“Insurance is dead – long live Insurance!”
At a conference last year, I started my presentation by making the above statement.
Bold? Yes, but I firmly believe there has never been a more exciting time to be in insurance – especially health & life insurance, and reinsurance – as innovation/disruption is happening. Are there hurdles? Absolutely. The industry has many legacy systems and is working in a heavily albeit softening regulated environment which has shaped the culture and the thinking. But what insurers do next is really a matter of life and death for them.
Is the future of the industry a technology company offering insurance (eg PingAn, ZhongAn), or is it an insurance company embracing digital technology (eg AIA, Southern Cross)?
The jury is still out but it is certain that InsurTech will play a key role because customers are digital, and because it drives efficiency and interconnections which is vital in a low yielding insurance environment.
It is also certain that it is happening now. The number of times “InsurTech” appeared on social media has increased by 800% in the last 12 months, while Swiss Re stated that investment into InsurTech so far is only 1/10 of FinTech despite insurance being 25% larger, and Morgan Stanley stated that the difference in expense ratios between a legacy insurer and a digital insurer can be more than 20 percentage points. Undoubtedly, we will see big changes in 2017 and onwards.
Making the offering relevant to the consumer
There is an increasing gap between what insurers offer and what consumers are looking for. Consumers are highly digital and insurers are anything but.
According to BCG, insurers are one of the least digital industries. Also with the significant increase in healthcare cost from chronic diseases driven by an ageing population and obesity, governments can no longer afford to keep up with the cost of healthcare. Gradually the cost burden is shifting to the individual who will be struggling to pay the cost of health and digitisation – directly and indirectly from insurance premiums – so there is an increasing interest in prevention out of necessity.
The insurance industry is inherently a reactive business (waiting for the accident to happen) whereas consumers are looking for a more proactive approach (preventing the accident from happening) ie make Health Insurance about good health, and make Life Insurance about good life. In here lies opportunities for the trusted industry who often has no interaction with the customers for years and even decades.
Use InsurTech to engage consumers on their life journey – prevention and protection – and become highly relevant. With mobiles, wearables/apps, and lifestyle navigation platforms (such as dacadoo’s), the pieces are all available.
Digital Health – A honey pot for underwriting
Over the last few years, we have seen the gradual making of the largest industry ever – a US$10 trillion Digital Health – which is the interconnection and in some cases the amalgamation of primary health, pharma, MedTech, technology, digital, gamification/social, and of course insurance.
Technology plays a key role and what used to be segregated and paper based silos are coming together as one Digital Health industry – an industry where unprecedented health data is more easily accessible often in real-time, and which places the consumer at the centre.
Given insurance has always been about understanding and pricing Big Data, Digital Health offers new opportunities in refining actuary models, in better understanding segment and individual risk, and hence ultimately to offer more bespoke products and pricing.
In auto insurance, we have “Pay as you Drive” and “Pay when you Drive”, and in Life and Health Insurance, we are now seeing “Pay as you Live” emerging as a new pricing model. We are moving towards a much more refined underwriting model with more and better data, and InsurTech is the connection to Digital Health. With these new insights, it will also allow the industry to service individuals who are managing their condition well and hence is a predictable risk for industry. This is potentially greenfield revenue.
2017 and beyond will truly be a matter of life and death, and InsurTech is the key.
Mr Thomas Dijohn is Vice-President Asia-Pacific at dacadoo.