Tech innovation key to industry growth
Technology is impacting on all facets of business, writes Pedro van Gaalen
On the hunt for growth and increased profitability, insurers are looking to technology-led innovation to reach and unlock untapped markets, carve out niches with new lines of business, and drive greater cost and operational efficiencies.
It is, however, easier for agile and nimble fintech or insuretech startups to develop and iterate new platforms and products that disrupt the market than it is for incumbents. For these reasons, numerous insurers are choosing to rather partner with these startups by investing in those businesses or acquiring them, says Walter van der Merwe, Fedgroup Life CEO.
“In this way the big insurers don’t need to compete to keep pace with digital disruption, which can be expensive.”
Van der Merwe believes the most prolific application of technology in life insurance currently is happening in product distribution. “Replacing existing insurance won’t deliver growth, which is why insurers need to crack the distribution challenge to reach new markets. Those that do will be successful, which is why this area is receiving so much focus.”
Bernard Ross, MD Life at reinsurer SCOR Africa, says the underinsured middle market remains a largely untapped target for most industry players.
“Insurers have been trying to access this market for the past decade, with limited success. However, beyond solving the distribution challenge, which is key, insurers should also consider how technology can assist in transforming the entire customer journey to fill the gap that exists between basic funeral cover and fully underwritten insurance at the top.”
Van der Merwe believes the ability to target segmented markets, be it the underinsured middle or millennials, hinges on an insurer’s ability to meet a specific need. “Historically, insurers developed products and pushed these on consumers via traditional distribution channels. Now many are trying to deliver these same products via a technology platform that automates onboarding. This doesn’t solve the issue of understanding and addressing the needs of these niche markets. The innovation and disruption of the product, particularly the cost, in addition to innovative digital distribution channels is the key to success.”
Amid this shifting distribution paradigm, Sharon Paterson, CEO at Infiniti Insurance, asserts that digital is undoubtedly the future for the insurance industry.
“However, our research suggests that digital adoption transcends niched silos, such as millennials, which contradicts prevailing conventional thinking. Rather, the appetite for online engagement aligns more with personality type than a specific age group. There are consumers in all age categories who already prefer purchasing insurance on demand directly via a digital platform, without being pressurised to sign on.”
But it is not just on the front end where the industry is innovating. John Nienaber, executive for speciality business at Old Mutual Insurance, explains that the combination of big data, data analytics and automation makes it easier for insurance companies to conduct business.
“The automated prepopulation of information and processing helps to realise efficiencies in back-end administration. This application of technology can streamline an existing model that works, which allows incumbent insurers to keep step with the competition.”
Ross adds that big data and analytics are also proving to be industry game-changers. “Insurers with access to the deepest and richest data sets, particularly from a growing number of peripheral and wearable devices, and which have the technological capabilities to analyse and use this information are gaining a competitive advantage.”
The evolution of insuretech extends beyond just mobile distribution and improved back-end administration, says Doug Laburn, executive manager of Partnerships at Lombard Insurance. “These are just small elements within the broader insurance value chain, where technology is impacting on every facet of the business.”