Adaptability

September Edition (looking at August), 2024

"This article is actually a little splurge directly from the brain of an over-thinking strategist. So please forgive me, there's a method to the madness in this article (I think)."

The <adaptive> future of insurance

The insurance market is changing all the time, and the rate of change is growing in response to ever increasing frequencies of economic and environmental change. Price hikes and in some cases a complete rejection of the risk has meant a lot of people are now asking fundamental questions about the future of insurance. From journalists, analysts, industry leaders, industry bodies, regulators to governments.

And in leading the strategy of our business I ask myself (constantly) what are the problems and opportunities facing insurers and how are we solving them. And in turn that often leads me to: What does Insurance as an ecosystem model really look like, and does this answer these challenges?

Insurance has a few but mostly complimentary definitions, but broadly speaking it's simple to describe and complex to deliver.

You assess risk, and then exchange capital for that risk overtime. And by capitalizing enough risk (pooling & investments) insurers can make the cost or price for that risk tenable enough for people doing the things associated with it possible.

It essentially frees us from liabilities we wouldn't otherwise be able to take. Enabling the businesses we run, the societies that bind us to the lives we live.?

It's wonderful, but even modest foresight models suggest it's being stretched.

The world is changing rapidly and insurance has been built for a world that in lots of ways doesn't even exist anymore.

And people often refer to things like insurers inability to carry certain risks now, to a general lack of adaptability, low levels of true digitization and even the lack of risk mitigation services available.

The good news is - there's plenty of answers. However, not many avoid a true transformation. With one-off innovation, "garage" models and point solutions that are often crippled by an inability to scale them, and then suffocated when the true cost is unveiled. And especially when it's revealed that they will only deliver moderate benefits anyway!

And with the advent of digital capabilities that have also surprisingly reshaped the physical context in more ways than they have perhaps disrupted commerce. There's a lot of things that are now far more possible than than they were even two years ago.

So, generally speaking our relationship between places and things has changed dramatically. "Connecting things" has been the focus until now, at this next stage we should all be focused on making the relationship between people and their lives, happier, safer, more productive and better for the planet & wider society.

To embrace this we need a new mindset. We need to go deeper into the ideologies of human first thinking and build these next ecosystems around deep human insight, and do this in the context of a sustainable future.

From things like connected cars and safely utilising their autonomous capability or their ability to diagnose and report an insurance claim, through to smarter homes and buildings, it all posses a lot of potential.

Overlay massive shifts in AI and other related technologies and we are in an era where we can massively increase the knowledge of a customer close to real-time and simultaneously massively increase our ability to act on this knowledge.

And it's ecosystem business models that enable businesses to establish much higher degrees of relationships with the people & things, and provide us with the ability to act on the increasing insight that comes from this.

And it is perhaps fair to say that these ecosystem businesses have in other industries typically become "marketplaces" e.g. eCommerce based - where owning the customer relationship can be completely divorced from the source of a product.

However, there are other examples, such as digital money or PayPal, or adaptive products such as modular phones, or the concept of rent not buy in the automotive sector which have reshaped that capability to respond, adapt and grow with a customer in new ecosystem models.

And I believe in insurance we are in a relative economic stall zone as we make this shift from an industrial era to a more dynamic customer focused ecosystem era.

I think this stall is happening because for insurers this change requires a complete change in the economic model. Where we value customers not just policies.

And yet without developing a digitised ecosystem of partners, proliferated distribution models and massive changes in the insurance propositions serving customers, it's very likely that insurers will continue to struggle even more with this change.

We therefore need top-down and bottom-up thinking and action to solve this. And this isn't happening enough yet. Don't get Lisa Wardlaw started! ;-)

Insurance by any other name...

I believe to make the change needed the definition or philosophy of insurance fundamentally needs to change. And with this new vision, so too will the working model that designs, delivers and maintains it.?

It has always been (arguably) about "supporting human endeavor", but this idea needs to be extended.

It needs an ecosystem vision, one that matches those pioneered in the aaS era, but one that also establishes the open and adaptive principles of modular producers and ecosystem drivers akin to PayPal, Intel or Amazon and Alibaba.

