Adaptibility
Rory Yates
Exco | Chief Strategy Officer | Adaptability, Responsibility, Transformation, Technology, Leadership
January edition (looking at December), 2023
For people in a number of countries this is the end of the year and a time for reflection. And on that basis I am going to reflect on a number of things in this months newsletter. Right from the start though, I want to reflect on all of the people who have contributed to my 2023 and say - Thank you!
Adoption or in Application?
I was asked recently if Insurance is an industry that struggles to adopt technology and if so why this might be the case. My short answer was - technology “adoption†is not the issue. It’s in its in application where we find the difficulty.
The reality is that, as the Economist Intelligence Unit unpacked 68% of insurance buyers want to conduct transactions online.?Yet, today, less than 50% of insurers are able to digitally provide a product or service quote; fewer than 35% can process a transaction or sale digitally; and only 23% incorporate digital into the claims process. So, as Chris Payne noted recently in an InsTech events there’s a clear customer gap still, and this remains the biggest opportunity.
So, why is this? There are lots of specific reasons why technology driven transformation has been tough, and failed a lot, in insurance. For me, this distills to two main things. And discussing this with Matt Gilham recently I wrote:
“I think the reality is a combination of complexity and a business model built around a piece of paper rather than a customer are the two defining factors that have seen technology adopted differently in this industry. Before I jumped back in I lead a business that delivered some of the largest e-commerce programmes in retail globally. And those differences jumped out at me immediately. Here's the thing, it's not a Luddite mentality though, the use of technology and the willingness to innovate is there. The adoption rates of new technologies looks pretty comparable (depending on what you're looking at of course). So, when we face down the complexity and focus on business model transformations around the customer and fully data fluid we see a stark difference in the ongoing adaptability of those insurer and the successful technology adoption with it.â€
So I think it’s less about technology adoption and more about how it’s applied. I’ve always characterized transformation as creating new value, through a new working model using new technologies where they are required. The most important of these being the first two elements. If we characterized a transformed business today as being a business that sees data as a perishable asset and constantly mines it for insight (data also being anthropological, neurological, psychological etc.). That these are utilized in a working model akin to an agile software development business, meaning that the insights created are acted on as close to real-time as is possible. And that this is provided to the customer as needed, through any channel, anytime, then we have shifted the dial.?
Insurance is also a highly regulated industry. This makes business models and the general approach of incumbents seemingly (often appropriately) cautious when it comes to the risks of abandoning legacy systems or technologies currently running their businesses. And of course Insurtech firms have capitalised on this. And this continues in various forms.
Take IRYS Insurtech as a great example in 2023. Bringing agility, digitization and human centricity into the agent space. And the plaudits are well deserved. Check out their CEO getting some recent well deserved recognition here.
And also, where point solution based Insuretech’s were sometimes initially considered disruptive competitors, insurtech firms are increasingly partnering with incumbents. This pairs their technological advantage with incumbents’ superior customer knowledge, understanding of risks and access to capital and so on. Such market dynamics are advancing innovation in insurance.
What’s at play here is a need to get the foundations right. Doing this will allow innovation to become a working model for insurers. Highly adaptive businesses that don’t just adopt technology they apply it to value creation at will.?
2023 seem to have been dominated by inflation, AI, Consumer Duty and Fairness, Ecosystems and the need for "dynamic" insurers.
Brexit or inflation? An expert explains why car insurance became so expensive and what will happen next
iNews by Grace Gausden.
In 2023 I was lucky enough to get published in a National Newspaper. And you can read it here. Although despite my "digital disposition" I will probably cherish the printed version a lot more. I am not sure I am an expert, but perhaps expert enough.
“This is a far more complex issue than merely simple economic inflationary impact and needs addressing at a government level. There are things insurers can and should do, but there are things that need addressing elsewhere. The time for collaboration is already overdue.â€
Podcast: How inflation and the Consumer Duty transformed insurance in 2023
Click here.
A great chat with a great bunch of people.
The experience / efficiency paradox. ??
I've long wanted to use this word in a published article. Paradox is such a great word after all. It conjures up a wonderful set of scenarios in people's minds.
?? And in this article for Insurance Thought Leadership I was lucky enough to get to write about how insurers are uniquely placed to gain efficiencies whilst improving experiences. ??
KEY TAKEAWAYS:
?? Insurance, like most industries, often sees a clash between the desire to be more efficient and the desire to provide a great experience for customers and employees. But there doesn't have to be a tradeoff.
?? Rethinking how data is updated, for instance, can create great efficiencies for the insurer while providing a much better experience. Why make customers and employees update three policies with a single insurer when one update could flow into all three?
?? The challenges to resolving the efficiency/experience paradox used to be technological but now boil down to having the right mindset.
