In search of a new ‘dominant design’ for the industry. What does insurtech have to offer?

There is little in the world of insurtech happening today that insurers couldn’t arguably choose to do for themselves if they were motivated to do it. They have the capital to invest. They have resources and could hire to fill gaps in any new capabilities required. They importantly understand the market and know how to move with the trends. And yet, despite having all of these things, they readily engage with the start-up community to do the things that arguably they could do for themselves.  So, why is that?   

In Making the Most of the Innovation Ecosystem, Mike Fitzgerald’s observes the main cultural differences between insurers and the start-ups they court. These cultural differences give us a strong clue as to why insurers engage with start-ups, even though on paper they do not and should not need them.

Alongside these deep cultural differences, I believe that there is another angle worth exploring to help answer the question, and that’s the market’s maturity stage and, with it, the strategies required to succeed.

One model that helps explain this relates to the work of Abernathy and Utterback on dynamic innovation and the concept of the ‘dominant design’. To be relevant to this discussion, you first need to believe that we’re on the cusp of a shift from an old world view of the industry based upon a well-understood and stable design towards one where substantial parts of the insurance proposition and value network are up for grabs. You also need to believe that, for a period at least, these two (or more) worlds will co-exist.

So, here’s a quick overview of the model (in case you’re not familiar with it)…

Settling on a “Dominant Design”

First introduced way back in the mid-1970s and based upon empirical research (famously using conformance towards the QWERTY keyboard as an example), Abernathy and Utterback observed that when a market (or specifically a technology within a market) is new, there first exists a period of fluidity where creativity and product innovation flourishes. During this period, huge variation in approaches and product designs can co-exist as different players in the market experiment with what works and what does not.

In this early fluid stage, a market is typically small, and dominated by enthusiasts and early adopters. Over time, a dominant design begins to emerge as concepts become better understood and demand for a certain style of product proves to be more successful than others. Here, within an insurance context, you'd expect to see high levels of change and a preference for self-build IT systems in order to control and lower the cost of experimentation.

Once the dominant design has been established, competition increases and market activity switches from product innovation to process innovation – as each firm scrambles to find higher quality and more efficient ways to scale in order to capture a greater market share. This is the transitionary stage. 

Finally, at the specific stage, competitive rivalry intensifies spurred on by new entrants emulating the dominant design, incremental innovation takes hold and a successful growth (or survival) strategy switches to one that either follows a niche or low-cost commodity path. Within an insurance context, outsourcing and standardisation on enterprise systems are likely to dominate discussions.

Applying the ‘dominant design’ concept to the world of insurance and insurtech

Building upon the co-existence assumption made earlier, within the world of insurtech today, there are broadly (and crudely) two types of firm: (1) those focused on a complete proposition rethink (such as Trov, Slice and Lemonade); and (2) those focused on B2B enablement (such as Everledger, Quantemplate and RightIndem). The former reside in ‘Fluid’ stage (where the new ‘dominant design’ for the industry has not yet been set and still may fail) and the latter in the ‘Transitionary’ stage (where the dominant design is known, but there are just better ways to do it).

Figure: Innovation, Insurance and the 'Dominant Design'


(Source: Celent – Adapted from Abernathy and Utterback (1975)

Outside of insurtech, within the 'Specific' stage, there is the traditional world of insurance (where nearly all of the world’s insurance premiums still sit by the way) that is dominated by incumbent insurers, incumbent distribution firms, incumbent technology vendors, and incumbent service providers.

So what? 

What I like about this model is that it starts to make better sense of what I believe we’re seeing in the world around us. It also helps us to better classify different initiatives and partnership opportunities, and encourages us to identify specific tactics for each stage – the key lesson being "not to apply a ‘one-size fits’ all strategy to the firm".

Finally, and more importantly, it moves the debate on from being one about engaging insurtech start-ups purely to catalyze cultural change (i.e. to effect the things that the incumbent firms cannot easily do for themselves) towards one begging more strategic and structural questions to be asked, such as will a new ‘dominant design’ for the industry really emerge?, what will be its time-frame to scale?, and what specific actions are required to respond (i.e. to lead or to observe and then fast-follow).