And the key to developing these adaptive business models is to generate foresight over insight.

aaS models partly do this by essentially looking at the value created by a product or service and look to sell that value over time as opposed to providing the capability to derive it in a one off transaction (perhaps repeated at a later date).

So in ecosystem terms, in different example industries, this would be about selling communication services by selling the communication success it derives, over and above the physical cable that makes it possible. Not a giant leap in thinking, but not enough for insurance either.

There's a large transformation needed to establish a new ecosystem model in markets like insurance, and this makes it more challenging than say selling a combustion engine on miles achieved. So where does that leave us?

I think it leaves you with an entirely new business model that has a data ecosystem capability embedded. This then needs a series of data services built over it. Services that make people safe (today), but can also be adapted (tomorrow). Services that optimise usage to drive sustainable outcomes e.g. optimising repairs through intelligently managed repair networks. And so on.

I've adapted many programmes to deliver ecosystems by refocusing transformation objectives on "creating new value" as opposed to delivering the same as today but cheaper and through new technology.

And this often this leads to several dramatic changes in what is built.

Importantly the service itself gets built differently from the ground up. For example, if you machine analyse a crashed car, and you also want to diagnose the repair, book the garage, help them order the right part replacement and guide the engineer to fix this in an optimal way etc. You need to understand that managing repair networks is highly complex. And you are going to have to take your customer on this journey often making choices and decisions with them.

However, not all of this new capability needs to be built from day one if the foundations of your business have been created in the right model.?And we need to make sure that the ecosystems insurers build are open and ever-evolving.

And broadly this feels to me like a sensible working vision for the future of insurance at this stage.

So, how do we make this a reality?

To be blunt, I think the ecosystem model is pretty straight forward.

You need a customer core.

Policy centric insurance business models need to give-way to customer centric ones.

Without the data fluidity & intelligence this creates it is impossible to operate an ecosystem optimally. Because this makes maximising the value of an integration in an ecosystem much easier, it means you are orchestrating the partner service into the customer & employee experience and not having to build new overlays of technology and fragmentation to do this (proliferating legacy).

Equally, operating in this way creates far better customer experiences, making them more seamless contextual and personalized.

And things like the potential to use an open banking API call to identify changing life insurance coverage needs in the context of life events, or embedding travel insurance into a holiday purchase, all becomes engrained in the working model of insurers.

When we see this happening at scale we see new opportunities the spawn from this, including the ability to adapt around the headwinds facing insurance.

A good example of this is in claims. Where taking out huge amounts of cost is still vital at the moment, and this becomes far easier when you have the ability to adapt and control the cost inflation characteristics driving this. Managing the entire FNOL to claims resolution process digitally, but also making sure that human to human experiences are prioritised in distress moments or when other fraud processes are needed. And so on.

Or where risk has become theoretically untenable, many observe that other options would exist if insurers could adopt underwriting capacity and reinsurance capability into new propositions. Risk services could be adopted to mitigate risk far more readily, but so could the way premiums are exchanged for the risk being presented. Or how a customers total relationship with the insurer across multiple risks presents a different view of their 'value'.

It becomes a lot more viable to deliver these new insurance offerings.

What's next?

It’s an incredible time to be in insurance.

This industry is experiencing accelerated change and it will remain increasingly impacted by many macro environmental factors in a profound way.

The only way to address this is to create far more adaptivity.

To achieve this admin systems need to move to customer success based ecosystems, and to achieve that the core technology supporting it needs to be fundamentally built around the customer, cloud native, highly extensible and in MACH architectures. Creating high levels of digitization and automation while putting the human in the loop whenever it’s essential to do so.

Cyber Insurance Market Poised for Innovation and Growth Following CrowdStrike Outage

Insurtech Insights and Joanna England have written this useful post event review.

And I was very grateful to have been asked to make comment.

This event was a massive learning experience, that's for sure.

Click here to read more.

The surprising county outside of London that is becoming an Insurtech Hub

The conurbation of UK Insuretech for me has long been centered on London, Norfolk and Lancashire, but with hybrid working and generally more open working models this is opening up all the time.

Lovely to see this sort of coverage coming out in the UK, well done Insurance Times . I am always surprised at insurers geo-locations and how multi-faceted we are in this regard.The richer talent pools, opportunities and lifestyle other county's and places offer will just continue to add to the rich competitive tapestry of the UK insurance market.

