Innovate or die (and don’t fear the rise of the machines!)

David Swigciski, Head of Corporate at DAS, looks at the unstoppable rise of insurtech…

Change is constant. The pace is accelerating, and it’s not going away. So you only have one option – adapt now, before your competition does.

Innovation has become a ubiquitous topic within insurance these days, and we’ve seen the Industry move from being extremely traditional to having a thriving insurtech market place in a short space of time. So what’s driving this, and where’s the new battleground?

Positive and negative influences

A number of factors have dictated this change – constraints such as legacy systems, the quality of data, a bias towards in-sourced developments, and a traditional focus on underwriting – whilst others are enabling and driving change, such as advances in technology, changes in customer need and expectation, a continual drive for efficiency, and an increasing threat of external disruption.

These factors inadvertently led the insurance sector through generations of consolidation, with standardised products distributed at the cheapest prices in an escalating race to the bottom. This status quo was ripe for disruption, and while insurance was late to the party, momentum has been building.

Where ‘insurance innovation’ previously meant mobile technology, telematics and ‘big data’, today it’s far more open – a digitally driven space where anything goes. We’re already seeing companies creating their own digital labs and corporate venture capital funds, investing and collaborating with insurtech start-ups.

This shift has seen London develop into a leading hub of global insurtech innovation, with a subsequently more entrepreneurial mind-set being one of the key things that is making working in the insurance sector so exciting today.

Distraction Risk

With technology enabling so many new possibilities, it’s easy to get distracted by exciting opportunities and to spread your resources too widely. You need to focus on where innovation brings the most impact, and whilst that’s obviously going to be different for every company depending on what you do (e.g. your propositions, customers, and current state), I believe there are some common areas that can shape your thinking, and help you focus:

1) Changing customer needs and expectations

Customer needs should be at the heart of your thinking, but it’s important to recognise that this is not a static position. Technology and other lifestyle factors are disrupting established customer segmentation models; generating new expectations from underserved sectors, and changing how customers want to engage with products and services.

Products and propositions need to adapt to this. It’s important that they offer the right cover, but also at the right time and through the right medium. Customers also need to be able to understand what they have, an area where providers can do more by avoiding unnecessary complexity such as adding extensions unlikely to ever be used, or including additional mandatory covers in one customer segment that are likely to result in issues of dual-insurance in another. 

2) Changes in business model / transactional efficiency

From a fundamental re-think of strategy through to changes in transactional processes or resources, changes in your model can unlock growth, create new markets, and deliver efficiencies. You should consider whether changes in how you work can deliver benefits – and don’t assume that today’s successful model will continue to thrive tomorrow.  Business model innovation – such as our very own E-Trade platform DAS Connect  – is about being clear on your purpose, and aligning your resources, processes and profit formula with your value proposition.

3) Be aware of the risk of external disruption

The threat of non-traditional players entering the market is very real and our industry seems to have realised just in time that we need to take steps – but it has to be now. The alternative is a slow death; one which might not even be that slow but painful.  There are however plenty of areas still exposed to significant disruption risk. Take the legal insurance space for example – if there’s one market that’s more traditional than insurance, its law. The opportunity (or threat!) of disruption is massive.

When considering your own innovation strategy, you need to be realistic about how others may disrupt your own market space, whether they are new players or existing businesses pivoting their approach. Try putting yourself in your competitors shoes – how would you disrupt your own business.

4) AI and robotics

AI and robotics are fast becoming the favourite scare story of our times – robots will take all our jobs, and you should fear the rise of the machines! The possibilities inherent in this technology are astounding. Today’s generation of AI is more accurate, efficient, and predictive than its human equivalent, and can replicate human behaviour so well that customers facing AI, can already be tricked into thinking that they are dealing with a person. So imagine what the next generation will be able to do.  It’s only 22 years since World Champion Garry Kasparov took on AI machine Deep Blue at chess – ultimately, he never stood a chance!

But let’s not kid ourselves – this isn’t going away. The need for increasing efficiencies will inexorably drive the adoption of automation and robotics. The limiting factor preventing the wide-spread adoption of AI right now is not the new tech – it is the state of the existing infrastructure, a lack of defined processes and above all, poor data quality.

So give up all hope now? No, I don’t think so. AI and RPA (Robotic Process Automation) doesn’t necessarily mean fewer people – it can actually mean that significant numbers of people can be freed from manually intensive processes, allowing them to focus on areas where they can add more value – or realise benefits that are current not being gathered because they don’t have the time.

Final thoughts

At the centre of all this has to be the customer. Providers can improve their efficiency and capability by embracing insurtech, but ultimately it has to add value to a customer who will receive benefits through cost and service.

From a legal expense perspective, as patterns of home ownership, employment and lifestyle all change, we need to ensure we can use innovation to provide a range of new insurance products that suit the way consumers choose to consume and live.

At DAS we’re working really hard on how our propositions can be redesigned to better meet customer need, reimagining the end-to-end journey to incorporate increased digitalisation, automation, and voice activation to enable all of our customers to understand and utilise their legal expenses insurance cover in much easier ways.

And we’re certainly not afraid of those machines.