Going back to my original question “What does insurtech have to offer?”. Insurers can do nearly all of what is taking place within insurtech as it exists today by themselves…but, as stated at the start of this blog, if, and only if, they are motivated to do so.

And there’s the rub. Many incumbents have been operating very successfully for so long in the ‘specific’ stage optimizing their solutions that making the shift required to emulate a ‘fluid’ stage is a major undertaking – why take the risk?. However, this is not the only issue that is holding them back. For me, the bigger question remains one of whether there is enough evidence to show the existence of an emerging new ‘dominant design’ for the industry in the ‘fluid’ stage that will scale to a size that threatens the status quo. Consequently, in the meantime, partnering and placing strategic investments with insurtech firms capable of working in a more ‘fluid’ way may offer a smarter more efficient bet in the meantime.

In a way, what we’re seeing today happening between insurers and insurtech firms  is the equivalent of checking out the race horses in the paddock prior to a race.  Let the race begin!







Where is the innovation in Individual life and annuity?

I had the pleasure of attending an amazing event last week in Las Vegas. The InsureTech Connect event drew over 1,500 people, from insurers to vendor to investors. Given the unprecedented size of an inaugural event, I was very impressed with how well the event worked. The sessions were good, but for me, the opportunity to have individual meetings with key industry players was even better. Our own Oliver Wyman was the primary sponsor of the event.

As I cover individual and group products, plus health and have an experience in P&C, I personally got a lot out of the event. I did have one major observation which I think speaks of the individual life and annuity industry. While I did not do a scientific study, I would estimate that over 50% of the content was focused on P&C insurance. This is not particularly surprising as they have all the cool technology like drones. My estimate was that the group insurers and health insurers were about 45% of the content, with an emphasis on topics like wellness programs and direct to consumer exchanges.

If you did the math, this only leaves 5% of the content for individual life and annuity products and that may very well have been a stretch. There was one session on eliminating the health data gathering for underwriting, which was well done and well attended, but past that, not so much.

Some insurers are diversifying, into Group or Wealth management, but I would not characterize that as innovation.

So what is holding us back as an industry? There are many things, from risk aversion, to length of the application to the sheer amount of data required for underwriting. I could write pages and pages on the topic, which explains why the next blog post you read from me is likely going to discuss the report I am finishing on this exact topic.

The potential for disruption in the space is huge and the coveted Millennial buyer is looking for just such innovation. Let’s make it happen.

The 2017 Model Insurer Nominations Start Now

It’s been five months since we awarded Zurich with our top distinguished award, Model Insurer of the Year, during our Innovation & Insight Day (I&I Day) on April 13. I&I Day has been growing and gaining recognition since its inception over 10 years ago. Over last two years, more than 250 financial services professionals joined us in New York City at Carnegie Hall in 2015 and at The Museum of American Finance in 2016 to celebrate the Model Insurer winners.

From September 15, we will be accepting Model Insurer nominations. The window for new entries will close on November 30. We are looking forward to receiving your best IT initiatives. You may be announced as a Model Insurer at our I&I Day in 2017. The Model Insurer award program recognizes projects that essentially answer the question: What would it look like for an insurance company to do everything right with today’s technology? It awards insurance companies which have successfully implemented a technology project in five categories:

  • Data mastery and analytics.
  • Digital and omnichannel technology.
  • Innovation and emerging technologies.
  • Legacy transformation.
  • Operational excellence.

Some examples of initiatives that we awarded early this year are:

Model Insurer of the Year   

Zurich Insurance: Zurich developed Zurich Risk Panorama, an app that allows market-facing employees to navigate through Zurich’s large volumes of data, tools and capabilities in only a few clicks to offer customers a succinct overview of how to make their business more resilient. Zurich Risk Panorama provides dashboards that collate the knowledge, expertise and insights of Zurich experts via the data presented.

Data Mastery & Analytics

Asteron Life: Asteron Life created a new approach to underwriting audits called End-to-End Insights. It provides a portfolio level overview of risk management, creates the ability to identify trends, opportunities and pain points in real-time and identifies inefficiencies and inconsistencies in the underwriting process. 