It was only a little while back Andy Davis and I covered this on his podcast about data talent and insurance: https://lnkd.in/eAwg6bds

Click here to read more.

Insurance is not that complicated

Thanks to IRYS Insurtech and Margeaux Giles I'm never going to have to explain how simple insurance is again.

And I love an ecosystem diagram and the way it looks all data fluid and circular. Nothing to solve really, we're where we need to be!! ??

Digital Poverty UK (the charity) is no more

This decision was made with a heavy heart, but the timing is right.

Charities take a lot of passion and effort and they often also have a purpose and a life span comes with this.

We are all incredibly proud of the work we have done. Also, the learning curve on this one has been phenomenal. And I personally have a much clearer view of the issues we face and the ways we can solve them.

I look forward to the future. And we have already started to work on new horizons as a team. And we will continue to work together closely on these.

Additionally I am also already looking forward to joining forces with other organizations, charities and people. Which includes getting back to ESG related issues with an ever greater focus.

My personal thanks to my fellow founders and everyone else that supported us, and especially those that got a laptop to a child when they were completely cut off of education during lockdowns. You're all legends!

Click here to read more.

Networks are so important

Here's a lesson in time.

On Thursday night this week I met up with my now neighbor(ish) and long-term industry peer David Tyers . It has been so long since we last met in person, so much so we couldn't even remember how long - maybe 15 years!

Here's the thing. Not only is it so important to build a network it's also really important to stay in touch with people who have made you think, supported you, shown themselves to be positive and kind people - these people will always make meaningful contributions to your life.

David and I first met as colleagues in The AA. In 2004,?CVC?and Permira bought from Centrica the British motoring association the AA, and in July 2007 merged the AA with Saga under Acromas Holdings (and another Capital Investor). And we got to work through this process end to end. An intense, fun and ultimately rewarding time.

Now David was always a bunch of things, but principally a really decent colleague and leader in the Insurance business. He is an incredibly quick thinker, knowledgeable and very "human first" in his approach. And we have stayed in touch, supporting each other from the sidelines, if you will.

When we met up - honestly, time disappeared. He's still all the things I remember, and annoyingly he doesn't look much different either. And we got to reflect on all the amazing people we got to work with over this time - it was a real talent fest. What we were (and I am now) reflecting on is that networks of meaningful people are important to all of us. We get to look back and see the journey we have been on, continue to learn with them and build and grow in the broadest sense. A simple lesson. Much harder to practice in modern hectic lives, but well worth doing!

The Distorted Reality of AI

I was deeply honored when Gajen Kandiah reposted this. Not only is he a prolific leader in digital, AI and transformation, but he's someone I have huge respect for as well. Having worked for him, presented with him and generally delivering some ground breaking work alongside him.

He wrote:

"Rory , brilliant analogy! The shift from invention to innovation underscores the necessity of continuous adaptation. It's fascinating how AI is transforming from a mere tool into a powerful force reshaping entire industries. Sitting on the fence debating about GenAI won't help; we need to delve into it, learn about it, and harness its potential to drive meaningful change. At Hitachi, we’re deeply engaged in exploring vertical industry use cases across our rail, energy, and manufacturing sectors."

This article came about because Lisa Wardlaw kindly asked me to write an essay covering her first podcast episode in season 4 of Insurance Unplugged in the hot seat, this time with Gary Hoberman .

These two provide more than enough inspiration in their amazing discussion, and I am just grateful Lisa thought this does it some justice.

And if you haven't listened to it please do - the link is at the end!

And of course, let us know your thoughts & feelings. And if you have them - please direct all your questions at the pod-stars and not me! ??

Click here to read more.

Building Trust in Insurance with Customer Centric Claims

I was lucky enough to respond to Amelia Matthewson at InsurTech Digital on the hot topic of Why Automation Alone Won’t Restore Claims’ Reputation. ??

See why I say things like:

?? ..."There are numerous reasons why the industry has consistently failed to address the issues, no matter how much money it throws at the problem. From underinvestment in claims transformations, treating claims as an isolated function, to patch fixes atop of legacy systems—there’s been little appetite to engage in the root-and-branch review that’s needed,"... ??

Click here to read more.