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Impact of five technology forces on the Engagement Era

Source: Asia Insurance Review | Aug 2017

With InsurTech exploding and disrupting the insurance scene, Mr Ian Tavener of Guidewire shares five technology forces and their impact on the sector. 

Tectonic shifts are underway in the competitive P&C insurance world. While classic competencies still matter – establishing a quality brand, rigorous actuarial data analysis, underwriting and claims management discipline, considerate customer service – they are no longer enough. The frontier of competition and the engagement with policyholders and agents looks different today than five years ago, and may be unrecognisable 5-10 years from now.
   Here are the five technology forces shaping the Engagement Era:
1  Digital distribution is displacing agent-based sales in personal lines and will impact small commercial lines. Smartphones allow for all kinds of innovation in the product definition, making it possible to easily bring to market single-item, single-coverage, and micro-duration insurance offerings, which can be underwritten with a photo. 
2  Innovation of distribution and product design will be complemented by more sophisticated service models such as self-service, beyond basic account management. Research shows that while people prefer human interaction over robotic navigation, they also want instant problem resolution and self-service. Increasingly, both preferences will be satisfied by conversational speech software or chatbots.
   While service will remain at the heart of insurers’ differentiation, the frontier of routine tasks that can be automated will expand dramatically.
3  The artificial intelligence behind chatbots is also part of the third vector of technology change – new data sources and analytical techniques. 
   The same machine-learning techniques that identify faces in a photograph can be applied to all insurance lifecycle decisions. Several InsurTechs believe that streams of data from embedded devices will provide more sophisticated loss history detail and that new algorithmic rating approaches will be more accurate than traditional retrospective actuarial methods. 
4  Digital distribution and service plus data sophistication will drive greater personalisation. Legacy P&C core systems are organised around policies, not policyholders – ie, customers. However, today it is all about the customer: meeting on her terms, understanding her preferences, tracking information she provides and what else can be inferred. 
   This inference can provide segmentation for service level, product offering, and cross sell potential, while exhibiting a more acute current understanding of the customer.
5  Finally, the maturation of software platforms and cloud infrastructure have advanced pure technology companies and other businesses.
   Uber, who relies on us having a supercomputer in our pocket, utilises multiple platforms: Google Maps for mapping, Twilio for text messaging, etc – all running on Amazon Web Services. 15 years ago, Uber would have had to work with just the Internet and early smartphones. Today, Uber leveraged existing platforms to become the fastest growing company in history.
   As technology advances, traditional barriers to entry to deliver insurance lower and investment in “InsurTech” explodes, grand ambitions are being fuelled – challenging the core of what insurers do. 
   Primary insurers could be commoditised as the faceless backend, while the new players capture the customer relationship. Even if you believe that InsurTech players will have a harder road ahead than they may think, some will succeed and the best of their ideas will persist.
   The strategic implications of these trends are self-evident and the competitive stakes have never been higher. A 
Mr Ian Tavener has led Guidewire’s operations in Asia Pacific since joining the company in 2004. He has been responsible for Guidewire’s entry into the APAC markets, growing our customer base and building our teams in Sydney, Hong Kong, Beijing and Tokyo.
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