Celina Insurance Group: Celina wanted to appoint agents in underdeveloped areas. To find areas with the highest potential for success, they created an analytics based agency prospecting tool. Using machine learning, multiple models were developed that scored over 4,000 zip codes to identify the best locations.

Farm Bureau Financial Services: FBFS decoupled its infrastructure by replacing point to point integration patterns with hub and spoke architecture. They utilized the ACORD Reference Architecture Data Model and developed near real time event-based messages.

Digital and Omnichannel

Sagicor Life Inc.: Sagicor designed and developed Accelewriting® , an eApp integrated with a rules engine; which uses analytic tools and databases to provide a final underwriting decision within one to two minutes on average for simplified issue products.

Gore Mutual Insurance Company: Gore created uBiz, the first complete ecommerce commercial insurance platform in Canada by leveraging a host of technology advancements to simplify the buying experience of small business customers.

Innovation and Emerging Technologies

Desjardins General Insurance Group: Ajusto, a smart phone mobile app for telematics auto insurance, was launched by Desjardins in March 2015. Driving is scored based on four criteria. The cumulative score can be converted into savings on the auto insurance premium at renewal.

John Hancock Financial Services: John Hancock developed the John Hancock Vitality solution. As part of the program, John Hancock Vitality members receive personalized health goals. The healthier their lifestyle, the more points they can accumulate to earn valuable rewards and discounts from leading retailers. Additionally, they can save as much as much as 15 percent off their annual premium.

Promutuel Assurance: Promutuel Insurance created a new change management strategy and built a global e-learning application, Campus, which uses a web-based approach that leverages self-service capabilities and gamificaton to make training easier, quicker, less costly and more convenient.

Legacy Transformation

GuideOne Insurance: GuideOne undertook a transformation project to reverse declines in its personal lines business. They launched new premier auto, standard auto, and non-standard auto products, as well as home, renter and umbrella products on a new policy administration system and a new agent portal.

Westchester, a Chubb Company: Chubb Solutions Fast Track™, a robust and flexible solution covering core business functionality, was built to support Chubb’s microbusiness unit’s core mission of establishing a “Producer First,” low-touch mindset through speed, accessibility, value, ease-of-use and relationships.

Teachers Life: Teachers Life has achieved a seamless, end-to-end online process for application, underwriting, policy issue and delivery for a variety of life products. Policyholders with a healthy lifestyle and basic financial needs can get coverage fast, in the privacy of their own homes, and pay premiums online in as little as 15 minutes.

Operational Excellence

Markerstudy Group: Markerstudy implemented the M-Powered IT Transformation Program which created an eco-system of best in class monitoring and infrastructure visualization tools to accelerate cross-functional collaboration and remove key-man dependencies.

Guarantee Insurance Company: In order to focus on their core competency of underwriting and managing a large book of workers compensation business, Guarantee Insurance outsourced its entire IT infrastructure.

Pacific Specialty Insurance Company: Complying with their vision is to become a virtual carrier, meaning all critical business applications will be housed in a cloud-based infrastructure, PSIC implemented their core systems in a cloud while upgrading infrastructure to accommodate growth in bandwidth demands.

If you have completed a project during the last two years that you feel is a role model for the industry, don’t hesitate to send us your initiative here. You may be the next Model Insurer of the year.

For more information about the Model Insurer program click here, leave a comment, or email me directly at I’d be more than happy to talk with you. The Celent team and I are looking forward to hearing from you and meeting you in person at the 2017 Innovation & Insight Day.

See you there!

How the IoT caused the Internet of Upside Down

The architecture around the Internet of Things and the constraints it poses has fascinated me for a long time. The good news for insurers is integrating the Internet of Things into insurance processes has some fairly common patterns now as described in my recent report []. For those with responsibility for the infrastructure of the Internet however, it is providing some interesting headaches. 
Upside down?
Why do I say upside down? In the early days of the Internet it was a collection of machines each with broadly the same importance connected together. As information services moved onto the Internet, followed by commerce and retail sites, banks and insurers and then streaming companies the Internet shifted more towards many machines seeking to consume from a (relatively) few machines. 
To support this demand architectures evolved to n-tier structures where data storage areas sat behind application servers, which sat behind web servers and then, not that long ago, caching servers and content delivery networks. 
The Internet has become a pyramid with a consumers machines at the bottom, hooked up to broadband geared towards downloading content quickly and increasingly powerful infrastructures delivering that content to be consumed. 
And then homes became data rich farms…
Suddenly homes are the sources of data everyone wants! Key information possibly of use to insurers even, now sits on devices at the bottom of the pyramid. In practice the Internet is shifting more towards the structure it had originally, but the infrastructure supporting todays services is not well suited to this new paradigm – or perhaps one that has re-emerged. 
In practice, most of this activity has moved from a pyramid to a less structured cloud already but software of the Internet is still catching up. 
So as you're looking at InsurTech firms or attending InsTech groups spare a thought for those poor architects and operations staff of the Internet and the headaches you're causing. 

