We’re living in an age of disruption. Amazon disrupted the publishing industry, Airbnb the hotel industry and Uber the taxi industry. The insurance and mortgage markets have often lagged behind the curve and we’re constantly being told that these markets are mature and ripe for disruption, but what does disruption in our industry look like?
The insurance industry is waking up to the fact that if it doesn’t innovate and bring new types of cover and new ways of interacting with its customers, then someone from outside the industry will. A survey by Fujitsu revealed that customers would buy insurance from the likes of Google or Facebook. It doesn’t matter that these businesses don’t have any experience in selling insurance. Customers look at them as companies leading the way and giving them what they want, even if they don’t know what they need right now.
That’s where technology is driving innovation – it is the engine driving consumer expectations and we have to keep up.
While insurers understand risks and how to price them, they don’t necessarily have the technology skills to deliver the innovation customers are looking for. That’s why I think it is more likely that we’ll see far more collaboration between insurers and those outside the industry looking to do something different. Investment in insurance technology businesses more than tripled last year according to research by Accenture rising to more than £1.57bn in 2015. Around 70% of global insurtech investment went into collaborative start-ups.
The use of data analytics is helping insurers to create new models that can help determine the types of products their customers want and need based on behaviour patterns. And the Fujitsu survey found that consumers are happy for insurers to use their data if it results in lower premiums. The advent of the Internet of Things and the connected home is going to enable insurers to access huge amounts of data for example.
One of the threats perhaps to brokers is disintermediation.
Peer to peer insurance is already here through the likes of Guevara in the UK and Friendsurance in Germany, while Bought By Many leverages the power of groups bringing like-minded people together to drive premiums down and ‘bargain’ if you like with insurers over depth of cover. Neither involve a broker.
We’re also seeing greater adoption of digital triage whereby a bot not a body is the first port of call for the customer – technology enables response to quick, simple questions and fast-tracking of more complex issues to a real person.
This is the concept behind robo-advice in the financial services sector. Now I personally think the widespread adoption of this is a few years away, mortgage intermediaries shouldn’t think disruption isn’t heading their way. In the aftermath of the recession, greater regulation of the mortgage market and the squeeze by lenders on their criteria has forced consumers into the arms of intermediaries. However will the Millennial generation want the depth of advice and expertise you offer? We’re starting to see an ease in lending and it won’t be too long before there is greater simplification in the process again.
I do think that the mortgage market will lag behind the insurance sector when it comes to disruption, however it’s important to remember what the famous scientist Roy Amara said, “the influence of technological developments are, in the short-term, often over estimated and when we look back over the long-term in reality they are generally under-estimated”. However, rather than think that disruption means the end to life as we know it, look at how you can embrace it. You might be surprised.
Brian Coulton
Head of Sales at Source Insurance
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