Technology set to impact future business
Emergence of telematics, mobile apps and hi-tech platforms shows firms need to keep pace with innovation
Technology is going to have a massive impact on the insurance industry and brokers including concepts such as the internet of things and the manner this will influence the way that the industry and its clients do business.
Michael Petersen, CEO of Risk Benefit Solutions (RBS), says telematics, for example, is set to not only affect the way companies carry out their operations but also raise issues such as who owns the data.
“It is predicted that over the next two years every vehicle will be manufactured with its own telematic device and the data will be owned by the client. Questions will arise as to how to transfer the data, how do you use the data, who owns the data and security surrounding such devices.
HACKER
“There is documented proof that control of a vehicle can be taken over by a hacker. Therefore, when talking about cyber risks you have to consider emerging technologies, their applications and the manner in which they might give rise to additional risks,” Petersen says.
He says many brokers lack the critical mass needed to investigate the implications of new technologies and their risks as well as solutions to mitigate the risks.
“Some brokers are going to be left behind. Millennials are going to be an increasingly important part of the market and they are more technologically advanced than previous generations. They will trend towards companies that can suit their requirements.
“Business to business and commercial tend to favour broker distribution models as this insurance is more complex. The more simple insurance may well be automated with machine learning helping to reduce costs and this may prove to be where insurers’ direct arms focus in future.
“Therefore, brokers may well lose business to companies that can offer their clients that advanced technology,” Petersen says.
“The cost of creating these high technology platforms requires a significant upfront investment and this will limit the players who are able to move in this direction.”
He says another area that is showing up on the insurance industry’s radar is what is known as “on demand insurance” or buying the insurance people need for the times that they need it.
“The concept is potentially disruptive to both traditional insurers and brokers. It is a new trend that is still emerging and under this innovation people pay for use. There are a number of overseas companies that already offer on demand insurance ranging from life insurance for the duration of a flight or increase the level of insurance on your vehicle when you drive down to Durban,” he says.
“Some people have motor cars but they might ride a bicycle to work. Therefore, they might decide to register with an insurer and using an app they just swipe on when they are using their vehicle. The person’s use cost is far lower because they use it less.
“Technology plays a huge role in these innovations so as to reduce the cost of the high volumes of small transactions.”
Another issue in the insurance on demand space is determining an effective pricing model so that companies know the appropriate charges for a narrow window of use.
EMERGING TREND
People who rent out their apartments for a few weeks a year will also be attracted to the idea of only swiping to insure when they are letting and not paying for such cover when it is not let. Says Petersen: “This is a major emerging trend and will cater for a lot of the currently uninsured market where people simply have not wanted to insure in the past and it is going to take away business from the traditional market.”
MANY BROKERS LACK THE CRITICAL MASS NEEDED TO INVESTIGATE THE IMPLICATIONS OF NEW TECHNOLOGIES AND THEIR RISKS