Guidewire Acquisition of FirstBest – A Wakeup Call for Core Suite Vendors?

The Guidewire acquisition of First Best should come as a wakeup call to other suite vendors in the marketplace.   Not to be a doomsayer, but the reality is the market for core system replacements is shrinking.  Many carriers are in the middle of a replacement or have already completed their replacement.  There are fewer and fewer deals to be had and more and more vendors in the marketplace chasing those deals.  

Let’s look at the numbers.   Donald Light’s recent PAS Deal Trends report shows that we’ve seen an average of around 85 deals a year over the last two years.  But there are more than 60 suite vendors out there.  Of those available deals, a very few key vendors – including Guidewire – will likely get half or more of them.   That leaves around 40 deals for the remaining 60’ish vendors.  That’s less than one each.  And that’s IF we assume the market will stay steady at 80-85 deals a year. This basic math shows that many core suite vendors will not get a single deal in 2017.  

So how can vendors satisfy their shareholders?  How can they generate growth and remain viable players?  The truth is some of them won’t.  But smart vendors are thinking about other options for growth.  And they have a few paths they can take. 

  • Sell things other than suites.  This is the tactic that Guidewire is showing with their recent announcement of the FirstBest acquisition and is also illustrated by their prior acquisitions of Millbrook and Eagle Eye.  Duck Creek is doing the same as shown by their acquisition of Agencyport.  Providing other core applications that carriers need allows a vendor to continue to grow their existing relationships, and allows them to create new relationships with carriers – even if the carrier doesn’t need a new core system.  Some vendors will purchase these additional applications; others will build them.
  • Sell to a different market – Insurity’s acquisition of Tropics lets them go down market to work with small WC carriers.  Their acquisition of Oceanwide gives them the ability to handle small specialty, or Greenfield projects.  While there are still plenty of deals to be done in the under $100M carrier market, most vendors can’t play in this space. Their price points won’t work for small carriers, and their implementation process won’t work. It’s too expensive and takes too many carrier resources.  The implementation process has to be drastically  different for a carrier with only 6 people in the IT department than it is for a larger carrier.   This strategy of going down market only works if a vendor can appropriately sell and deliver their solution to a small carrier while still making margin – and many vendors just can’t do that. 
  • Enter a different territory – Vue announced today they’ve entered Asia with Aviva; Sapiens entered the US by purchasing MaxProcessing.  And we see other vendors including Guidewire, EIS, and Duck Creek moving outside the US.
  • Sell services – many vendors provide cloud offerings – which provides a steadier stream of income.   Vendors such as CSC or The Innovation Group (prior to the split) had/have a large proportion of revenue coming from services.  Vendors like ISCS provide additional BPO services such as mail services and imaging.   

Any of these strategies are viable – but I predict we’ll see more vendors using them as the market for core system replacements shrinks.  Smart vendors are already thinking ahead, working on their long term strategy. 

Carriers who work with these vendors should be watching as well.  No one wants to work with a vendor that won't be here for the long term.  If you’re a carrier considering a new system –

  • Make sure your vendor is showing momentum – new sales.
  • Look to see what the signals are for their long term viability – will they be a survivor selling new suites?
  • Do they have the resources to create or acquire new capabilities like portals, analytics or distribution management?
  • Are they entering new markets, new territories or providing new service offerings?

If you don’t see these signals, you may want to start having a conversation with your vendors today. 



Complexities, Capabilities and Budgets

I've just published a new report called Complexities, Capabilities, and Budgets.   Here's a quick overview – ping me if you'd like to chat in more detail aboaut it.

