The fragmentation of traditional insurance markets and concerns around the profitability of underwriting has led insurance providers and online comparison sites to look more to insurtech propositions.
Over recent years, firms that have attempted to replicate the success of insurance comparison sites without providing enough differentiation have failed, says Ian Bradbury, CTO Financial Services Fujitsu.
“Tesco ran a comparison site – which they disbanded because it was just a ‘lookalike’ offering and they failed to capitalise,” he says. “Google as well – which has a lot of potential in this area – ran a comparison site and that drifted away.”
Software capable of aggregating data in a better way, and the potential of the internet of things (IoT) are just two examples the market is turning to in order to look for customer growth. With Amazon sounding out some of Europe’s leading insurance firms to see if they would contribute products to a UK comparison site, the US retail giant could force innovative movement among incumbents.
Bradbury points to Amazon’s diversified offering as a differentiator in and of itself, with potential tie-ins across the business that could feed into an insurance offering.
“Where does Prime fit into all of this? If I’m a Prime member whenever Amazon has added anything to its portfolio it’s always enabled me to receive additional benefits over and above, and that then pulls more people into Prime which in turn supports the rest of the business model that they have,” he says. “It already offers standard warranties on lots of things and it could go one step further and offer something like automatic purchase additions to contents insurance. They could pull together the best portfolio for customers.
“The comparison sites don’t have that Prime membership following added value that it can pull through. There could be loyalty schemes around pricing and all the crossovers Amazon can offer across the business will certainly play a part in this, I’m sure. The comparison sites don’t have that,” says Bradbury.
“It also has Alexa - from a home insurance perspective that’s extremely valuable.”
Comparison sites have become “complacent”, he says, as they’ve become the go-to place for general insurance purposes. However, while they don’t have the competitive advantage a firm the size of Amazon may have currently, Bradbury is adamant that they could offer something the tech giant can’t.
“One area I don’t think Amazon will be able to compete with the comparison sites is in innovating and evolving," he says, pointing to the fact that comparison sites are agile in terms of their attitudes toward technology given their history, and can offer distinct price and value insurance products.
“There are different plays in this marketplace that have not yet been exploited and therefore there’s room for different suppliers with different approaches,” he adds. “I think a lot of the aggregators – the comparison websites – which were start-up, digital natives which were able to implement a new way of thinking and they were able to evolve themselves very quickly. If you like, at the comparethemarkets, they’ve been able to evolve very quickly to respond to changing conditions.”
The insurance market has changed drastically over the past few years, with a number of large scale mergers and acquisitions creating new players struggling with their portfolios. Aggregating their systems is a large and cumbersome job, and so telemetry and automation are beginning to play a major role in the sector. Further, with the insurance sector becoming increasingly fragmented and more driven by personalisation –in large part thanks to the aggregator sites – developments within insurtech could continue to shape the industry further.
“We’re in a market in which there are organisations pulling the value chain apart,” says Bradbury. “A lot of the big insurers have made big acquisitions, taken on books from other insurers and have been slowly trying to aggregate systems with common approaches.”
“There’s a lot of work around automation we’re doing at the moment to help with that. That consolidation and the technology around it can improve service. If we can use that automation to offer a completely digital experience it actually helps for their customers as well,” he says.
Using big data, automation, and sustaining the drive toward a personalised approach can help produce more refined product offerings, which could lead to a differentiated network of insurers with different value chains and a broader spectrum across the market.