In what has now become a Total Systems annual tradition, we have turned to the noble art of divination to see whether we can establish what the coming year might bring for the insurance industry.
A quick nod to 2016
A glance at our 2016 prophecies shows we nailed one of our predictions, but another is proving more problematic:
There will be a need to overcome internal silos – we saw some action
Last year we recognised that to look after insurance customers holistically, companies need to think customer rather than product. There has been much talk of this in 2016. Then, finally, there was evidence of action when insurance giant AXA merged its life and general insurance entities in Singapore. They announced the intention to provide a one-stop-shop for their life and general insurance products from January 1 2017.
Big Data will continue to be a focus – yes, a focus, but where was the action?
The focus was there: In May this year we saw The Financial Times running a piece entitled Big data analysis to transform insurance industry, so there is no denying that it is a continued focus in the market. At that time Lori Sherer, head of the advanced analytics practice at management consultancy Bain, was quoted as saying “The insurance industry has been a little of a hold out” but he believed it to be “now on the brink of innovation”.
…but innovation proved more difficult: Data is a tricky commodity and Admiral hit the headlines in November with their innovative idea of using computer analysis of Facebook activity to create “a reputational track record in the absence of a driving history or no claims bonus”. On the day of the planned launch, Facebook blocked the plans. Jim Killock, executive director of the Open Rights Group, said: “Insurers and financial companies who are beginning to use social media data need to engage in a public discussion about the ethics of these practices, which allow a very intense examination of factors that are entirely non-financial.”
So the debate will rage on…
But enough of 2016 – what does our crystal-ball tell us about the New Year and the exciting opportunities that await the Insurance Industry?
What can we expect to see in 2017?
Our prediction for 2017 can be stated plainly and simply:
“Insurers will at last start to take advantage of new technologies.“
We feel that a recent blog from Anthony Baldwin, CEO of AIG, sets the tone for an exciting future for technology in the insurance space in the coming year:
“ … as insurers we have an even more vital role to play as a risk taker and economic enabler. But we have relied too long on outdated processes, focused too much on the product, and failed to invest in technology. ”
We would love to predict exactly who might invest in what, of course, but the mists in the crystal are, at present… a bit misty.
Instead, here are our five top tips – five areas that we believe the insurance market should be watching with growing interest:
- Artificial Intelligence
There has been much scaremongering about the impact on jobs. Talk of AI can conjure up pictures of a future run by machines. This is not what we see for 2017, but we do see AI being introduced slowly to improve efficiency and automate some simple existing customer-facing underwriting and claims processes. In our view, customers still value a personal approach, so introduction of automation will need to be gradual and always driven by improving the customer experience.
Car giant Ford is to start testing the so-called autonomous cars on UK roads in early 2017. So this huge technological step forward will happen and insurers will need to be prepared. Although the future looks bright for the driverless technology, it may take a while until we see the main effects on insurers. Indeed, it is likely to require future legislation to establish who the “driver” of an autonomous car is – will the insurance risk shift between the traditional driver and the car’s manufacturer depending on who is actually driving at the time?
We believe that insurers who are able to make use of increasing volumes of data, insurers who can build policies that recognise shifts of risk, are far more likely to move ahead of their competitors. Such insurers should quickly find opportunities to make a profit in a very competitive market.
The internet of things
This has been a buzz topic in the industry for years. Back in 2013, Insurance and Technology magazine published an article entitled 5 Insurance Impacts of the Internet of Things . This is still a fascinating read, but three years on, the concepts have not been widely embraced by Insurers. Vitality Life dipped their toe in the water very successfully by linking life insurance discounts to health and well being. But we have a long way to go. For example, how long will it be before we see underwriting decisions linked automatically to the output from smart watches that monitor sleep and exercise patterns? Or when will home insurance risk be linked to frequency of occupancy measured with smart carpets that can monitor footfall? This will all come, but our prediction is that take up will continue to be a slow burn.
Another buzz topic, but one that seems to have taken root very quickly as the technology can work for almost every type of transaction involving money. Although a survey by the World Economic Forum’s Global Agenda Council suggests that currently only around 0.025% of global GDP is held in blockchain, we predict this will increase significantly in the next few years. Insurers will see it as a way to speed up settlements and reduce costs. In addition, it could help reduce fraud as every transaction is recorded and distributed on a publicly accessible ledger.
Customer focused distribution
The retail industry is leading the way with simple, integrated customer engagement that links the telephone, internet, and face-to-face shopping experiences. They encourage multiple product purchase and offer discount or free delivery for bundled purchases. The technology exists that can tie together all distribution channels across all product lines to deliver a truly integrated shopping experience for the insurance customer. But the insurance industry still lags woefully behind.
We see a future where you can have flexible insurance that can grow with your needs, flexible insurance that can be purchased conveniently from a single hub across a multitude of distribution channels. We believe the trend starts next year. An interesting concept due to launch in 2017 is Brolly, a free personal insurance concierge, powered by AI, and available through a mobile app. Brolly is being built to make it easy to understand, manage and buy insurance. We predict that others will follow this one-stop-shop route.
It’s clear that the next generation of insurance customers see technological evolution as a natural process. If insurance providers do not recognise how technology can help them, they run the risk of being left far behind by not only their competitors, but also by the expectations and demands of their customers.
Our prediction for 2017 is that insurers have recognised this and are about to do something about it. Exciting times ahead. Merry Christmas everyone.
Now, where’s that port and stilton?