Insurance is being transformed by rapid changes in information technology, skyrocketing customer expectations, rapidly evolving distribution models, and radical changes in underwriting and claims. How are IT organizations changing to accommodate the new capabilities they’re delivering, and how are budgets shifting to accommodate this transformation?

In this environment, IT leaders have had to become very smart about how to run, grow, and transform the business with relatively stagnant budgets. The most effective IT leaders have assumed a strategic role in guiding their companies.  

A growing number of leaders have made understanding and maximizing the value of IT a critical part of their missions. Insurers that have moved toward an outcome-based measure of IT value are increasing, and CIOs using value-based metrics are increasingly seen as more strategic members of the teams.

Most carriers have not increased IT resources significantly to meet these challenges.  Insurer IT budgets have stayed fairly flat as a percentage of premium over the past 10 years, although the percentage spent on maintenance is shrinking as carriers invest more in new capabilities. 

Looking out for the next two to five years, Celent believes that carriers will continue to rapidly deploy new technologies. Measurements of IT value will continue to mature and shift toward value metrics (those looking at the outcomes of cost, time, and value improvements) to rate the performance of IT. This will enable a more informed debate over where to spend scarce IT dollars. 

For many insurers, the approach toward IT budget construction and the measurement of value remains rooted in a traditional approach of centrally planned budgets and top-down portfolio metrics which can mask where IT value is being delivered,  IT organizations that are seen as more strategic are more likely to measure the overall financial impact of technology delivered.

The privacy bomb and cost of personal data debt

I often hear architects talk about technical debt but it strikes me that a different debt is waiting for insurers.

Imagine a world where the regulator says that a customer owns data about the customer, regardless of where it is stored. The key observation here is the decoupling of ownership and control with storage. Most regulators have gone nearly this far and made statements about consumer ownership of consumer data, so perhaps it's not out of step with reality. This is discussion so far but perhaps the technology hasn't caught up with the intent. If we ignore the limits of technology …

There are perhaps 3 models emerging:

  • A. The data remains where it is and is controlled from there. Requires APIs…
  • B. The data moves as customer moves. Requires data standards…
  • C. Customer data is held in a shared environment. Requires APIs and data standards

Let's take a moment to really think that through for an insurer. If you hold data about a customer in your systems, that data is owned by another party. Ownership here is a complex word – it implies but is not limited to controlling access to the data, determining appropriate use of the data, revoking access to the data, determining how long that data is kept.

Scenario A
What if the storers are obliged to provide these controls to the owner of the data and actually – what if that obligation exists regardless of whether that owner is a customer?

Such a scenario may make it prohibitive for insurers to capture and store data directly. What would the world look like in such a scenario? Insurers would request access to customers data and have to disclose why they want the data, what they will do with it and perhaps the algorithms used  in order to offer products. Such a world might favour insurers with simpler pricing algorithms that are more expensive but customers understand what is being done with the data.

If we take it a step further, in theory there would be intermediaries emerge who help manage consumer data and help consumers simply share their data with trusted partners. I would suggest most people would not dig into the detail of who is sharing what so a service that says, "we've found these 15 services that only use the data in these ways and we've packaged that up for you" would be most welcome.

If however, we take existing businesses into this world then suddenly enterprises will be faced with the issue of how do they offer appropriate controls and management around the data already in place.

The standard already exists for sharing information in this way leveraging OAUTH as is used by Twitter, LinkedIn, Google and Facebook.

Scenario B
The cost for doing migration and conversion will lie with the party holding the data. A different type of debt.

This is the model the insurance industry is assuming will come to pass but it requires shared data standards which are harder to implement than API standards. There is also the issue of potentially lossy data migrations – I.e. The quality of the data is reduced in the migration – will this be 'OK' from a regulatory point of view?

Further this is more confusing for a consumer since the mechanism and means to manage access to the data will change each time there is a move. An approach intended to increase portability and movement could become an inhibitor as consumers grow concerned about retraining.

In theory though, this would allow insurers to differentiate on trust and service – a place where they already play.

