Written by Rick Huckstep
In no particular order, here are ten of my predictions for the coming year.
#1 Lemonade will provide the Uber moment the industry has been waiting for
The Lemonade story is quite phenomenal. In a little over a year; they built a tech platform to operate as a full stack carrier. They got licensed in one of the toughest States in the US. They raised $60m investment and got underwritten at Lloyd’s. They went live in September with a 5x cheaper proposition that customers are tweeting about. Last week they announced plans to go nationwide in 2017.
But, the most significant factor about Lemonade is that they are doing insurance differently, whilst also doing it the same. Just like Uber do transportation. They get you from A to B in a car, just like taxis have been doing forever. But Uber also do it differently in a way that customers have noticed and they have liked. I think insurance customers will be saying the same about Lemonade this time next year. However, the opinion expressed in this twitter poll shows that the majority doesn’t agree with me. We will just have to wait and see!
# 2 Blockchain will move rapidly from pilot to POC in the commercial and wholesale markets.
There will be two techs that dominate insurance in 2017. One will be blockchain and I stand by the predication I made a year ago on this. Whether the consortia approach with B3i will succeed or go the way of R3, only time will tell. But what is clear is that the insurers have been quietly checking on blockchain’s viability throughout 2016. And they like what they see! Now, we will see a rapid chase for first mover advantage, especially in the wholesale and commercial markets as insurers see the order of magnitude benefits on offer. Genuine blockchain expertise will be highly valued!
One to watch is London based, ChainThat. To find out more about why blockchain matters to the insurance markets, go here and here for more on ChainThat. And look out for the next issue of InsurTech Insights on the subject of blockchain and commercial (re)insurance.
#3 AI will dominate mobile customer engagement
The other key tech that will dominate insurance in 2017 is Artificial Intelligence (see early reports on the success of Amazon’s Alexa). AI takes many forms, but the focus will be customer experience and the use of (chat)bots for quote and buy, simple claims and policy admin. There are situations where humans will still want to talk with a human, such as reporting an RTA. And remember, the AI tech still has a way to go. But the focus on AI will enable insurers to serve mobile customers at their point of need (customer’s need, not the insurers need!). To see the future, go East young man and look at WeChat and Zhong An
Or watch this video of Hugh Terry conversing with robot Sophia
AI will be a subject covered in InsurTech Insights in the next couple of months, when I talk again with Spixii, who I first covered back in April 2016, here.
#4 Customer Experience will replace Operational Efficiency as No1 strategic agenda in the boardroom
There’s been enough navel gazing on this one. If incumbents have learnt one thing from the InsurTech startups, it’s that focusing on the customer is the secret to success. Encumbered with legacy IT, large work forces and unwieldy workflows, the largest insurers cannot change quickly enough (4th Industrial Revolution and all that!). They will start to separate out their legacy insurance operations and create wholly new digital insurance businesses in partnership with InsurTech digital platforms. As Gartner predicted back in 2015, the fastest growing companies will have fewer employees than smart machines. The largest insurers will become as nimble and agile as a startup!
#5 InsurTech will merge into the mainstream and become Business As Usual by end 2017
For an industry that is used to coming second to a snail in the 1 metre dash, the move to embrace InsurTech has been a revelation! By the end of the year, the lines will be blurred between the innovative startup and the incumbent insurers. The number of startups will also start to fall away as the gaps and spaces for innovative thinking run dry (for a while at least). We will see several things happen as the old and new world fuse together;
- Incumbent insurers will partner with InsurTech platforms to launch new digital products (see #4 above)
- Digital strategies take hold within established insurers as they build their own capability
- InsurTech startups will be acquired by the established players on the supply side as they seek relevancy (such as software vendors, like Guidewire; the tech providers, like IBM; and the consultancies, like, all of them!)
- First generation InsurTech’ers hit scale and become mainstream
#6 Personal lines value-chain will start to change shape
#7 Connected Insurance will remain a distribution play
Telematics, Wearables and IOT all promise better risk management and customer engagement. But, despite lots of activity in the market from both startups and incumbents, the underlying insurance products remain largely the same. Until actuaries define whole new models and insurers start to underwrite products using these new sources of data, the use cases for connected insurance will continue to be defined by how products are distributed, not by how they are priced.
#8 P2P Insurance will still be searching for scale at the end 2017
So far, no business model has come forward and defined what P2P Insurance is. However, they all have one thing in common, which is to redefine trust in the relationship between insured and insurer. This is a noble ambition and long overdue. Personally, I want to see P2P insurance succeed and establish itself as a significant way of doing insurance business. I see many merits in all 3 waves of P2P insurance. However, just maybe, when we look back at how Lemonade have redefined trust in 2017, we will also see the beginning of the end of P2P insurance. Just saying!
#9 The “buying” of insurance will get easier
Two of the biggest barriers to buying insurance is (a) product complexity, aka, jargon, and (b) inconsistency of terms between competing products, aka, jargon. Getting a simple, apples for apples comparison is damn near impossible for Joe consumer. And regulators have done little to help consumers navigate this maze. The price comparison sites haven’t solved this well enough either, nor have the digital brokers. The space is open for InsurTech to use sophisticated meta search, APIs and algorithms to provide consumers with simplified comparisons tailored to their needs. This is why I see the emergence of the digital introducer as the space to watch. (BTW, I don’t see the digital insurance wallet taking off, not until a better customer proposition is put forward!)
#10 Speed to Pay will become key measure in claims settlement KPIs
Tech enabled claims handling will increasingly become automated and self-serve in the hands of the customer. This addresses the unintended consequences of insurer’s efforts to contain costs and fight the fight against fraud. Up until now, insurers have built inefficiency, bureaucracy and layers of cost into their workflows. These impede customer service (from the customer’s perspective).
InsurTech digital claims management platforms, videotech and self-serve claims solutions offer insurers a way to start again. Putting the customer first and in control, claims handling will shift to being a process based on speed to pay. Fraud will always be there and tech can prevent much of it. But the shift to speed to pay will benefit both insurers and customers in the long run.
My Top Picks of the InsurTech Predictions Lists
The following are some of my favorite expert predictions (in no particular order, no favoritism and only from those available at time of writing!)
John Warburton – predictions from the broker perspective
Nigel Walsh – the teacher marking his own homework
Oliver Bussman – the year of the pilot
CBInsights – round up of InsurTech in 2016
InsuranceAge – top 10 predictions
Daily Fintech – 2017 predications for InsurTech
Cap Gemini – Top 10 trends in insurance 2017
The Financial Brand – Top 5 InsurTech trends
Reggy De Feniks – 10 Insurtech trends that set the digital agenda
Jean-Claude Sudre – The Insurance Model 2035
The author, Rick Huckstep, is an InsurTech thought leader, public speaker and Chairman, The Digital Insurer.