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Summary of The Digital Insurer’s Roundtable discussion on wearables and digital distribution – in partnership with Leo Tech

On the 22nd of March 2016, The Digital Insurer, in partnership with Leo Tech, held a roundtable discussion in Singapore with 10 senior Insurance Executives to discuss

  1. The impact of the Internet of Things (IoT) and wearbale devices on Life & Health Insurance and
  2. The impact of technology on distribution in Life Insurance.

It was an excellent discussion with lots of openness, insights and knowledge from our participants – a great example of how bringing together a meeting of minds can facilitate powerful connections and discussions.

We have summarised below the highlights from the session.

 

1. The impact of IoT and wearables on Life & Health Insurance

Opportunities

Opportunities Possible Outcome
Managing chronic disease The use of wearables to manage chronic disease has become more prevalent – they have become more medically reliable with an increasing number of Doctors willing to use them
Transforming the Operating Model to fit customer needs. Must be available 24×7 , saving Life on the go. Wearables are reliable medical proof
Increasing access to insurance Health monitoring could increase access of Term Life Insurance to previously ineligible customers e.g. those who have existing conditions
Enhancing underwriting Combining genome sequencing with wearables could be a major breakthrough in the life insurance industry and could be used for underwriting purposes

 

Challenges 

Challenges Possible Outcome
Sustaining customer engagement Use of fitbit tends to wear off after first 2-3 months; requires constant investment to maintain customer engagement
It is hard to find a sustainable model for wearable devices; It’s hard to sustain the customer engagement
Data sharing and privacy How much data that has intrinsic value to the insurer (beyond e.g. # of steps and sleep patterns) will customers be willing to share?; will customers share data knowing that it will be used for underwriting purpose

In terms of life insurance, I am skeptical about people being willing to share information with the Insurance company
Using wearables for price adjusting life insurance product like Term Life, seems to be star trek. Industry is far from digital currently

Data use Need to consider how real value be extracted for customers – devices provide data but what does it mean for the customer and how can they improve their wellness
Data validity Is it possible to extract the correct data that truly shows how “healthy” someone is and how does one measure behavioural change?
Amassing data Will insurers be able to amass this level of data or will this need to come from third parties?

 

2. The impact of technology on distribution in Life Insurance

Opportunities

Opportunities Possible Outcome
Regulators are open to change With digital, there is an opportunity to change the dialogue with regulators and to show them how processes can be improved
Making online distribution easy
  • Simple products which are easy for the customers to follow and make decisions
  • Simplifying the online acquisition/subscription process
  • There is also a need for simplification of policy processing requirements such as regulations and KYC
  • Reduce turnaround time
Differentiated products Introduction of differentiated products within different channels
Disintermediation Disintermediation of insurance is not necessarily a bad thing. If insurers become the manufacturers of the product and utilise other companies to distribute products, so a model that pursues collaboration at the front end. Not so common in Asia yet but we are seeing this in other regions – think, Beagle St, Haven Life, Sureify
Collaborating with new entrants Increasing opportunities for incumbent insurers to partner and collaborate with new entrants who are looking to enter the market and e.g. who are focusing on particular aspects of the value chain

 

Challenges 

Challenges Possible Outcome
Overcoming regulations The challenge with having a full digital process that allows straight through processing is in overcoming regulatory challenges – the industry needs to engage with regulators and get regulations smoothed out in order to allow for a full digital process
Going digital with Direct Purchase Insurance is easier as it’s a straight through product. Go outside that and it becomes much more challenging
Changing product design Focus group research shows that customers actually want to speak to someone and that they value face to face contact – they want to really understand the product and what they are buying as it is a complex product. Therefore it’s the product design that needs to change e.g. modular/configurable products that customers can actually understand. This is more so with Life Insurance than for example General Insurance which lends itself more naturally to full digitalisation
Omnichannel Omnichannel also becomes an important consideration as that allows customers to conduct each part of their customer journey through multiple channels eg research online, purchase off line
Educating consumers Life insurance is not a commodity product – it is inherently complex and expensive yet customers crave simplicity and lower prices; this is the paradox that insurers must overcome – consumer education is key for this
Focusing on front end systems Prevalence of traditional backend systems in Asia – insurers need to become more agile and make their front end systems more dynamic/simple. Most insurers will start with the back end when thinking about product design – what about if insurers focused on the front end first? New entrants are following this thinking and putting customer experience first and not worrying about back end as they can partner with insurers to do this; this is a threat for incumbents
Adjusting to emerging eco-system Incumbents and traditional insurers must successfully collaborate with this emerging eco-system/new entrants
Continuing engagement with customers Partnering and collaborating will play a key role but there is a risk that the customers become disintermediated from insurer and insurers want to be closer to the customer, they still want to own the customer – insurers must think about how they manage this

 

The quote below provides a great summary and end point for the discussions – the next two years are certainly going to be pivotal for insurance in Asia!

“Lots of large incumbents are doing the face-to-face model but what you see now is enough new insurers looking at the market and saying the way to build distribution is through disruption or digital so the conditions are absolutely right for change and disruption. The next two years are going to be interesting. I’m confident it’s not going to be one, it will be multiple insurers who will do this”

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