Is Insurance Ripe For Disruption?
Also seen in: International Bankers Magazine pg.10
This is a sentiment shared by many outside insurance while skeptical insiders often believe instead in the resilience and measured progression of what has withstood the test of over 300 years of practice.
Who will prove prophetic? Are the business models of risk transfer going to fundamentally shift or will InsurTech simply grease the existing machine? At over ￡4 trillion of insurance premium paid globally, to say the industry is ripe for disruption is to prophesize an opportunity which is unrivaled by the entertainment, hospitality, and automotive industries by a wide margin. It is safe to say insurance will continue to evolve, but it will be as much about new technology as it is about changing the culture of the companies, the skill set of their work forces, and the buyer’s expectations and behaviors.
The technology which dramatically increases the speed, scale, and availability of the transactional components of the insurance chain is being acquired or built with increasing frequency. A growing network of sensors (Internet of Things), the big data it generates, and AI are creating opportunities for more dynamic and accurate pricing models. These represent an arms race of low-level disruptions. If insurance is ripe for fundamental disruption, it is unlikely insurance itself will be the inspiration for it. This is difficult to predict but not impossible to react to. Netflix started in 1997 by mailing DVDs to people – now “binge-watch” is in the dictionary.
Other examples include:
- Darwin, who may have outlined evolutionary biology in 1859 would not have expected NASA to launch satellites with antennas designed using evolutionary algorithms.
- AirBnB wasn’t devised by a lifelong owner of a Bed and Breakfast – both founders were designers and started with advertising an air mattress on their floor.
- Uber wasn’t built from the driver’s seat of a black cab or yellow taxi – instead, a software engineer followed quickly by a nuclear physicist, a computational neuroscientist and a machinery expert.
- And finally, Henry Ford may have been an engineer, but his disruptive idea had to do with the production process rather than engines.
Low-level disruptions such as new products, cheaper products, faster transactions, AI underwriters, drone-assisted claims processors, and smart contracts embedded in Blockchain technology, continue to change insurance but in the next ten years will risk transfer undergo a fundamental shift? If the answer is yes, it will start with people.
What do you think?
More Detailed Reading
- https://techcrunch.com/2013/02/16/the-truthabout-disruption/?guccounter=1
- https://b-hive.eu/news-full/2017/5/23/why-theinsurance-industry-is-ripe-for-disruption
- https://insurancethoughtleadership.com/whyinsurance-is-ripe-for-disruption/
- https://insuranceblog.accenture.com/ insurance-industry-is-ripe-for-disruption-andtechnology-investors-are-eager-to-capitalize