There is an increase of innovative new entrants into the insurance space; what effect will these disruptors have on the industry?
Innovation in the insurance industry is not a new thing. Cuthbert Heath is widely viewed as a pioneer and an innovator, credited with creating the market’s first burglary, earthquake and hurricane insurance well over a century ago. But the term disruption is relatively new, and within insurance circles, nearly always involves the use of new digital technologies. It’s probably fair to say that the evolution of these technologies has outpaced the inventiveness of the insurance market but now insurers are able to use technology to truly disrupt, which is creating new markets to replace incumbent firms, products and processes.
As customers’ expectations of tech delivered services has increased, so has the requirement of insurance to provide frequently updated and tangible benefits. Until recently, most policyholders interact with insurers just once a year, but disruptive services now allow continual pricing reviews (via telematics) and to amend policy coverage and limits at any time (via customer portals).
Looking forward, Peer-to-Peer insurance and Social Brokers are using technology to group customers with similar needs together and then leverage these economies of scale to drive better deals for them from insurers, or in some cases, sharing risks between themselves.
Artificial Intelligence is now seen as the key to future insurance disruption. The somewhat daunting prospect of self-driving cars will no doubt stretch insurers’ provisions to consider new risks, as whilst initial tests suggest these cars are safer than human drivers and have the potential to reduce accidents, new risks appear, such as hacking, terrorism and computer breakdown.
Industry participants that will be negatively affected will be those that do not keep up with new technology and consider how this can aid them to produce products for the emerging risks of tomorrow. It could be said that email disrupted the fax machine market, but it could also be said that this was just an evolution of communication technology.
One thing in the insurance market is for sure, continual evolution is no longer enough to stay contemporary. Technological strides are huge and to keep pace, so must be the strides of insurance innovation, and there is no shortage of businesses fighting to be on the podium.