Advisen

Insurtech: Fix the boring stuff first, execs say - CIAB round-up

By Rebecca Bole, Advisen

There was much talk about the transformative potential of insurtech for the commercial P&C industry, as senior executives gathered at the CIAB Insurance Leadership Forum (ILF) this week, but many warned that the industry needs to “focus on the fundamentals first” to be successful.

Insurtech is a “wake-up call to the industry to look at efficiencies,” according to Marc Cohen, President of HUB International. “The traditional ways of doing business are not going to produce the required profits to invest back into our businesses and add value to our clients,” he told Advisen.

“The administrative costs of doing business are too high,” Willis Towers Watson’s CEO of Global P&C, Eric Joost told Advisen at the ILF. “Technology can help reduce these, but we can’t just skip to the cool end-product. The industry needs to have a healthy respect for the steps in the process to make this possible.”

Joost said that the industry should aspire to a more tech-driven industry, while focusing on the fundamentals. “If you build it with bandaids and duct tape, you won’t end up with an adequate system. Success comes down to working hard on the basics, like sharing data and accounting.”

Joost noted that many of the basic, administrative tasks – like sharing data across counterparties – are being duplicated at the carrier and broker level. To this end, Willis Towers Watson recently began trialing it’s new Connected Broking platform to allow more efficient communication between brokers and carriers in the placement process.

“In the placement process, we move a lot of data around. Brokers have to be clearer about the roles and responsibilities of the counterparties, to avoid doing the same job multiple times,” Joost said.

Swiss Re America President, Keith Wolfe concurred that there was pressure across the industry for efficiency, which has been lacking “for a really long time”.

Wolfe told Advisen that technology will be part of the solution, but “it’s not just about the shiny new idea. You have to think intelligently about the problems we need to fix and then bring the technology to solve those problems,” he said.

Wolfe added that the reinsurer’s role was to bring the various parties together to solve a problem, administering the capital and the expertise to bring a technological solution.

This was echoed by Tony Kuczinski, President and CEO of Munich Re America, who said the reinsurer was “making investments in promising new technologies and start-ups and building out our own capabilities for innovation to assure that our company and our clients are successfully positioned for the changes that are already underway in the global marketplace.”

QBE North America CEO, Russ Johnston cited an extended period of margin compression in the insurance industry as the driver of technology solutions to lower the cost of doing business.

Speaking to Advisen at the ILF Johnston said that around 30-35 cents on the dollar is spent on delivering the insurance product and the market has to “figure out how to do things differently”.

“Much of the cost is tied-up in basic administrative elements of delivering insurance: the submission, quotation and delivery,” Johnston said. “A lot of that work is duplicated by the carrier and the broker. We need to find the right balance of standardization and innovation and agree on who’s doing which tasks.”

The fevered interest in insuretech is indicative of a “hype curve” as various forces, including the high cost of conducting insurance business play out in the sector, according to outgoing Zurich North America CEO Mike Foley.

Foley said that the commercial insurance market will absorb some of the insuretech solutions - being developed around blockchain, big data, the Internet of Things, social media and wearable devices - as buyers look for faster, more efficient transactions and more choice from their insurance providers.

Foley added that insuretech had enabled Zurich Insurance to constantly re-shape portfolios in the past decade rather than applying a “blunt instrument” to understand and measure risk.

Foley warned, however, that the market would have to learn to “think exponentially, rather than incrementally” about how to adopt technology into their product offerings in order to become “more surgical” in their assessment of risk. Foley said that he expected existing carriers, rather than new-comers to insurance, to be successful in adapting insuretech to their businesses. He noted that incumbent carriers were able to apply technology in a highly regulated and fragmented business, where new technology firms were less familiar with the industry.

On a practical note, FM Global CEO Tom Lawson shared that FM Global aimed to understand the emerging hazards created by new technology and to provide solutions in the form of loss prevention technology.

“We want to adapt to that future state of emerging hazards and to answer our client’s questions before they ask them,” Lawson said.

He noted that FM Global had formed a dedicated group, to research technology outside of the insurance sector, including fintech and blockchain, and assimilate it into insurance. “The key is to take a look at technology being developed in the wider world and consider how it might apply to our clients. We should not stay in our insurance silo and try to create our own solutions in a vacuum,” Lawson said.

Brokers and carriers also noted that technology would be adopted in order to better serve the client in the near future – with the broker remaining a vital part of the insurance supply chain.

Philadelphia President and CEO, Bob O’Leary told Advisen: “Technology can help speed up the insurance buying process and facilitate underwriting, but can’t replace a human in commercial insurance transactions.”

“As millennials start to become business owners, they will still need guidance and advice from insurance agents and brokers,” O’Leary said.

Mike Pesch, CEO of US Retail P&C brokerage at Gallagher, noted that the demographic of insurance buyers is changing. “In the next 10 years, those buyers will have grown up with a different mentality around how they interact with their trusted advisers,” Pesch told Advisen.

“Any broker who is talking to customers right now, to understand how they want their buying experience to develop, has a competitive advantage,” he said.

The Hartford CEO, Chris Swift said: “As we build better digital experiences for the customer, there will be a whole host of activities supported by advanced data and analytics. But advice will be an important part of the model for a long time. The insurance product is purchased once a year – buyers are reliant on their carrier and agent to keep them informed on their risk factors and advise on appropriate cover.”