Click here.
Digital transformation in insurance: are insurers coping?
InsurTech Digital asked me how insurers are managing digital transformation. I argued that it's time to move from economies of efficiency to economies of speed. ???
"The opportunity for emergent customer-centric insurers has always been to make sure they increase the knowledge of the customer (not just the knowledge of the risk) and simultaneously achieve the ability to act on this knowledge. This is the primary motivation for all ecosystem business models." ??
Click here.
Insurance fraud: Why insurers have no excuse not to act
I was lucky enough to be interviewed by Mia Wallace and Insurance Business America on one of the hottest and most important topics in our industry:
?? Insurance fraud – why insurers have no excuse not to act ?? .
Go give it a read ?? and you'll find out why I say things like: “Up until now, [insurance] technology has let the side down,†he said. “Principally, because within the technology, fraud is essentially done on the side which means it's disruptive and interruptive to the insurance journey. It hasn’t looked to create that seamless, continuous anti-fraud operation sitting behind every customer interaction that is required." ??
Mia Wallace has obvs used her incredible journalistic talents to make the overall piece sing, and I am grateful for this honest and well thought through interview and write up. The ability to tell these stories in our industry, and have this sort of quality come from that is something I am always grateful for. ??
?? Click here??
Some more Claims & Fraud thoughts from me in 2023:
And I might have mentioned AI a few time myself in 2023:
Fear, hype, regulation, responsibly and rationalisation
Some "Predictions" for 2024
Analog Life Insurers are in a race for digital
We often talk about legacy in insurance, but we all know why it’s still here. Reliable, often cheap it was born out of the economies of scale era of insurance. And in life & protection it often made complete sense to maintain these, and even the “software†market in this sector has been built much the same way until now.
This is set to change at pace. The business case for digitization is now vastly improved. Movement in the sector, consolidation and new markets such as SME Group Benefit schemes require much higher degrees of intelligent experiences to compete with employer, employee and general scheme requirements. This combined with much lower costs to change makes new digital technologies a far safer bet. Growth is now on the agenda and technologies will need to play a key role in this.
Faster to market innovation is becoming the new working model
For a long time innovation has been rendered to “garageâ€, “hubs†and “labsâ€. Built on the principles of lean start ups these have typically failed to produce the transformative success they once promised. Largely because when the emergent ideas and business models are applied to the deep complexities of broader insurance propositions, or they rely on the insurer to utilize their best asset, the customer, there’s typically a realization that the foundations for incubation and success aren’t there.
Full stack insuretechs offering wholesale coverage will continue to emerge and grow, but we will see Fintech style acquisitions emerge more and more into 2024. As insurers move on all fronts, build, buy and partner.
Others will look to embed the cultural benefits of innovation far deeper into the core of their business models, this will lead to clearer visions for future success as the real problems will be unearthed and tackled far more robustly than until now.
Post pandemic Health Insurance will take a leap into the unknown
Medical care suffers from shortages and other challenges to access, while global unrest and economic shifts hit insurers financially. Capital intensive investments in new technologies like Machine Learning capabilities, alongside those in customer experience, data & analytics, and administrative or product systems will also continue.
The shift in customer expectation will require healthcare to get closer to the customer. IOT and smart devices combined with better ways to utilize and manage health will come online fast. Aviva in the UK are already offering same day GP appointments to their customers and these services will continue to emerge rapidly.
Employee based insurance services will become relationship based
There has been a shift in the force. And generally speaking the rebels and Jedi’s are set to win the battle. And bringing peace to the force in this instance means making it vastly more straightforward to integrate with, make it digitally available across the employee lifecycle and service employee benefits and schemes subsequently.
Whilst we have seen various movements in basic digitization in employee experiences we’ve seen little movement in insurers offering core digital propositions that are more akin to modular producers like PayPal in banking. This requires far greater degrees of modularity, scalability and resiliency and the ability to adapt both the product and how it’s provided to employees than ever before.
The new generation of insurance in this sector is coming online, with the US leading the way, but EMEA is also set to follow this in 2024.
Your rabbit might not be worth the premium
Pet insurance is set to either implode or reinvent itself. There are clear signs of capital investor movement and models that look to support the pet's life and not just the financial burden of care. And these models are looking ever more likely to win. This is partly because soaring vet costs, new vet practices and break-throughs in care and other economic factors are driving up claims costs and prices at an alarming rate. And one way to balance this is to make the pets life better and reduce risks, and to build broader subscription models that build in more value to tackle this.
Pet centric ecosystems will make this model viable, treating every day pet life as an opportunity to provide and extract value. Vet networks, pet food and health services sitting around an insurance?core make a lot of sense. And pet owners care a lot about their pets' lives and insurers will do more of the same in 2024.
