated image recognition on claim damage can improve the efficiency and speed of managing and settling a claim, thereby improving the customer experience. In addition, AI/ML technologies combined with big data can help all parts of the insurance value chain better understand and manage the overall risk portfolio. However, the major advancements are yet to come as all enterprises (and not just the insurance industry) understand and implement next-gen solutions at scale in their tech stacks over the coming years. Paul Donnelly, Munich Re Automation Solutions: All risk-based decisions are based on making connections between various data points and identifying patterns within them. But these patterns often aren’t visible to the human eye, which is where advanced analytical modelling comes in: it
can reveal previously hidden connections and relationships with an exceptional degree of accuracy. This approach can be used to identify and eliminate questions put to potential customers during the application process which are potentially irrelevant or just redundant. In certain circumstances, and with appropriate risk management the number of questions asked can go down significantly, with little to no impact on risk be taken on by the life insurer. The customer experience will greatly benefit from the application of advanced analytics and, indeed, the analysis of fringe cases. Martyn Mathews, Lexis Nexis Risk Solutions: AI-ML techniques are already helping us do more with less. As an example, we know that conversion rates of people shopping for home insurance is challenged by the number of hard to answer questions
throughout the application process. The latest advances in data prefill solutions use a huge amount of modelling, linking and AI-ML techniques to return accurate information on the person and property. The result is quicker home insurance quotes and in-turn increased conversion rates. In pricing, AI- and ML-based analytics solutions have changed how the market uses data to deliver appropriately priced premiums. Machine learning algorithms now help identify the most predictive set of attributes to differentiate pricing models. That insight is built into a single view of the customer delivered at point of quote directly into broker software systems. Going broader than pricing, in motor, telematics data helps us get on the front foot at first notification of loss (FNOL), helping to deliver a better consumer experience postaccident, whilst providing invaluable insights
WHERE DO BROKERS BELIEVE THE MOST CHANGE IS NEEDED?
9% 24% 9% 12%
18% 12%
15%
Claims and back-office functions Data analysis/ modelling Technology Market-facing operations (underwriting/ broking) Strategy Culture Dealing with data security across our IT estate Source: NTT DATA: History Made Faster: Preparing for the Wave of Change
regarding the circumstances of the collision. In commercial property, AI can provide valuable insights regarding a potential location for a new branch or business relocation – flood risk, crime rate, or other local circumstances that increase risk. Image recognition ML techniques gives us the speed limits of UK roads, in real-time. Without this data we could not know with a good degree of confidence that a person may be travelling at twice the speed limit in an urban area. This allows the insurer to make contact with the customer and take the appropriate actions. And finally, in an industry first, ML has helped us normalise and classify vehicle build data from every car manufacturer around the globe to enable insurance providers to price drivers’ insurance based on the safety features of their vehicle. As usage-based insurance continues to develop, whether through aftermarket telematics devices, smartphone apps, connected vehicles, even in the future from
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INSURTECH smart home data, all that data needs to be gathered, normalised, and standardised so that consumers can enjoy an improved shopping experience based on their needs and preferences. AI-ML techniques will be fundamental to that process.
What should brokers consider when deciding whether to partner with an insurtech firm / solution? Sastry Durvasula, Marsh: Brokers will need to first make the decision on which parts of the value chain should be digitised, what operating models should be changed, and whether to build, partner or buy. It is not feasible or profitable for brokers to digitise with a broad-brush sweep, rather to choose specific solutions or business areas that will benefit most by innovation. As many insurtechs specialise in specific aspects of the value chain and have solved a particular ‘pain point’, it makes good sense to look at a partnership, rather than in-house build. For partnership considerations, brokers should have a clear understanding of the use cases and their synergy to the core business. The best engagement model is to experiment with a few pilots with multiple insurtechs and obtain actual results that can then be assessed to understand the larger technological, operational and monetisation aspects of a broader engagement. Paul Donnelly, Munich Re Automation Solutions: When you’re embarking on something as important as transforming how you do business, you need to be confident the partner you choose can deliver. I believe that brokers need to embrace the improved speed-to-decision capabilities that insurtechs can provide as data is only powerful when it is harnessed correctly. By partnering with the right insurtech, brokers will be able to capture and process data more efficiently to improve all business processes, from sourcing the right target market to product development.
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Martyn Mathews, Lexis Nexis Risk Solutions: As I said earlier, brokers know their customers. They should use that knowledge to help them understand the basis for future opportunities. Analysis of customer data could help them understand the potential life-time value of that customer or what that customer’s propensity to renew or to cancel will be. Once you have this deep level of understanding, the value of linking with an insurtech will be clearer. Depending on their stage of development, look at the breadth and depth of the data they hold, the technology they can offer you and then evaluate the value-add this proposition could offer to your customers and to your insurer panel, and whether it meets your businesses objectives. Paul Middlege, Davies: The primary thing is first to understand what problems you want to solve with insurtech. Once the problems are defined and suitable solutions sourced, it is then a matter of trust and cultural fit. Does the service come from an established provider who
doesn’t run the risk of going bust in six or 12 months? Do they have the sort of track record that reassures you that you won’t be putting critical parts of your business in the hands of people with good intentions but limited experience?
