Article Synopsis :
This report from Oxbow Partners focuses on the Lloyd’s and London markets, which it considers initially viewed insurtech with interest, but little understanding of the potential for change.
They may believe their corporate and speciality markets are isolated from the surge of insurtech because they are specialist, but this would fly in the face of all the evidence
Insurers, reinsurers and managing agents have created ‘labs’ while corporate insurers are busy creating new products.
Don’t be distracted by noise
The example given in the report is Beazley’s ‘Breach Response’ cyber product that offers pre- and post-loss services in addition to liability coverage.
The SME insurance value chain is being re-engineered and while it can be debated whether insurtech is the chicken or the egg, it is certainly transforming the way business is being conducted.
Oxbow argues this is all just noise. It doesn’t identify insurtech as being essentially different from other industry trends and it covers both the new generation of rapidly developing startups and the trend of implementing swifter technology-led innovation which is facilitated by insurtech (and other third parties) deliver new business models, products, distribution channels, etc.
What the commercial and speciality insurance has to understand is that insurtech has arrived in the “Lloyds heartland” and the pace of change will only increase in the coming years.
The report identifies four key drivers of change:
- Insurance market forces: Lloyd’s and London have an expense ratio of around 40% which is unsustainable. Technology is already being put to work to reduce this.
- New technologies: Artificial intelligence (AI) and natural language processing (NLP) are not hopes for the future but work now and implementation can be accelerated. In addition, analytics is changing the nature of the products, driving growth and closing protection gaps for customers.
- Demand changes: The digital customer already exists, and digital customers want to buy digital products.
- Socio-technological changes: Change isn’t only happening inside the industry, but everywhere and will only accelerate. This report considers the impact of 3D printing and how insurers must adapt and develop new solutions in response to that changing world.
The pace of adoption will accelerate
It is essential to have a detailed understanding of one’s own organisation and also how competitors, service providers, and possible future competitors are behaving.
It suggests that if a particular piece of insurtech is proven, implementation will be rapid providing early adopters with a considerable competitive advantage.
Managing agents are nimbler than many insurance companies and this provides the Lloyds market with an advantage.
They can also take advantage of Lloyd’s extensive licenses and their own relatively simple international management structures to take this technology globally and apply it in other markets. It offers them the opportunity to keep London at the center of insurance innovation, but it needs to be adopted from the board down and vested interests ignored.
This may require a new vision for the senior executives, but profit from the changes rather than be swamped by it, that environment needs to be created today.
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Digital Insurer's CommentsThis report is making it clear that there are opportunities for managing agents to take advantage of the innovations offered by insurtech.
It also makes it abundantly clear that those who fail to take advantage can anticipate being left behind.
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