(Image credit: Juliane Liebermann/Unsplash.)
Talk with anyone in the insurance industry and mention that “times are changing,” and you get no argument. Not only are insurance and the insurance industry changing, but change is changing. Technology enablement, cloud, ecosystems, data accessibility, AI, risks, products, and customer sentiment are pushing insurance out of tradition and into innovation faster than some may like. Yet, for the most part, all of the pushing is moving insurance in the right direction. The trends might be fearful in pace, but they certainly aren’t fearful in the result. Insurance may be improving itself in ways that will benefit the world. What kinds of benefits can we expect?
Greater coverage — more people and more businesses may find themselves covered through more relevant options and fewer steps to usage, including embedded coverage, reducing the insurance coverage gap.
Greater predictive protection — insurance may improve underwriting profitability, reduce its own costs and customers’ costs through a dramatic uptick in data-driven risk assessment for underwriting as well as avoidance or mitigation through proactive solutions.
Greater efficiency and effectiveness — insurers are right now grappling with operational challenges including talent shortages and tech debt that will give them the “excuse” to redesign their operating models and introduce better solutions and ecosystems to improve operational results.
Greater resiliency — a rapidly-growing set of risks is likely to touch off two ancillary trends: new product development and better risk knowledge and response.
To help us sort through these trends and others, Majesco invited three industry insurance technology experts to carry the conversation further, asking them about what they are seeing as the telltale signals that will shape our futures in 2023. To see and hear their insights, you can view the 2023 Signals that are Shaping the Future of Insurance webinar, and also dip into some of the high-level thoughts in this blog. Our panel includes:
Chris Frankland, InsurTech & FinTech Global Advisor & Mentor | Connector of Ideas – InsurTech360
Adrian Jones, Partner, HSCM Ventures
Dr. Henna A. Karna, General Manager (GM), Managing Director, Global Insurance & Risk Management Solutions – Google
Myself, Denise Garth, Chief Strategy Officer — Majesco
Denise Garth: Today’s customers, as we know, have completely different expectations than in the past. They are living different lifestyles and they exhibit far more robust digital proficiency. They demand different experiences, and they have different expectations about value. According to a recent innovation assessment report, “the rise of digital platforms and ecosystems will make relationships with customers even more important.”
To meet the expectations, we need to look at areas that are impacting insurers such as digitalization, data, and risk resilience—new ways of dealing with both the new customer and the new risks we are seeing in today’s era. In the following questions, we uncover some of the trends and opportunities that insurers should consider moving forward.
DG: How do we define digitalization? What do you think the areas of focus for insurers should be?
Dr. Henna A. Karna: Digital companies are associated with digital experiences. Companies need to ask themselves, “How am I evolving my product and my solutions?” and “How am I serving my customer?”
I like to think about it in two different ways.
First, there are ‘outside in’ companies and ‘inside out’ companies. Outside in are digital companies that are taking the breadcrumbs of a customer experience and then evolving their data, their products, or solution. Non-digital companies often work inside out. They know what they’re good at, and they have versions of what they are good at. They are maybe not as attuned to the end customer as perhaps a digital company.
The second way we could look at it is by looking at the frequency of customer interaction. With a digital company, the frequency is 24/7. It’s bi-directional. Digital companies are also very authentic. They are looking at transparency and an authentic experience for the end customer. Everything’s evolving—their data, and their technology—in order to have that digital DNA.
Chris Frankland: The ability to innovate and build solutions quickly has kind of opened the door for rethinking what that traditional insurance and the customer experience looks like. I think the temptation is to look at technology as the solution, but what I’m seeing emerge is a kind of hybrid approach.
We are now trying to learn and think about where and how we use technology across the insurance value chain. Where does it make the most sense to apply an automated solution? We are learning more about where that should fit within the lifecycle. I think the companies who will be successful at delivering this future customer experience will be the ones who know where and how to leverage technology and do it in a way that’s quite sensitive to people and to customer needs.
DG: What are the differences you are seeing between startups and what traditional insurers have been doing to prepare for digitalization?
Adrian Jones: Startups are an interesting set of characters in the insurance world. On one hand, startups have a lot of advantages. They can use completely modern technology in order to draw a completely different business model or in some cases, a fairly similar business model, but one that is differentiated in a handful of material ways. Insurance is really a game of inches. It’s a game of being just a little bit better than everybody else at everything along the way. One of the challenges, therefore, in considering insurance companies in their path towards digitalization, whether they’re startups or incumbents, is evaluating which changes add up to a difference. How do you assess the many intricate, small places, where if you are a little bit better at it than everybody else, you will have a much better company overall?
Startups have an advantage because they can architect themselves in the best way technologically. They are at a disadvantage because they don’t necessarily start with a lot of things they need—actual claims data, an in-force book, distribution. It makes for an interesting playing field. Can startups become like incumbents faster than incumbents can become like startups? That is who will ultimately be considered a great insurer—whoever combines the best advantages of the power of incumbency with the ability to use new technology and new data to be just a little bit better across the board.