Scenario C
The greatest challenge with a shared environment is who is the trusted party? Google, Twitter, Facebook and LinkedIn among others have made moves into authentication but they don't hold all the data and regulators in multiple countries are seeking to grasp control and this is a topic for Insurtech startups as well.

Some see Blockchain as a possible solution – the data in a shared open place, but secured and encrypted.

At this point this seems like the least likely solution, requiring the greatest cooperation and investment from the industry and governments. Regulators at this point seem to be supporting the other two.

Which will come to pass
There is a clear trend with private data becoming more valuable, but the cost of storing it is becoming more onerous. Regardless of which of the scenarios comes to pass or if some other scheme emerges – insurers must balance the cost of storing the data and the value it may bring now and in the future.

Is State Farm Pre-positioning Itself for the End of Auto Insurance (and Maybe the End of Homeowners Insurance Too)?

Once in a while an insurance company asks me for advice—and occasionally even follows the advice which I provide.

I can say, however, that State Farm has never asked me for any advice about what they should do if the need for auto insurance disappears or substantially declines. Nor has State Farm ever asked me what they should do if the demand for homeowners insurance should take a similar dive.

Some readers may be wondering why would State Farm seek advice from your humble blogger about either topic?

Well, because I have been writing and talking about the end of auto insurance for four years. My just posted Celent Report, The End of Auto Insurance: A Scenario or a Prediction?  looks at how three technologies—telematics, onboard collision avoidance systems, and driverless cars—will depress auto insurance losses and premiums over the next 15 years.

I have also been writing and talking about the impact of the Internet of Things on the property/casualty industry for two years. Celent research subscribers can look at my reports: The Internet of Things and Property/Casualty Insurance: Can an Old Industry Learn New Tricks and Can a Fixed Cost Property/Casualty Industry Survive the Internet of Things?

So without even a word of advice from me, it looks like State Farm has pondered potential declines in auto and homeowners insurance; and decided to start some early positioning for itself and its agents if such things come to pass.

Proof Point: A new State Farm commercial called “Wrong/Right” shows a world without windstorms, traffic accidents, building fires, and emergencies. The commercial goes on to ask what about State Farm in such a world? The implied answer is that State Farm and its agents will be in the lending, wealth accumulation, and retirement income businesses. The tag line is “Here to help life go right.”

Which personal lines property/casualty insurer will jump in next?

Re-inventing underwriting: New ingredients for the secret sauce

Innovation is exploding across all aspects of underwriting and product management. New technologies are transforming an old art. But if there is one lesson to be learned, it is that carriers whose systems are not already capable of handling these changes will be alarmingly disadvantaged.  I've just published a new report looking at innovation in underwriting. 

Underwriting is at the core of the insurance industry. It is the secret sauce of the insurance industry. For hundreds of years, this process was accomplished through the individual judgement of highly experienced underwriters. Insights were captured in manuals of procedures and carefully taught to succeeding generations. 

Over the last few years, carriers have been heavily engaged in replacing core policy admin systems enabling a fundamental transformation of the underwriting process.  Gone are the days of green eye shades and rating on a napkin.  Gone are the days of identical products across the industry.  Gone are the days of standard rating algorithms used by all carriers. 

Carriers are using their newly gained technology capabilities to create dramatically different products, develop innovative processes driving efficiency, improve decisions, and transform the customer experience.  This transformation of underwriting is enabled by the ability to use business rules to drive automated workflow, but even more importantly this is a story about the fundamental transformation of insurance through the application of data.

This report looks at underwriting and product management and describes some of the newest innovations in each area with specific examples provided where publicly available.

What you’ll see is that almost every aspect of the underwriting and product management functions are being fundamentally transformed as carriers find new ways of utilizing and applying data. Carriers are using their newly gained technology capabilities to create dramatically different products, develop innovative processes driving efficiency, improve decisions, and transform the customer experience.

Key findings:

  • Carriers are using product innovation as a competitive differentiator and are experimenting with new types of insurance products that go well beyond basic indemnification in the event of loss.  Parametric products, behavior based products and products that embed services to prevent or mitigate a loss are becoming more common.
  • Predictive analytics are being used to better assess risk quality and assure price adequacy, as well as to control costs by assessing which types of inspections are warranted, or when to send a physical premium auditor, or when to purchase third party data.
  • Individual risk underwriting hasn’t gone away for commercial Ines, but the characteristics that are driving it are more quantified, requiring more data and more consistent data. 
  • The role of the product manager is changing dramatically to one of managing the rules rather than managing individual transactions.  This requires new skills and new tools. It also will drive changes in how regulators monitor carriers underwriting practices. 

