While the vision for InsurTech's future is transformative, much of the progress in the last year has been incremental.
InsureTech Connect 2017, presented by Oliver Wyman, brought together over 3,500 leaders from startups, incumbents, investment firms, regulators, and more to project a radical vision of the future of the insurance industry and explore how we can work together to make that vision a reality. Over two days and across thousands of connections on stage, at the over one hundred-twenty exhibits, and in one-on-one meetings, ITC mirrored what Chairman Caribou Honig called a Cambrian explosion that has occurred in the insurance industry in the last 18-24 months.
Given the events in Las Vegas that directly preceded ITC, one might have expected a more muted atmosphere. But assessing and managing risk is what this industry is about, and awareness of the tragedy added urgency and energy to a gathering dedicated to staying on top of human challenges—from the everyday to the catastrophic.
We saw five key themes emerge from a wide range of creative, energetic, and sometimes intense dialogues:
- Inversion of strategy: A shift in focus towards meeting customer needs as the starting point for future business models / ventures. InsurTechs are building end-to-end experiences for customers in a truly customer-centric model, and then partnering with others to gather the capital required to support their products. This shift may require agile changes to pricing, rates, or coverage to meet the needs of the capital provider, but capital is becoming more of a commodity and we expect to see continued growth in MGA-type models.
- Clean-up of the back-office: Last year, there was little emphasis on back-office operations, with InsurTechs focusing on UI/UX as their core capability. InsurTechs are now actively developing APIs and micro-services that solve back-office issues ranging from poor information gathering and data exchange to manual processes that hinder better customer experience. Incumbents were actively seeking out these solutions at ITC.
- Need to integrate a whole “new body” of insurance: We have started to see innovations covering the whole “new body” of insurance: eyes (computer vision), ears and mouth (conversational AI), nose and skin (smart sensors), and arms and legs (drones and robots). What remains to be solved is how to bring all of the disparate pieces together into a cohesive whole – a platform that leverages all of the technology that is available to truly meet evolving customer needs.
- Power of people: Incumbents are increasingly realizing that beyond technology, they need to develop a digital culture, with employees who are fluent both in the language of traditional insurance and the language of InsurTechs. In multiple sessions there was spirited discussion of how to attract talent from Silicon Valley and key universities, and enable that talent to thrive in an industry that is famously stodgy. The pace of change within insurance companies is accelerating dramatically, and incumbents will need strategically placed digital natives to navigate the changes.
- Greenfield development: While incremental change will continue, incumbents need to start creating greenfield operations that are not saddled by existing operational processes and IT infrastructure. Once these operations are in place and a minimum viable product is ready, incumbents must not hesitate to cannibalize their own legacy businesses.
In the last 12 months there has been significant promise but few notable successes. But as InsurTechs and incumbents gain more experience and become smarter at delivering change, we see more promise of successful impact over the next 12-18 months.