Future of Insurance

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TIME TO BLOW AWAY TRACK DRIVERS TO IMPROVING IMAGE NOW MACHINES CAN 04 CUT POLICY COSTS 10 AND SERVICE 12 DETECT FRAUD 03 THE DUST AND COBWEBS Will consumers buy products Technology and new platforms Machines learning from data can Insurers are at last shedding their staid image and embracing change based on the internet of things? improve customer experience transform insurance processes

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PUBLISHING MANAGER HEAD OF PRODUCTION Blowing away the Exposure Manager, the first solution Misha Jessel-Kenyon Natalia Rosek

PRODUCTION EDITOR DIGITAL CONTENT MANAGER on the RMS(one) platform, delivering Benjamin Chiou Lorna North dust and cobwebs MANAGING EDITOR DESIGN accurate, actionable exposure analytics Peter Archer Samuele Motta Grant Chapman The insurance industry is at last shedding its staid image to your risk manager. Kellie Jerrard to move with the times and embrace technology to offer clients a superior service CONTRIBUTORS

DAN BARNES CLARE GASCOIGNE OVERVIEW to these and in new areas, such as time. Today’s squeeze is of a differ- happened years ago, in the indus- Award-winning Formerly on the staff of ANTHONY HILTON cyber attack or loss of reputation. ent order of magnitude. Rates have try’s defence the technology was business journalist, the Financial Times, she is he specialises in financial now a freelance journalist Devising policies which meet cli- been in decline now for at least not there. Unlike banking, where technology, trading specialising in City and ents’ needs has required a funda- ten years. transactions can be standardised and capital markets. financial features. nsurance companies have mental rethink. At the same time – and this is and therefore lend themselves to long cultivated the image of Even without this client pres- what perhaps has made the funda- computerisation, insurance pol- being solid, well-established sure, the industry would have had mental difference – the insurance icies are tailored to individual ANTHONY HILTON ROB LANGSTON and dependable, that they to respond to a hostile external market has become more integrat- needs. Only in motor insurance, Author, journalist and Editor of MENA Fund I broadcaster, he is a former Manager, the monthly are islands of stability in a world environment. The past decade has ed with the other capital markets. where there is scope for standard- City editor of The Times title for the Middle East which is anything but. They have been an unprecedented period of This has brought a wave of new isation, has technology become and managing director of and North Africa asset to. The essence of their business is downward pressure on rates. The risk transfer products designed to the norm. The Evening Standard. management industry. they help their customers manage low interest rate environment has appeal to pension funds and other But more will follow because for and share risks. Such customers caused a collapse in investment patient capital, which has noticed the first time technology is reach- True Accumulation Monitoring Hazard-Based Insights Proactive Risk Response MARK TAYLOR DAVEY WINDER have to believe the organisation income; there is additional com- insurance offers higher returns ing levels of sophistication where Utilize RMS hazard intelligence News editor of Award-winning will still be around when the time petition from new than other finan- it can be applied much more wide- Flexible reporting zones with Respond to real-world events PaymentsCompliance, journalist and author, he comes to pay out on claims. capital entering cial markets. This ly, and this is what is happening, the most trusted Exposed Limit for informed assessment on promptly and confidently, he has written for The specialises in information The image has served the indus- the industry from in turn has led the both among traditional players Guardian, covering security, contributing to try well for 300 years, but more re- outside. And on belief that the cy- and in fintech firms’ intent on calculation in the industry. where to grow the business and improving customer service while financial services, Infosecurity magazine. cently its downsides have also be- top of everything cle will always be industry disruption. On the pro- regulation and compliance. come more apparent. Sometimes, else, post-2008 For the first time the same again be- cess side major projects are under areas to avoid. avoiding surprises. to the modern eye, insurance has there has been technology is cause, even in bad way to deliver connectivity with HELEN YATES seemed too wedded to tradition. a tidal wave of reaching levels times, new capital the thousands of agents and cli- Freelance journalist, Its desire for continuity and sta- regulatory change. is coming in. ents the industry has around the she was formerly editor bility has brought a reluctance to Of course, insur- of sophistication Meanwhile, the globe. Within firms progress in of Global Reinsurance embrace change. Faith in the old ance has always where it can be hit to insurance areas such as big data and block- and managing editor of ways meant it failed to respond to been cyclical and applied much company profita- chain is transforming risk assess- Strategic Risk. customers who were growing im- this was both a more widely bility inherent in ment and selection, collection patient with the resultant costs strength and a rock-bottom rates and verification of information, and inefficiencies. weakness. Pe- and low invest- and pricing. But it has now been forced to riods of relative ment income has The big question still unresolved Although this publication is funded through advertising and For a clearer view of your exposure, contact us at [email protected] adapt. The world has changed prosperity would bring in more been disguised by running down is what role will the individual sponsorship, all editorial is without bias and sponsored features are clearly labelled. For an upcoming schedule, partnership in- hugely in the last 30 years and the competition and push down rates. reserves, perhaps to dangerous have in this? How much of insur- quiries or feedback, please call +44 (0)20 8616 7400 or e-mail value of a modern global business Reserves would be run down, then levels. Indeed, only last month ance will become tech-driven? [email protected] lies much less in physical assets when disasters finally hit, the huge the Prudential Regulation Au- Can the industry still add value Raconteur is a leading publisher of special-interest content that can be insured against flood, sums which had to be found to pay thority felt obliged to warn that it through advice and personal rela- and research. Its publications and articles cover a wide range fire and theft. claims would act as a trigger for felt some in the industry might be tionships, and if so how will it be of topics, including business, finance, sustainability, health- Today the worth of a business is rate hikes. going too far given that reserves rewarded? Will there still be a role care, lifestyle and technology. Raconteur special reports are much more intangible and much Unfortunately, even in tough have fallen now every year for for people delivering quality ad- published exclusively in The Times and The Sunday Times as well harder to value; it lies in the knowl- times this acted as a brake on 15 years. vice or is the future entirely about as online at raconteur.net edge of the workforce, the quality radical change because there was In this environment it is inevita- price? Read on. www.rms.com The information contained in this publication has been ob- tained from sources the Proprietors believe to be correct. of the supply chain, the unique- always a belief that things would ble that the industry would look for ness of the intellectual property, turn up again before too long, as ways to cut costs and to embrace © 2016 Copyright, Risk Management Solutions, Inc. However, no legal liability can be accepted for any errors. No Share this article online via part of this publication may be reproduced without the prior the strength of customer relation- they usually did. But that is anoth- new ways of working, and while Raconteur.net consent of the Publisher. © Raconteur Media ships. The risks come in threats er reason why it is different this critics argue this should have

