Where Finance Finds Its Future
How to make the InsurTech Revolution actually happen
According to Willis Re, there are around 3,000 self-proclaimed InsurTechs at work in the world today. The age and size and funding and technologies of InsurTechs is so various, and the range of activities they pursue so immense, that it is difficult to comprehend which innovations are working and which are not. The use of video and telemetrics, such as the admission of photographic evidence and sensors in motor insurance, attract headlines. But the sales and the funding tend to go to larger and more established firms, including more or less conventional insurance companies and software as a service (SaaS) vendors engaged not in reinventing the industry but in grinding down the expense ratios of the incumbents. Most InsurTechs have lowered the expectations they set at the height of the blockchain boom of 2015-18 and now seek partnerships with or acquisitions by the incumbents. Blockchain-in-insurance persists, but largely in collectivised or infrastructural forms, and as private or permissioned rather than public networks. It is artificial intelligence (AI) algorithms, capable of extracting information from growing repositories of digital data and learning from it, that are now seen as the crucial innovation in an industry which has relied since its inception on the quality of the data it can obtain. But even in the (ostensibly, no-brainer) case of data, the insurance industry seems stuck between the narrow focus of InsurTech specialists and the daunting and ever-increasing immensity of the data available. What is required to break the stasis is a fundamental re-conceptualisation of the industry to alter the incentives of both the insurers and the insured. At the moment, insurers assess risks not as problems to be managed but as financial opportunities. Policyholders, on the other hand, treat insurance as a less-than-honest product and an invariably negative customer experience. For them, it inhabits a twilight zone that lies somewhere between a necessary evil and an occasion for fraud. A true and durable InsurTech revolution would reverse the polarity of this negative dialectic. It would use data to understand the real needs of customers, as opposed to the cover which people are obliged to purchase for contractual or governmental reasons. The industry would then put a price on covering in their entirety the probability and impact of the risks that customers ought to cover - and then invite those customers to pay the premiums for a superior product. This Future of Finance webinar will review the impact of InsurTech on the insurance industry and ask whether the industry needs to re-think the fundamental principles by which it operates before it can be transformed by new techniques and technologies.