INSURTECH AS A GLOBAL PHENOMENON – TOP INSURTECH COUNTRIES
1. United States 2. United Kingdom 3. India 4. Others Source: Deloitte - InsurTech entering its second wave – countries recorded from 1998 through H1 2018
the feedback against not only the customer transaction but also the individual who interacted with the customer, their manager, their department, their location and more. We then provide the data within an online platform that is accessible to our clients. Data is processed and reportable in near real-time. What problem are you solving in the insurance ecosystem? The primary problem ServiceTick solves is granting visibility around what customers & their employees honestly think about the insurance provider. Our technology saves hundreds of staffhours by taking thousands of paragraphs of feedback and automatically turning them into defined risks, ideas, action points and more. It identifies hidden process and people issues that are often quick to resolve. Resolving these can produce a significant return on investment. Most importantly, we help our clients retain customers by identifying those in distress and automatically informing managers and recovery teams.
INSURTECH PROFILE
DAVIES Founded: 1968 Headquarters: London, United Kingdom Director of Product: Paul Middlege
Tell us about Davies. Who are you, and what do you do? Davies delivers operations, consulting and technology solutions across the risk and insurance value chain, including excellence in claims, underwriting, distribution, regulation, customer experience, human capital, transformation & change management. Our technology solutions include our voice of the customer & voice of the employee SaaS platform, ServiceTick, which allows our clients to identify process issues, engage their employees and truly
understand what their customers thinking and saying about them.
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What’s your key area of focus in the insurance ecosystem? Our ServiceTick feature suite allows our insurance clients to listen to their customers, understand what they are saying and then act upon that feedback. We typically monitor new business (quote & sale), service (MTA, cancellations, renewals) and claims (FNOL, seven days on, settlement). We are also used by our clients to help demonstrate TCF to the FCA. How does your product work? Our omnichannel measurement technology allows customers to rate their experience through their channel of choice. We store
What’s next for Davies technology solutions? Within Davies, our propositions and underlying capabilities continue to evolve, whether inorganically by future M&A where we are likely to add new automation and robotics capabilities, or organically through product enhancements that our development teams bring to market. For example, one of our focuses is to bring together our analytics offering with the existing feature set, within ServiceTick, alongside additional tools to promote employee engagement. We have recently launched gamification features that automatically reward staff for positive performance. Our regulatory products provided through our Veriphy proposition the award-winning specialist KYC (Know Your Customer) and AML (Anti Money Laundering) compliance solutions SaaS operation - continues to add new features to meet market demands.
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SPECIAL REPORT
INSURTECH
What’s next for insurtech? Paul Donnelly, Munich Re Automation Solutions: Insurtechs will continue to bring innovation to the industry, within a broad set of capabilities. However, I think that at the core of this innovation will be two things, the customer experience and data. The customer experience will continue to improve and match the expectations of the “always on” customer. Deep analysis of the vast amounts of available data within organisations will bring greater efficiencies to both back and front office insurance operations. Data will allow a deeper understanding of risks that are being presented, will enable the better understanding of fringe cases, and the possibility of new or enhanced product offerings being made available to the market. Martyn Mathews, Lexis Nexis Risk Solutions: Insurance is a hard business to be in, whether you are an established player or a new entrant intent on disrupting a process or industry. As such we will see a continuation of insurtech successes, failures, mergers and acquisitions. However, all innovation is good for the market – it helps the sector learn and
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progress – so we should expect more developments, particularly in the use of data from the IoT, like wearable tech and connected car and device data. We know all vehicles leaving the production line by 2030 will be connected. The ecosystem is now being created to enable consumers to shop for insurance based on their connected car data as well as the safety features of their vehicle. In essence, motor insurance of the future will factor for both the static build of a car and dynamic data on how the car is used. This type of innovative way of thinking will set the tone for other segments of the market to think differently about how they use data captured through devices, whether that be water safety shut off valves to monitor or prevent escape of water claims or through water level monitors on the sides of commercial buildings to monitor for flood risk. But first, it will be interesting to see who will win the race to leverage vehicle build data to deliver the first motor policy where the car will be the star in determining the premium. Broker margins are squeezed so the advent of this data and connected car data from vehicles will help them access this information without significant up front cost, providing a real step change for the market. Paul Middlege, Davies: We’ll continue
seeing the evolution and broader adoption of tech that is moving from “buzz words” to maturity. The use of AI & machine learning to aid underwriting, fraud detection and claims decision making will grow. We’ll also see increased adoption of robot process automation to fulfil ‘simple’ tasks and thus free up humans to focus on more complex queries. Niche start-ups will expand and continue to offer flexible & personable solutions via elegant apps. We’ll also see the tech giants enter the market further. We’ve already seen the expansion of the likes of Google & Apple in the health space with their wellbeing apps & devices, while Amazon’s & Facebook’s home camera & audio devices are already in part protecting homes. Pivoting towards insurance offerings for them seems to be a logical next step. Perhaps the most significant point is the impact the coronavirus pandemic will have long-term on the insurance industry and beyond. Expect to see a rise of home working after the crisis and as such technology (such as cloud contact centres, advanced business continuity planning tools and distributed team manager solutions) to support that. Sastry Durvasula, Marsh: Overall, the future looks quite promising for insurtechs as well as incumbents across the insurance value chain to transform the industry in a variety of ways. We have seen this in fintech over the last decade with many examples of innovative startups and incumbents propelling new ways and disrupting from within. We are now beginning to see this happen with the insurtechs, a few who have already achieved unicorn status or completed successful acquisitions and partnerships with incumbents. However, most insurtechs are yet to gain scale and operate as a major stable company over a length of time. Insurance is a highly complex, regulated and decentralised industry with a lot of legacy operations and technical debt. It is critical for insurtechs to focus on distribution at scale, effective claims handling, and strategic partnerships with the incumbents to fully unleash the opportunities ahead.
