2019 is set to be a year defined by collaboration in the insurance sector. In an October Capgemini survey, 96% of respondents said they were looking to collaborate with insurtech firms in some way. 77% said that “partnering to develop a new solution” was their preferred approach. When asked of the impact fintechs might have in the market, 67% said new entrants would “redefine” the customer experience.
“The insurance industry is having its Janus moment right now. There is immense investment in a lot of digitisation of the backend for efficiency, while the other face is looking forward at disruption,” says Scott Walchek, founder and CEO of Trov. Customer are becoming used to digital experiences in their everyday lives, and will begin to expect that same level of service when it comes to their insurers.
”Traditional insurance companies are facing huge pressure to change due to the mounting demand for seamless customer experiences and the rise of innovative insurtech startups,” Jerome Bugnet, industry technology evangelist at MuleSoft “In 2019, it will be imperative for traditional providers to put disruption at the heart of their digital strategies and specifically to hone in on their connectivity strategy – both internally and externally with third parties.”
Investment in insurtech start-ups has grown by 36.5% between 2014 and 2017, yet they face a struggle to capture and hold onto consumer trust, something which traditional insurers usually have in spades. “The first cohort of insurtechs will also be reaching their refinancing threshold, and some may not make it,” says Walchek. “What’s more, funding for insurtechs will be harder to come by as VCs tighten their wallets, given the extended time horizon accompanying insurance economics. In my opinion, it will all come down to integration over innovation and mobility will be the battleground for both carriers and insurtechs.”
Competition from giant technology firms like Amazon, Google and Apple might not be at the forefront of a traditional insurer’s mind, yet these heavyweights could still make an impact in 2019. “Mobile commerce sales are growing at a clip of 16% year on year – and this will only continue in 2019,” says Kevin Gillan of managing director of SquareTrade. “Smartphone penetration is increasing rapidly, particularly in developing countries. As companies facilitate easier browsing experiences for customers who want to shop online, we’ll see continued major growth in the mobile retail market.
“Big online retailers such as Amazon contribute towards this shift towards mobile in a major way – for example Amazon’s 1-click option has made the payment stage as quick as possible. This has served to remove friction from the payments process and ease the shopping experience considerably. Expect to see plenty more companies following suit in 2019, in an attempt to emulate [the success].”
An agile approach could lead to the proliferation of mobile-lead microproducts. More than five million households in the UK have no form of home insurance, with 42% of those asked why citing inability to take out blanket cover. “With microproducts, people who can’t afford to insure all of their belongings will be able to insure key items which have significant value,” said Tony Tarquini, European Insurance Director at Pegasystems, in an emailed comment. “For instance, there is a growing consumer demand for microinsurance from university students and generation rent – individuals who may not be able to justify the high costs of home contents insurance but heavily depend on access to a working smartphone and laptop to go about their everyday lives. However, this will make the market more competitive, and insurers will have to be clever about how they approach microproducts.
Underpinning this transformation will be adoption of the cloud. According to Ovum, a quarter of insurers have adopted the cloud for their claims systems, with fraud detection (21%) and CRM (24%) not far behind. Cybersecurity will remain an area of concern for many with cloud, because core systems and critical data are essentially being moved off-site to a third party. Yet, with 59% of insurance respondents to an EY report revealing that they have discovered “significant” incidents within their organisations, those concerns might be mitigated as legacy architecture begins to show its age.
“Cloud-based configurable software will completely transform the back office, but it won’t all happen in 2019,” says Graham Elliott, CEO of Azur. “Inefficient coding systems simply can’t go the distance. Cloud systems can access, analyse and enrich data in real-time so insurers and brokers can fulfil the need for immediate gratification - claims or applications can be acknowledged in less than half the time. Businesses can make changes rapidly in order to keep pace with the market, rather than being held back by legacy systems.”
“Over the coming year we will see insurers begin to reimagine their organisations through an ‘Insurance as a Platform’ model by unbundling and repackaging their assets as discrete sets of capabilities that are exposed via APIs,” adds MuleSoft’s Bugnet. “In this approach, every service, process and component is productised and therefore discoverable for the broader ecosystem to reuse. This will expose and decentralize resources, so lines of business can innovate and move more quickly. As insurers embrace an API strategy, they will naturally begin to create an application network of plug-and-play technology building blocks. This approach will create the perfect foundation for rapid innovation and closer collaboration with insurtechs, as well as future proof insurance companies for success in the years ahead.”