Robo-advice the least of brokers’ concerns

As published by FA News

https://www.fanews.co.za/article/intermediaries-brokers/7/general/1227/robo-advice-the-least-of-brokers-concerns/31334

The widespread adoption of technology is changing how insurance stakeholders interact in both the business-to-consumer and business-to-business worlds. Insurers and insurance brokers who hope to stand out from the crowd in a competitive marketplace will have to place the client, or end-consumer, at the centre of everything they do. “Our product focus is now on placing more core functionality into the hands of consumers via their connected devices, wherever they are in the world,” says Andre Symes, CGO at Genasys Technologies. He adds that it is important to improve the customer journey whether that journey begins with buying insurance directly online, through an insurer’s affinity partners or via a broker platform.

Innovation and trust for the win

The industry is still getting to grips with what technology means for non-life product design and distribution. Insurtech brands are putting pressure on traditional insurance brands, who often fight back by acquiring or investing in these start-ups to protect market share. “Large insurers, possibly concerned that start-ups will cannibalise their existing policyholder base, bring them back into the business; the risk is that innovative solutions become diluted and starts looking like traditional solutions once more,” says Symes. But there is nothing wrong with a traditional insurer owning or underwriting a start-up provided they do not stifle innovation. An optimal solution is one in which the start-up retains independence but is able to leverage the consumers’ trust in the traditional insurance brand. Symes believes there should be ongoing efforts to ensure that the likes of JaSure, Naked and Pineapple retain their authenticity regardless of ownership. 

FAnews wonders whether the traditional model of non-life personal lines insurance will continue under its three broad categories, namely buildings, household content and motor. The status quo seems intact for now; but over the medium to long term the model will have to evolve to accommodate the modularisation of covers and changes in consumer buying behaviour, among other factors. One of the radical departures from the old way of thinking about insurance is to swap the asset, which used to be at the centre of insurance product design, with the end consumer. We are moving to a world where the consumer’s interaction with an asset, rather than the asset itself, will determine the type of cover that is needed. 

Impact of pandemic on insured risks

“The three traditional verticals in the short term insurance market will change to reflect a more modularised approach to cover as well as emerging concepts such as pay-per-use,” says Symes. We have already seen countless examples of these trends as South Africa and the rest of the world powers through pandemic. Your clients have, for example, benefited from reduced non-life insurance premiums due to the lower usage of motor vehicles during lockdown. And the risk to insurers of claims against buildings and household contents policies have also reduced significantly due to work-from-home. A policyholder who works from home is better placed to identify and intervene should a geyser burst occur, for example. 

Things get interesting when we consider the non-life insurance solutions that are possible using today’s technology. We are fast approaching a future where our insurer or broker can offer non-life insurance covers at point of sale at any retail partner. For example, you will be able to buy additional cover for your mountain bike or other valuables at the same time as purchasing an airline ticket. And you will soon be able to purchase a vehicle online and be offered a risk-appropriate insurance policy, in real time, based on your detailed personal information and comprehensive driver behaviour. The insurer or affinity partner would be able to pull this information from various third party data sources, which will share your data having previously obtained your permission. 

Autonomous claims in a tech future

Technology will revolutionise the claims handling process too. Let us say you hop into your newly-acquired and just insured BMW 330D and get into an accident on the way home. Tech-enabled insurers will know more about that accident within seconds of it occurring that we could ever have imagined. “We have built technology that can interpret telematics data following an accident by referencing customer and vehicle databases,” says Symes. An insurer will almost immediately have information about who was driving the vehicle, the direction of the impact and the forces involved in the impact. From this data it can instantaneously determine the likelihood of driver injury, the likely extent of damage to the insured vehicle, the estimated cost to repair that damage and whether a tow truck is required on scene. Technology makes instant and virtually autonomous claims settlement possible! 

As the above example illustrates, platform developers are now able to create solutions that are “a couple of steps ahead of what insurers and insurance brokers are prepared to adopt”. This hesitancy could be explained by the palpable fear among sectors of the population about the pervasiveness of technology. “The adoption of technology and the rate of its adoption has always been a challenge; but we have seen how the pandemic has shifted perceptions around its use, even among the most tech-averse individuals,” says Symes. Concern about insurance fraud remains one of the main objections to instant claims resolution and settlement; but technology addresses this issue too. It is already possible to assess the likelihood of fraud by running algorithms against big data including social media accounts and driver telemetry. These algorithms will flag any claims where an element of fraud is expected for further investigation. 

Expanding the non-life insurance market

We asked Symes whether the global economic contraction caused by lockdown and pandemic had taken some of the wind from the Insurtech sector through 2020? “The pandemic has shaken the market out a little bit; we are thinking of it as an unfortunate forest fire that makes way for new seeds to grow,” he says. It appears that the world is moving towards a more mature Insurtech marketplace where the dominant players are servicing areas of growth. “Technology has reduced customer acquisition and ongoing policy administration costs to such a degree that it is possible to offer microinsurance and parametric insurance profitably,” concludes Symes. “It enables motor insurers to target the uninsured using modularized motor insurance; the outlook for non-life insurance is positive because technology gives us a look-in to a much wider cross section of the consumer market”. 

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