Expect The Unexpected

11.12.16

Insurers and brokers are nervously bracing themselves for the impact of the insurtech revolution, but only time will tell what disruption will really look like.

Over the last three years ‘insurance, but not as you know it’ (the technology revolution as described by Deloitte) has been gaining momentum in a sector that has been less keen to innovate than other financial services. Many in our industry agree this technological disruption is a threat to the sector, particularly general insurance in the short term, and especially when it comes to new entrants with new technology based business models.

However, this opinion was tempered recently when Standard & Poor’s (S&P) stated that they thought insurers were over estimating the potential disruption new technology is going to cause.  S&P take the view that many of the insurtech companies are just too small and lack the capability, financial resources and industry expertise; it is interesting that, for the time being, major technology players continue to show little or no interest in our space.

We shouldn’t take our stronghold for granted and there are examples where the industry has been responding through investment and collaboration to protect its position as well as create opportunities from potential threats.

Although not a direct comparison, there are similarities to what we are seeing in the General Reinsurance and Large Commercial space where initiatives are being driven by the London market Target Operating Model (TOM), the London and Lloyd’s market modernisation programme and the Ruschlikon community of leading re/insurers and major brokers. These bodies are promoting the global adoption of ACORD standard structured data messaging, and there are a number of cases of collaboration between competing markets and technology solution providers. 

As an example, in the spring of this year, Régis Delayat, the chief information officer of Scor and Ruschlikon chairman wrote to the re/insurance community to report on important milestones achieved and the enlargement of its footprint over the last 18 months: The number of accounting and claims transactions being processed electronically, based on Acord standards, grew globally by 20% to now around 1.2 million; the global community of insurers, brokers and reinsurers now totals more than 100 implementations across 6 continents in the re/insurance industry across all types of business, and the expansion of the Ruschlikon community and new relationships with insurers.

He also referred to the formation of the Ruschlikon Technology Provider Group in late 2015 with the primary purpose of working together, increasing, broadening and simplifying global implementations of Acord messages and Ruschlikon Best Practices.  

An excellent example of this collaboration is where three of these technology providers are working together to transform and deliver Acord structured technical accounting messages to a major insurer from all of its broker partners, a service that is totally aligned with Ruschlikon’s objectives.

Process improvement

There are also numerous case studies of the financial and process improvements that have been achieved by certain re/insurers and brokers. One of these case studies was presented at the recent Acord event in Boca Raton, Florida, by a reinsurer who utilised a technology provider to transform data to Acord-standard from customers without Acord messaging capability. The statistics are pretty impressive: 672% increase in fully automated transaction and a 50% reduction in booking time.

These numbers are compelling and complement Ruschlikon’s overall assessment of what can be achieved: time and cost reductions typically between 30-60%; and reduction in unmatched cash, faster reconciliation of cash positions, with settlement times improved by up to 35%

So what can we conclude from this? Perhaps we should start to expect the unexpected? It certainly would have been hard to believe, say, a decade ago, that competing brokers, carriers and - certainly - service providers would be collaborating to the extent we are seeing today. This would seem to indicate the collective insurance market is not taking its future for granted - but taking the bull by the horns and dealing with this situation.

There is a view that disruption is driven by customers, not technology, and there continues to be a widening choice of innovative insurance products underpinned by technology for them. Customers are now searching for a multitude of things from a variety of providers, such as ease of doing business, transparency and timeliness, together with convenience, personality, and trustworthiness.

Using technology to achieve these things is what disruption is really about. Brokers and carriers need only to look at how they can best serve their policyholders, creating and delivering products on their terms. When we have these requirements it is time for the industry to disrupt itself, addressing the customer needs, before anyone else does.

Only time will tell how disruption threats and opportunities shape up for everyone in the market.

 Steve Street is a director at Stripe Global Services

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