The global insurance industry — like every other strand of commerce and government agency — is feverishly focused on leveraging the benefits of a digital environment. The development and adoption of insurtech has a clearly defined progression. The first of these two phases began with a focus on digital distribution and data, the second was heavily focused on sales and marketing. 

In the first phase, the underlying insurance product remained more or less the same, but some parts went digital.

The second has seen the emergence of risk carriers that are changing the underlying insurance product and using insurtech to automate the value chain. This second phase has seen considerable advances in new sources of data and the ways in which data is processed.

 

Clear and present danger

Those carriers that show the greatest innovations also pose considerable threat to traditional insurers’ models. This is not only because they are doing things never previously conceived, but because they have the technology working now and incumbents have yet to build — or adopt others’ — technology platforms.

That may not pose an immediate problem, but insurers must start preparation now if they are not to see their businesses damaged by ‘early adopters’.

Adoption is not a simple case of bolting on a few peripheral systems. Or be seen as a chance to refresh the business in a piecemeal fashion by simply moving traditional business online. It offers the opportunity — and requires — total transformation of the existing business model.

How they handle this repositioning of the business strategy will likely determine whether they are considered a tinkerer or transformer and indicate how sustainable their business will have become. Market commentators suggest the industry will have been transformed in as few as 3 or 4 years and no longer than a decade. This means insurers must have a digitally focused and automated digital-first/customer-first business that would be comparable to the tech giants of today.

 

Building the future on partnership

Some incumbents have been investing in insurtech already with mixed results. They have accepted they cannot easily build tech themselves and may increasingly view insurtech companies as partners rather than competitors.

Most of the tech to be deployed in the next phase is expected to be on value chain innovation, to reduce cost, improve efficiencies and generate ecosystems that will support future insurtech developments.

This will represent a complete 180-degree shift in focus from processes to placing the customer at the heart of everything insurers seek to achieve. Focusing on the customer allows insurers to develop a service that is considerably better than the existing model.

Products can launch quicker, meet customer needs better, capitalize on a broad range of existing data and build on practical experience. These foster services and products that are relevant, and operate on a high-speed, customer-centric front-end.

 

Where to start?

There will be a major trend to API or microservices architecture in order to work around the transactional legacy systems, but also allow interconnectivity with many other systems.

At all times, the customer must be at the center of the process design, and robotic process automation (RPA) will increasingly be deployed to offer better customer interaction and data harvesting.

Building a platform business requires state-of-the-art technology and very fast and flexible time to market. This is not achievable on legacy systems alone. Insurers will have to invest in customer-facing digital platforms, intelligent automation to streamline processes, and develop smart contracts for claims and predictive underwriting.

_{The excerpt was taken from the KPMG publication entitled Insurtech 10: Trends for 2019.}