Welcome, 2017! With 2016 in the record books, it’s a good time to look back on what we learned during the past year of growth, adaptation and change.
If there’s one lesson that 2016 sent loud and clear, it’s that innovation is changing the game at every turn. At the start of the year, we anticipated that 2016 would be a year in which the industry would either embrace or fight change. The number of InsurTech start-ups is steadily growing and some are making grand plans to affect change. Although it only began selling insurance in the summer of 2016, by late December, Lemonade announced its plans to expand nationwide throughout 2017 and the company recently announced it set a world record for speed by processing and paying a claim in a mere 3 seconds.
Where InsurTech aims to disrupt the current distribution model and improve the customer experience, other innovations that are not specific to the insurance industry are creating a new set of challenges. In Oct 2016, former Google employees at Otto paired up with Anheuser-Busch to complete the world’s first commercial shipment using a “driverless” truck. Self-driving cars have been long anticipated and tested for personal use, but this commercial application was the first of its kind. Adding further complication, and blurring the line between commercial auto and cyber risk coverage is the Amazon Snowmobile – an 18-wheeler that can transport up to 100 petrabytes of data from a company’s data warehouse to its cloud servers. Now an industry that’s been slow to change is thrown into warp speed as what used to be science fiction has become reality and new coverage complexities emerge. What remains to be seen is how insurance will be required to adapt, develop the necessary skills to innovate and keep pace.
The second lesson is to keep a close eye on how traditional insurance players respond to this wave of innovation. Reinsurers are particularly interesting to watch, as low investment yields and an increasing mix of capital interests in the reinsurance space spawn new ways to invest and leverage their own capital. In fact, CB Insights has reported a 20x rise in reinsurance investments in InsurTech from 2013-2016. One big advantage reinsurers have compared to traditional carriers is that they are capable of serving the entire supply chain (from quoting to binding to claims handling) and aren’t restricted by legacy systems and distribution models that primary insurers are required to navigate.
And last, but certainly not least, we saw in 2016 the industry recognize that the customer is king. Policyholder customers have long been dissatisfied with interactions with their insurance companies, seeing it as a “necessary evil”, rather than a positive experience. In the past year, companies have spent their time and energy not just on developing new tools for tech-hungry Millennials, but also in empowering their human workforce. As much as we love an app, it can’t replace the trusted advice of an agent.
This is certainly not a comprehensive list of lessons from 2016, but these are three important dynamics to watch as we enter the new year. Adaptability and flexibility are now requirements in the business of mitigating risk. This is a shift not just in the way of doing business, but also in the way we think about the customer and technology-driven solutions. For a more in-depth look at how these lessons could impact the coming year, register for our Jan. 31st webinar 2017 Outlook Report: An Industry Mindset and get your own copy of the full report here.