What Does the Digital Landscape Look Like for Insurance?

Emerging Digital Trends in Insurance

The world as we know it today wouldn’t work very well without insurance.
Stephen Catlin, Founder and CEO, Convex

“The world as we know it today wouldn’t work very well without insurance.”

That’s what Stephen Catlin, Founder and CEO at Convex, wrote in his book Risk and Reward: An Inside View of the Property/Casualty Insurance Business, in 2017. During our recent webinar, The Future of Insurance: Powering the Next Paradigm, Stephen confirmed that the statement still stands true today.

But while insurance feels permanent to the society we live in, its operations are still subject to change.

So, as part of the webinar we identified the emerging digital trends in insurance, including the unrolling impact of COVID-19.

This blog will outline the key insights gleaned from Stephen, alongside fellow guest speakers Silvi Wompa Sinclair, Group Head of Portfolio Underwriting at Swiss Re, and James Kent, Global CEO at Willis Re.

Becoming digital isn’t a choice, it’s survival

Digitising processes is the only way insurance businesses will help guarantee their future in the industry. “You have to bite the bullet,” in the words of Wompa Sinclair. This was her response to an audience member asking how they might bypass the cost of digital transformation.

It may be this investment, combined with the complexity of the task and hesitancy to move away from tradition that has caused insurance to be one of the last financial service industries to really make inroads into its digital transformation.

Now the industry is fast-becoming at risk of missing the boat, especially as COVID-19 rapidly accelerates consumers’ appetites for digital and online experiences.

It’s only recently that insurers realised the severity of being able to meet these expectations. The pressure is mounting as digitally-native organisations, including first-mover incumbents, external industry players, and early stage businesses, swoop up business.

Even for those who have invested early, it can be difficult to see impactful results. “I believe the industry has lagged embarrassingly behind compared to other financial sectors,” says Wompa Sinclair.

However, for many, the insurance industry is starting to sit up and take notice. The pandemic has been the catalyst that has given many the push they need to begin implementing digital technology into their processes, achieve efficiency gains, and improve customer experience scores from what they’ve already applied.

The rise of InsurTech – friend or foe?

The industry’s gradual adoption of digital has given insurance technology companies increasingly important roles in business operations. “The industry has invested 20 billion dollars in insurance technology since 2012,” confirms Kent.

For some, the InsurTech industry could be seen as a rising ecosystem of competitors given their hybridity of an insurance offering and a tech user-experience. However, the insurance industry is starting to see the rise of these early-stage business as more friend than foe as they have a lot to offer as a strategic partner to traditional insurance businesses.

There are largely three options for incumbent insurers when looking to acquire the infrastructure, processes and talent to digitally transform.

They can buy, partner, or build. 

“Insurance has a horrible track record of building,” explains Kent. He suggests that buying or partnering with InsurTech companies may be the easiest and least painful option when looking to accelerate digital transformation.

Most face the issue of a huge backlog

While the insurance industry may be a late bloomer, its speed of transformation is not necessarily because there’s an unwillingness. The industry understands that digital, underpinned by enriched data capability, offers huge potential.

However, a significant complexity to transformation is legacy of highly customised technology systems which come with a huge backlog of errors that need to be fixed.

“You have to fix that first, only then can you augment that with external data – and the industry is not at this stage yet,” explains Wompa Sinclair.

Another complexity is that there are both regional and subsector divides in where the industry is in terms of digital maturity. For example, Kent called out that it’s not uncommon for some of his industry partners to still receive bonds by post.

Plugging the data gap

Data enrichment is easier to attain for general insurance such as motor or property because they rely on a small number of players in the value chain. This makes the transformation to digital and its fruition relatively easy to achieve, which is why early InsurTechs tended to focus in this area of insurance.

However, in the corporate sector and specialty insurance, where there are a greater number of players in the supply chain this adds to the complexity and makes its harder in getting the necessary data to develop a high resolution understanding of the customer

Sourcing, standardising, and aligning data from each of these players can dramatically reduce the pace and effectiveness of digital acceleration for the insurance industry.

Therefore, finding a reliable source of external data and the tools to enrich existing data sets and improve analytical capability is vital for insurers looking to grow. Such an approach gives these insurers the purview that is essential for an insurance business looking to progress their digital transformation.

Catlin agrees that enriching data with reliable external sources will only become more necessary, especially for the most complex areas of insurance. “Finding a way to bring that outside data into your own data is a challenge,” he says. “But it’s the key to the future.”

Digital transformation in the insurance industry may feel like an unappealing obligation. However, it holds many benefits, as our guest speakers discussed in our webinar. If you’d like to learn more about this you can listen to the webinar on-demand.