We expect to continue to see innovative technologies being deployed in underwriting and product management over the next 3-5 years – especially in the following areas:

  • Carriers will continue to focus on product differentiation.  The Internet of Things will facilitate more behavior based products and more parametric products. Carriers will find new ways of embedding services within the product, or as part of the remediation after a claim. 
  • The role of the product manager will change dramatically focusing on deep understanding of rules.  Vendors will need to provide tools to better analyze the usage rates, the impact, and the stacking of rules. 
  • We’ll continue to see a massive eruption in the amount and types of data available.  Unstructured data such as in weather, car video, traffic cameras, telematics, weather data, or medical/health data from wearable devices will become even more available.  Carriers will invest in managing and analyzing both structured and unstructured data.  Implementation of reporting and analytic tools as well as supporting technologies – data models, ETL tools, and repositories – will continue to be major projects.
  • New technologies will create new exposures, drive new products, and generate new services.   From wearables, to advanced robotics, from artificial intelligence to gamification and big data, carriers will be applying physical technologies as well as virtual technologies to drive product development and risk assessment.

The available technologies to support property casualty insurance are exploding. Shifting channels, new data elements and tools that can help to improve decisions, provide better customer service or reduce the cost of handling are of great interest to carriers.  Investments are being made across all aspects of underwriting and product management. Staying on top of these trends is going to continue to be a challenge as new technologies continue to proliferate.  But if there is one lesson to be learned, it is that carriers whose systems are not already capable of handling these changes will be alarmingly disadvantaged.

For carriers who are already moving down this path, this report will shine a light on some of the creative ways carriers are transforming the process of underwriting.  For carriers who have not begun this journey, this report may be a wakeup call. The pace of change is increasing and carriers who continue to rely purely on individual underwriting judgment will find themselves at a disadvantage to those who are finding new sources of insights and applying them in a systematic manner to improve profitability. Wherever you sit, this rapid pace of change is exciting, empowering and galvanizing the insurance industry.

What does Brexit mean… ?

This is the question on everyone's lips. I had delayed writing this in the event that some clarity emerged but in day 5 of Brexit that clarity and certainty is proving elusive – indeed uncertainty seems to characterise the whole affair. This has been a discussion within the European team (thanks to Jamie and Nicolas) for some time and this post will briefly concentrate on the impact of the events so far on insurers with operations and interests in Europe. This will not discuss the UK governments response thus far.

The only certain thing about Brexit as it stands is uncertainty. Will Brexit really happen? When will the process start? Who is negotiating? What is the opening position? What we can say with some confidence there will be little regulatory and legal change in the short term and some unknown quantity of regulatory and legal change in the medium term.

The key unknown is the continuing participation in the single market and the other institutions in Europe, particularly the passporting. This more than Brexit itself, will define how strongly businesses with operations in the UK will respond.  Those with headquarters and staff in the UK to be present in the EU will need to reconsider this position if Britain leaves the single market as well as the EU – or indeed if any of the agreements reached put this position in jeopardy.

Uncertainty breeds volatility in the markets, a depressed investment environment and bond rates will hit the market further, particularly life insurers. This could well impact sales of investment products across the EU and UK until some certainty is restored. Existing products would not be safe either, with some investors looking to cash out.

The outlook for technology investment is trickier. If anything the pressures for reducing costs, agility and flexibility will be exacerbated. In the short term it is reasonable to assume reduced investment with alternate investments and clarity increases. It is plausible that this will affect the InsureTech market as well – particularly in London.

For UK insurers, It is likely that the FCA will engage with insurers and the ABI as the UK seeks to set out how it differentiate itself from the EU which will require agility and flexibility from the insurers to adapt to the new opportunities. A similar process may occur within the EU.

As is probably clear above, the one thing needed is clarity.

Do follow our Brexit posts from the wealth management team as well