10 Burning Insurance Tech Questions for 2017
As exciting a year as 2016 was for insurers that watched their industry take the first step into a new digital era, the impact on established processes is still uncertain and fungible. We asked several experts to ponder some questions that the industry will look to answer in 2017.
Insurtech was clearly the buzzword of the year, as carriers and third-parties alike looked for ways to interact with and incorporate the innovations of the technology startup community. But now, it’s time for those innovations to pay off. “Parts of the insurance value chain [that] are optimized through new technology that makes economic sense will gain traction,” says Novarica’s Mitch Wein. “Other insurtech will fizzle out because it will be more ‘gee whiz’ technology than creating business value.”
With more digital initiatives comes more pressure to keep customers’ precious personal information safe. There were few high-profile insurance breaches in 2016, but regulators are keeping a close eye. “It would be a grave mistake to be complacent,” says SMA partner Mark Breading.
Following a frenzy of core systems replacement across the insurance industry, insurers and their technology partners are looking to take the next step, Breading says, “as consolidation of providers continues and companies extend their value propositions by extending into other areas like data/analytics, portals, and customer experience.” Both Breading and Wein predict an increase in core s-systems replacement among life insurers.
Several personal lines insurers used drones on a to respond to claims last year, thanks to the ease of getting high-definition looks at damaged properties, says Aite Group senior analyst Jay Sarzen. If drones are being used for claims, he adds, “they certainly can be leveraged for underwriting purposes” in the future.
One of the biggest stories of 2016 was Google’s abrupt exit from the insurance industry with the shuttering of its Google Compare auto insurance aggregator. If the company did attempt to do something else, “it’s not clear what role it would play,” Sarzen says. “Clearly, the market was not impressed with Google Compare, which was really nothing more than a Google search engine that left consumers to their own devices to determine coverage. If Google is going to play, it needs to create more of a value proposition for consumers to use it, which could mean working with carrier partners to migrate consumers further along the quote process than had been done in the prior iteration. “
Wein notes that there are definitely specific use cases where blockchain technology can be applied in insurance, especially around reinsurance agreements, intercompany accounting, and claims. There will be a “great deal of investment and experimentation” this year, Breading adds, but he also believes that “widespread implementations and industry impact are still a few years out.”
Telematics, the Internet of Things, big data and distribution innovations are fundamentally changing how people consume the insurance product. “There will be innovative new products and the industry is moving faster in this area,” says Breading, but Wein notes that it still takes six months to a year to design and deploy a product. Regulators will have to catch up with technology before insurers can fully leverage it, experts agree.
This question looked to be answered very early, with Guidewire’s acquisition of ISCS and Duck Creek’s buy of Yodil happening within a few weeks of each other. “It is all about extending value propositions, whether via movements into new solutions area or in adding support for complimentary lines of business,” Breading says.
It’s a digital world for sure, and insurers are living in it. However, online aggregators and agencies are “still looking up” at traditional brick-and-mortar agencies, says Sarzen. “What will be interesting to see is if these traditional agencies continue to embrace technology and pivot towards offering a more digital distribution experience for their clients,” he continues. “It’s possible that a good chunk of the growth in digital distribution may come from the very distribution channel digital vendors are looking to make less relevant.”
The answer is yes, according to experts, but visibility is an issue. Wein notes that “The adoption rate is uneven across the insurance industry today, with larger carriers ahead in leveraging analytics.” Of course, Breading adds, “many are reluctant to share those results since they provide market advantages."