In the last year I have been to quite a lot of conferences about InsurTech in various forms and the most recurring question is: "What's the role of Insurance in the future?" followed immediately after by "How will insurance look like? Will it be more technology or insurance?".
If we look at the big picture of how technology is changing not just business but the entire life of all people around the world, we can understand better the extent and depth of change. If we add to this already scary picture the light speed at which all this change is coming, what we get is the picture of a terrifying event at first glance.
We are going to live in a hyper-connected world, where every object is somewhat connected to all others and artificial intelligence is used to manage such complexity, taking decisions at a speed that would never be possible for a human being.
Insurance has been historically the first completely data-driven business and it kept that advantage for more than 100 years. Not bad. We come from a long way back but does this guarantee us an equal place in the future? Insurance has a huge opportunity in the future but needs to change and evolve dramatically.
The skills required look more and more the same you would expect to find in Google or similar high tech shops. Also the customer experience we need to create has to be at the level of Apple and others because this is what customers have become used to and now expect from everyone occupying a slice of the most expensive square meter in the world, their company webpage on users' smartphones!
Insurance has always been good in monetizing the asymmetry in the risk between the risk perceived and the risk calculated thanks to advanced skills (actuarials) and a huge amount of legacy data collected over time (claims, etc.). Thanks to sensor data everywhere (producing enormous amounts of data) and new predictive models based on machine learning and available at low cost, all the historical advantages of insurers are fading fast.
Just look at motor insurance: until a few years ago motor was a relatively boring business. Now we need to figure out new models for assisted driving cars and even redefine a new legal framework for autonomous cars which anyway will introduce new business models based on managed mobility (Uber and alike partnering with car manufacturers and municipalities).. and please all done by 2020 at the latest!
The connected home is already coming with another nice package of redefinition of business roles in the value chain and intriguing possibilities to redefine what insurance can do for you in terms of protecting your lifestyle. Insurance is asked to shift from claims settlement to risk prevention and finally lifestyle protection. I don't want to pay to be paid if something wrong happens, I want to pay to avoid that something wrong happens in the first place! This is no different to the shift happening in the pharma world with the notion of "patient outcome", where people will pay not for a pill but for a health outcome (I just want to stay healthy).
Finally let's break a couple of golden pillars of insurance.
First, the past is no longer the best predictor of the future (what? try to tell this to your underwriter friend).
Second, the individualization of risk forced by "quantified risk" age (sensors and dynamic pricing) is destroying the blending of the risks - meaning that in good old times, good risks subside the bad risks making insurance affordable on average across the whole community.
To complete the picture, don't forget the many things we do not know yet - probably many more than we know at all - or things like cyber liability or business interruption in a hyper connected world...OK, I'll stop here, I think that's enough for today.
New clients asking for new products, the surfacing of new risks and the shift towards new business models ... what interesting times we live in! I consider it a blessing and a privilege.
I will have the honor to talk about the future and technology during our next event in Milan "Tech is King" on October 4th and there will be many other very interesting presentations. Don't miss it if you are around.