3 Things Disruption Means for Insurance Technology

Telematics. Cyber risk. Price- and value-comparison websites. Self-driving cars.

Disruption. The word “is violent; it calls for change; it goes beyond just mere interruption,” said Lynette Gil at LifeHealthPro. “For some, it might even represent chaos.”

Yet some, including Todd Silverhart of LIMRA, value it. “Some disruption can help pave the way for innovation,” Silverhart said. “The reality of the situation … is that changing consumer expectations are going to demand disruption from all companies they do business with.”

Personal lines insurance disruption

Some disruptions remain on the horizon; others have already cut into the dance. New distribution channels are here, for one thing. Example: Overstock “survived the dot-com bust by selling dying Internet companies’ inventories,” said Matthew Brodsky at Risk & Insurance, selling insurance lines from auto to P&C to workers’ comp.

Then there’s the Internet of Things, disruptive by definition. Laura Hay of KPMG said that if P&C insurers brought their expertise in telematics to commercial and homeowners products, they could prevent claims “by managing properties proactively and warning customers of dangerous situations.”

“On the underwriting side there is a huge volume of new data available (telematics, mobile phone, health tracking etc.) with which to make decisions,” said Rob Moffat, principal at the investment firm Balderton Capital. “And there are new machine learning techniques to work with existing data. Smartphones allow a much more efficient and pleasant claims experience. Personalization software and machine learning enable ‘segment of one’ insurance. The list goes on.”

What disruption means for insurance technology

“Technology can have a huge impact on every important aspect of insurance,” Moffat said. Here are three implications.

1. Agility. “The ability to move quickly and nimbly in response to market opportunities and challenges is a prized but elusive capability for insurers,” said Kathy Burger at Insurance Tech. “They’ve been held back by legacy systems, fractured and siloed infrastructure, clunky databases, and turf-focused organizations.” There’s relief, however. “Insurers are investing in modern core systems, there’s significantly more collaboration across most insurance enterprises, and innovation is being … incorporated into the organizational culture,” Burger said.

2. Data. Big data makes it possible to work smarter, not harder by leveraging data-driven decision-making processes. Key word: measurables. “By understanding the measurables of their plan and leveraging data, plan sponsors will make smarter, more informed decisions to create competitive benefit packages while addressing plan-specific needs with actionable insights,” said John Ludwig at Employee Benefit Advisor.

3. Hacking. “Drivers and homeowners alike worry that confidential records could be open for cyber crooks,” Nasdaq said. “The more extreme worries involve losing control of vehicles or home features.” It falls to the insurer to establish trust with customers, first and foremost by protecting itself against the growth industry of organized cybercrime.

While disruption inspires a certain amount of legitimate angst, it’s not to be feared. At least not for those whose posture is forward-leaning, rather than resistant. On the contrary, it’s exciting. And it’s about time.

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