Brand Marketing has its work cut out
Insurers are getting a lot of bad press. Trust remains typically low. And people are increasingly seeking alternatives or switching - voting with their feet and using the proliferation of distribution to make it worthwhile.
Whilst there’s a lot that needs to be done we will see insurance brand marketing come back into play. We have seen underinvest and deleted marketing spend as it typically gets diverted to channels of acquisition, and moderately into retention. What is needed now is another sense of consecutiveness, conscience and purpose. When price is the only variable brand engagement plays an ever greater role in making the most of the differentiation available to an insurer.
For all it does in our lives insurance should be loved not just barely tolerated.
Money will flow and not a moment too soon
Many predict that a lot of the economic conditions in 2023 will continue in some form, however the financial markets are seemingly preparing for a comeback. Whilst we have all felt the pressures many have seen more resiliency in the markets than expected. And despite a realization that post pandemic savings are running dry it is likely that inflation is more in control and along with this the credit markets will open up.
For insurers there are multiple benefits here. Investments are likely to see stronger returns. Pressure from shareholders for ever higher dividends on their own stock will reduce. And generally speaking a market ripe for M&A in certain sub-verticals and new credit lines to support this will be welcomed.
This will in turn spur on wider industry investments and we will see better valuations and growth from this. This is an optimistic but realistic view for 2024 and one I suspect we would all want to see come to fruition.?
Thank you for reading the Adaptability Newsletter. We will take a shift in format for 2024. And I will be looking to get your feedback very soon.
Helping the insurance industry find competitive edge in an ever shifting disrupted digital world, working at CGI.
1 å¹´A lot to digest there Rory as ever. A lot of parallels to the discussions I've been having in the market - including the efficiency over experience discussion which was a debate at a recent claims conference I was talking at (and one driven by an especially poor - but not unusual apparently - claims experience). One item in your tonne of content here that really resonated was the statement about we are still building around an industry tied to a "piece of paper" thinking. I think this is one of the major shifts in thinking we need to work at if we are going to shift the experience for customers, staff and partners. Digital paper is still paper at the end of the day (even if we add a bit of AI to jazz it up a bit) and I think that drives a lot of the serial thinking we are still seeing. Personally I'm looking forward to 2024, and just maybe we can get some of those old ways of thinking shifted. Happy Christmas!
Lots to chew on Rory Yates and thank you. May I add a couple of added observations? 2023 has been a year in which many insurers have initiated experimentation with GenAI and LLM driven especially by some mouth-watering subsidies from the gorillas ij the market- Google and MS/OpenAI . I wonder how many have asked how much it will cost when market rates are charged and they are 'on the hook'? Allied to that, by definition, the main improvements to be gained are in the bottom-performing segments. The least profitable customers and risks covered for example. There will be small and even negligible improvement in top-performing segments as by definition GenAI predicts the most likely outcomes, not the best. This means, that as the full cost of deploying GenAI is charged many use cases will be untenable. I'll be writing on this in the New Year using traders on exchanges as examples of GenAI and LLMs being leveraged to weed out the poor-performing parts of portfolios to lift the overall profitability. That leaves traders to spend more time planning and achieving growth rather than administration and control. I am sure the same applies for risk management in the insurance industry. Thanks again for the great thought starters for 2024
Senior Editor - Insurance | Master's in Interactive Digital Media - Trinity College Dublin
1 å¹´Absolutely love this and not just because it's a chance to reflect on the last time we caught up! Thanks for being such a great advocate and driver of innovation in insurance, as ever Rory. Already looking forward to our next chat.
Innovating at the Edges | Digital Strategist | Digital, Innovation, Strategy, Finance, Operations, M&A | BreakerofStatusQuo ??| Insurance, Banking, Health, Geospatial | Farmers, MunichRe, PwC
1 å¹´Bandwagon - here for it!!!!! As highlighting conceptual analogies is an amazing skill and one I totally appreciate in you Rory Yates ??????
Preventing Fraud, Protecting Growth, Reducing Risk | Helping you accelerate your capability in tackling fraud | Consulting, Interim, Moderation and More | Fraud Strategy - Fraud Risk Management - Independent Assurance
1 å¹´Always a pleasure to chat with you Mr Yates, and great to see your discussions with Mia Wallace on insurance fraud. Although I'd likely rephrase to 'every reason to act'! The #insurancefraud tech world for sure has changed in the last 5 years: i) the fraud issues which we used to know existed, but had no tech solution to now invariably do have tech solutions ii) the challenge is now not 'is there' a solution, but how to layer in a cost effective way and iii) fraud tech is no longer stand alone but seamless to enterprise decisioning and automation. Looking forward to 2024 editions of Adaptability. And merry xmas sir.