InsurTech - Setting New Trends in Insurance World

Ranjit Nair, Director, Engineering, GlobalLogic

Ranjit Nair, Director, Engineering, GlobalLogic

The advancement of technologies is playing a crucial role in transforming the lives of customers, especially of the Insurance companies. Due to emerging need to go Digital, Insurers’ are evolving, collaborating, and investing more with Insurtech firms to discover greater opportunities for efficient ecosystem. These new technologies - broadly categorized under the name InsureTech - are revolutionizing the way of doing business and causing a fundamental disruption in the Insurance ecosystem.

InsurTech is fundamentally a component of the overall FinTech wave which was embraced by Banking, Financial services, and Capital markets companies several years ago. There is a growing recognition across the financial services sector that, while banking and capital markets built up a considerable weight advantage by starting their FinTech journeys earlier, it is the insurance industry that will ultimately see the greatest benefit – and the highest levels of disruption – from this global upsurge of innovation.

With that, there are four broad areas that are setting new trends in the Insurance world:

1. Cyber Insurance
In cyber insurance, a suite of new products is beginning to emerge as insurers jostle to provide the best solution for a market that not too long ago did not even exist. This has opened up new revenue streams for insurers and, in several instances, whole new carriers have sprung up to try and fill the gap in the market as it grows. Cyber insurance coverage helps to meet evolving threats, and need for protection is in demand for following areas:

● Privacy Liability - A failure to maintain confidentiality of data
● Network Security Liability - The unauthorized use of your networks
● Media Liability - Your online media liability
● Cyber Extortion - Network or data extortion / blackmail
● Data Asset Loss - Data loss and restoration including decontamination and recovery
● Business Interruption - Due network security failure or attack

Challenges:
Cyber insurance has lack of historical data, reporting of cyber-attacks that are not consumer based, no geo boundaries, source is hard to find (need forensic analysis), assessing the financial impact direct/indirect. Determining liability sees goalposts constantly shifting as regulators redefine responsibilities and new types of risk emerge.

Opportunities:
Insurers have biggest success on cyber insurance where risk mitigation and improving risk profiles of customers are being used.

They invest in cyber security technology firms and bring in solutions to the customers for prevention of cyber-attacks. Using the threat analysis data predictive analytics of insurtech solutions are used to define policy coverage and prevent claims.

2. Autonomous driving
The shift to autonomous vehicles will cause dramatic changes in how insurance premiums are generated. With most autonomous vehicles likely to be owned by original equipment manufacturers (OEMs), OTT players, and other service providers such as ride-sharing companies, the number of individual policies will decline, reduction in claims, along with revenues from premiums generated by these policies.

Challenges:
This will create issues for insurers when it comes to liability. It will raise the question on the motor policies of the future to insure the owners of an autonomous vehicle, and if there will be a provision of liability cover for the manufacturer.

Opportunities:
Advanced Driver Assistance Systems (ADAS) are now the norm for all new cars, providing drivers with a suite of tools such as lane departure warnings and automatic braking to improve safety and reduce risk. Telematics technology, meanwhile, is already changing the way policies are underwritten with the additional data it provides on things like driving style, time of journey and driving location.

3. New ways of thinking and working
Changing attitudes of millennials and Generation Z are already transforming the way insurers are expected to do business. Digitally native, they expect the speed and flexibility which includes insurance.

Challenges:
These new generations are not content with an annual premium bought on a price comparison website focused purely on cost. They want to buy insurance from a service provider that makes their lives easier and lessens the stresses associated with modern life – their focus is on value and benefit, not just money. Older people are also increasingly demanding flexibility to meet their shifting needs, as jobs for life become a thing of the past, life expectancy increases, and everyone has to think about ways to make their money and possessions last longer.

Opportunities:
Insurers who succeed with this growing market are able to offer policies that start when they are needed and stop when they are no longer required, meaning mid-term adjustments will become a thing of the past. For insurers, creating a service that meets the needs of these new customers is essential for their future success.

4. Climate change
Climate change is arguably the biggest challenge facing humanity today. For insurers, it also presents an array of new uncertainties that make pricing risk harder than ever.

Challenges:
But the unknowns about exactly how the climate is changing and what impact this may have are making it harder for insurers to project claims into the future and estimate the risks they may be facing when underwriting a policy. The assessment of the risks associated with catastrophic failures is complex in nature and hard to define the coverage, pricing, and liabilities caused.

Opportunities:
While there are obvious benefits here for policyholders, the business case for insurers is also clear, as any mitigative measures that can be deployed should also help reduce the cost of claims – and so boost insurer profits. This presents huge opportunities for insurers to think and act differently and so meet the needs of a whole new market of customers.

And ultimately this is what the next wave of insurance is all about – insurers using technology, real-time insight and deeper customer engagement not only to improve their own financial performance, but to improve the lives of their customers, and the resilience of society and the planet as a whole.