Disruption is the force of change driving the entire business world and the insurance industry has not been spared.
A new book examining a range of disruptive technologies that will transform the traditionally conservative sector and its products says that insurers need to re-imagine insurance, transforming it from a one-off purchase to a range of data-based real-time services. Insurance companies who do not transform will be the Kodaks of tomorrow, it argues.
The author, Dr Michael Naylor, a senior lecturer at the School of Economics and Finance at Massey University in New Zealand, and who has 20 years’ experience teaching financial and insurance advisers in Asia-Pacific, notes that change is exponential and society will face an avalanche of drastic changes over the next half-century. He said insurance will be particularly hard hit as it is lagging with legacy IT systems and an inability to be flexible fast enough to cope with new “born digital” competitors. And because of the analytical data focus of insurance, it is likely to face far greater disruption than most other sectors as the combination of disruptive innovations will uniquely impact more on data analytics than other sectors.
70% of insurance jobs disrupted
The book first provides an overview of the key drivers of disruption, such as the Internet of Things, mobility and Big Data among others. The next section covers how these will impact different segments of the insurance business. The consequences for some individual employees are worrying.
While automation could cut insurer costs and hence premiums, while speeding up response times to clients, those in administrative roles who may find their jobs drastically changed or gone by 2025, while jobs which depend on analysing trends will die, replaced by expert system programmes.
Dr Naylor estimates that around 70% of all jobs in the industry will be profoundly disrupted – in this brave new world, customer is king. Subsequent trends highlighted like individualisation and dynamic insurance further expound on how the insurers’ relationship with clients is transformed.
Not all is lost
The book’s greatest value, and here is where things get really interesting, is in its second half, which tells insurers what they can do to adapt and survive.
The devil is in the details, and besides the major overhaul required in platforms and legacy systems, Dr Naylor has culled the findings of major consulting studies’ to provide useful summaries of how each affected segment needs to transform.
For example, underwriting needs to incorporate more technical skills, auto insurers need to invest in car telemetrics, while life and health specialists should look at the use of sensors for critical markets and work with analysts on data flow.
He analyses the impact of disruption on staff from brokers to administration and advises, with specifics such as recommending how robo-adviser systems can fine-tune their questionnaires for clients.
A perfect storm
The sobering conclusion is that we are in a “perfect storm” of tech advancements and most insurance players will require immense transformation to ride it out.
In the next two decades, Dr Naylor predicts, the industry will be very different from today and many of you reading this will no longer be working for your company which will cease to exist due to bankruptcy – or change so much it will be nothing like it is now. If that does not faze you, he does go on to offer more tech trends in the even more distant future.
The book provides a very readable and clear overview and an excellent textbook to usher in 2017. if you are still fretting over what to get your boss for Christmas, here is one good option.