Dr. Henna A. Karna: So, companies are wondering, “Which inch do we start with?” How do you figure out which steps are the right small steps that make the biggest impact? In my experience, we have often seen organizations focusing on what is immediately creating value, for example, on the underwriting or on the claim side. But there’s a huge gap, when we think about the broader insurance value chain, where there’s not as much innovation occurring on the reserving, on the risk, or even on the pricing.
Adrian Jones: Right. Where do you start? Where do you look first? One area might be data. The data that comes into the industry, in many cases is not standardized. It’s not necessarily high-quality data. If you’re just a little bit better than everybody at managing that data, taking it in, storing it, using it in your systems, analyzing it, and then importantly, taking executive action as a result of what the data tells you…I think that’s one big element of great insurance companies.
Chris Frankland: I think there is a challenge still on the carrier side (perhaps on the more traditional incumbent side). There is a lack of visibility around existing processes and workflows, an understanding of how all of these pieces connect together. And absolutely, a key piece is turning carrier data into smart data and trying to figure out where it can fit and benefit within the entire insurance lifecycle.
With as much as we’re seeing the technology improving and opening doors to innovation, we are now asking, “How do we understand our existing process landscape and how do we apply technology to solving those problems?” I think there’s a lot to be able to optimistic about, but still certainly challenges on the way.
Dr. Henna A. Karna: Sure. Consider a scenario where the underwriter gets the empowerment to be an influencing force on the reserving side so that the insurer can reserve more precisely and more accurately, freeing up capital to do more things in organizations where sometimes the capital gets lost. That’s not far away, technically. It’s actually very possible right now, to do all of that.
Risk Resilience: Underwriting using data and analytics
DG: This leads us into the concept of risk resilience. We’re living in a world that has increasing risk. Insurance can no longer be about just underwriting and then waiting for the claim to happen, but insurance also has to help avoid or minimize the risk, creating greater customer value.
Underwriting is at the heart of the insurance business, but we have been very focused on evaluating individual risks. Sometimes we haven’t gotten to the portfolio level, let alone even understanding the layering on of new types of risks, like climate, societal, technology, cyber, etc. These have additional implications to reserving.
What are we seeing, from an underwriting perspective, that uses data and analytics to make insurers more risk resilient? How do we engage brokers and customers more effectively in the process?
Chris Frankland : We have seen the emergence of companies who are looking at more of a continuous assessment of risk when it comes to underwriting. The once-per-year, traditional approach does not work for the new risks.
Cyber, for example, is a daily risk landscape. It changes dramatically, day by day. It is absolutely critical that we rethink traditional methods and models, and ways that we assess risk. We will likely see that that type of approach moves into other verticals. You can see it in health insurance and kind of consider where we are with wearable devices and all of the ways we can more accurately monitor and measure someone’s risk profile. I really believe that we soon have a more holistic, embedded, ongoing risk assessment approach to how we deliver insurance products going forward.
Adrian Jones: Yes, we sometimes lose sight of the societal value that insurance brings as a part of the value of insurance. We help people put a price on risk and then manage that risk down because we can manage the price down as well.
Think of early insurers like the Hartford Steam Boiler Inspection and Insurance Company. Inspection came first. This was the age of steam. Boilers were blowing up and killing people at work. So, they said, “Alright, we’re going to go inspect them. And after we inspect them, then we’ll insure them as well.” The inspection was at least as important as the insurance.
Thus the American industrial landscape became far safer. So, I think that using data for risk management and insurance is absolutely core to what insurers are doing. It is a part of the value that we bring to society and it’s a value that customers want.
Dr. Henna A. Karna: Our industry has a true mission—to save the world and make the world better. It has been always on that mission. We use our data and our technology and our people and our talent to get closer all the time.
Previously, the ability to understand risk in an actionable way was fairly expensive. But now, the analytics—how it affects our risk perspective on a micro level—is more consumable in our industry in a way that it is not going to strain our technology and our operations teams. We can do all we wanted to do in a simpler way. How do we stay simple?
One of the ways is something I’ve noticed in our industry worldwide. We are acting on the principle, “Let’s not reinvent the wheel where it has been done really well somewhere else.”
So, if we know of InsurTech organizations that are very good at ABC, we don’t need to reinvent that. Let’s lean in, and partner with them because they’re already a league ahead of us in that space and then we can do the other parts.
Using our ecosystems, we can start to understand the risks so that insurance can be predictive and preventive. That’s the flywheel effect we all want. We take the route that increases our revenue, but at the same time, it brings down the cost of those risks in such a way that it’s actually about making the world better.
Denise Garth: This certainly sounds optimistic for a world in the midst of greater risk and change, yet in our next segment, you’ll see why. The growth of embedded insurance, trends in startup/incumbent relationships, and an improvement in customer engagement methods are signals of a new era of insurance. This era will be enabled by the growth of interconnected technologies. It will be built on next-gen core platforms, partnerships, and ecosystems. It will be characterized by a greater understanding of how each small step provides value to both the customer and the organization.
It’s exciting to think about and it will be surprising as it unfolds—maybe giving insurers the perfect tools for prevention combined with the added comfort of risk resilience.
For more of the 2023 signals discussion and to hear our panelists’ predictions for the next five years, be sure to watch the 2023 Signals that are Shaping the Future of Insurance today.