Lists are as traditional in January as New Year’s resolutions. Consequently, over the next few weeks, you’ll be deluged with advice about the trends you must follow and the tools and techniques you must have to be successful in 2020. Those of you who read my articles or follow me on LinkedIn know that I’m fascinated by insurtech. But rather than making specific product or service recommendations, I want to take a look at three key concepts that I believe will shape insurtech in the coming year.
I think we all agree (now) that the insurance industry is ripe for automation. Consumers want buying insurance to be similar to other online shopping experiences and support to be available 24/7. Additionally, the desire to capture the knowledge of Baby Boomers before they retire and concerns about a looming talent shortage drive the industry’s desire to automate.
Currently, lots of insurtech startups are tackling various insurance processes: actuarial research and modeling; claims filing, processing, and payment; client relationship management; communication among stakeholders; document storage; policy creation; reinsurance and subrogation; sales and marketing; and underwriting – just to name a few! These innovative solutions, however, tend to focus on a single step in the process. As a result, migrating information from one system to another or from applications to legacy systems often remains problematic.
End-to-end automation is essential to provide the seamless customer experience consumers desire. This may come about as incumbents, ready to jump on the innovation bandwagon, acquire insurtech firms. On the other hand, the insurtech community may shift towards an “open source code” approach that makes exchanging data easier.
Data Privacy vs. Data Capitalization
More than ever before, a business’ value is determined by its data assets and other intellectual property. Who “owns” that data, however, is a hotly debated topic. Despite – or perhaps because of – consumers placing more and more of their personal information in the public arena through social media and online commerce, their demands to control access to that data are increasing. Following the example of the EU’s GDPR, American regulators are stepping in to uphold consumer privacy rights.
Under the traditional, actuarial model of insurance, anonymized data still had value. Now, however, the drive to personalize the insurance experience – from quoting and underwriting to customer service and retention to the claims experience – means that consumers and the insurance industry must come to an understanding about how data will be used. For some consumers, personalized insurance products offer the promise of lower premiums and optimized coverage. For others, however, having detailed personal information available to insurers puts their ability to afford or even obtain insurance, especially health and life insurance, in jeopardy. Moreover, this doesn’t even take into account the possibility that more sophisticated algorithms will find correlations, if not casualties, between different risk factors.
In talking about using data to customize the insurance experience for each client, it’s important to define that term. For too many carriers and agencies, customization has been more equivalent to a game of Mad Libs:
Dear[NAME], excited to learn that you are also interested in [SOCIAL MEDIA SCRAPE]. By the way, I see that you and your [PARTNER/COMPANY] have a [INSURABLE RISK]. I’d love to have a conversation with you about your [INSURANCE RISK] needs and how our [INSURANCE PRODUCT] can meet your needs.
Okay, the process is usually a bit more subtle, but it’s still largely matching clients to existing products. As we move into the next decade, we need to fulfill the promise of truly customized insurance coverage if we expect consumers to continue to grant us access to their most sensitive information.
So, Where Do We Go From Here?
In his landmark documentary series, The Day the Universe Changed, James Burke discussed how the application of statistics to human morbidity and mortality led to the rise of modern clinical medicine, public health services, and a more profitable insurance industry. “[Actuarial science] was proof that human life obeyed mathematical laws,” he stated, “that you could treat people like numbers and they’d respond like numbers.” Now, we have an unprecedented amount of data available, and insurtechs find new ways to use that data seemingly daily. As a result, the future of our industry may lie with finding a way to treat numbers like people, or at least to focus on the people rather than their numbers.