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INTERNET OF THINGS INSURTECH: UK REGULATORS HELEN YATES Safer driving is t’s 2025, early evening and you’ve fewer accidents AHEAD OF THE GAME just left the office and got into and the way we your car to head home. You re- Imotely turn up your home ther- operate is to A number of factors are driving disruption in the insurance industry, posing a major challenge mostat to ensure it is warm upon ar- reward them rival and your car telematics device for that for the regulators – a challenge the UK regulators are rising to with gusto, says Helen Chapman, quickly assesses the best route. You reverse carefully, mindful that good an insurance partner at law firm Hogan Lovells driving behaviour earns you dis- are not down to a lack of consumer ap- counts on your insurance premium. petite, but a result of issues that are not You get home with time to spare for a being addressed by insurers? “Long- 20-minute run, recorded by your ac- standing insurer models, legacy sys- tivity tracker, and noted by your life tems and relationships are major bar- DIFFERENT ISSUES AFFECTING THE INSURANCE INDUSTRY WHICH THE NUMBER OF STARTUPS PURCHASED BY (RE)INSURERS and health insurer. riers to full adoption,” says David Hill, SO WHAT ARE THE FACTORS REGULATORS NEED TO CONSIDER REGULATORS: RUNNING This is one vision of the future in founder and managing director of Ad- DRIVING THE DISRUPTION? *Estimate SCARED OR EMBRACING which the internet of things (IoT) vent Solutions Management. “For that L & S THE FUTURE? NA OC IO IA promises to transform the way con- to happen, insurer models and rela- MAJOR SOCIETAL T L A R S 79* H sumers behave and interact with their tionships need the infrastructure and CHANGES E The scale and pace of change in the in- I 01 N F +30%

insurance providers. It is a vision the mindset. E T S dustry presents a significant challenge

G that today’s telematics and weara- “IoT is arguably as much a threat as In the retail insurance space, con- for the regulators. The FCA has com- ble device providers are striving for. it is an opportunity as young entre- sumers are more connected than mented that it sees change as the new But there are significant hurdles to preneurs unencumbered with legacy ever, via a multitude of devices and 61 normal and is embracing it. The FCA overcome before the industry can issues nip in and take their business. through multiple platforms. This has actively sought ways of ensuring IN TECH BIG DATA progress along this digital journey, However, while established insurers HA N has two consequences: first, con- C O it meets its objectives, which include K L not least of which is whether consum- are not as agile as newer players, they sumers increasingly expect a much C O +126% ensuring the relevant markets func- O G

L Y ers are willing to share so much data are experienced and business savvy better, smarter service. “People are B tion well and protecting consumers. about themselves. and many are investing in IoT to dis- frustrated with a clunky process for FCA In order to do this and ensure that FINANCIAL CONDUCT Telematics, or black box insurance, cover what is really possible.” buying insurance, and want an easier AUTHORITY regulation remains relevant to the has steadily grown market share in Kevin Roberts, broker and affinity and quicker process through simple new normal, it initiated Project Inno- the young driver segment, where cus- Track drivers to cut director at Legal & General, thinks digital channels,” says John Salmon, a 27 vate in 2014, including an Innovation tomers are happy to have their driv- that ultimately the challenge for technology partner at Hogan Lovells. Hub, which Mr Salmon describes as N NG I VES ing behaviour monitored in return insurance players is to work collab- Second, a larger proportion of con- I TM “extensive ‘sandbox’ testing, ena- W E O N R for lower premiums. But it has yet to oratively as new technology emerg- T sumers fall into Generation Y or the G bling innovative insurance business- make significant inroads into other the cost of policies es. “Finding solutions together that millennial generation: these individu- es to take part in assessments of how market segments. For consumers, it’s ensures data and technology can be als are less likely to own property or they meet regulation, without fear a question of “what’s in it for me”, says used when required is paramount. We cars, are less attracted by life assur- of penalty”. It promises to provide Jamie Macgregor, senior vice presi- Are consumers reluctant to adopt telematics, wearables must remain curious and entrepre- ance and are looking for more tailored fast, frank feedback on the regula- dent of Celent’s Insurance Practice. neurial,” he says. cover they can buy easily and quickly. 2014 2015 2016 tory implications of financial firms’ A lower premium is the first answer, and other insurance products based on the internet of However, high expenses are a major They are attracted by the sharing technological development. Work- particularly for young drivers where impediment for insurers seeking to economy. Helen Chapman, who runs Source: CB insights ing closely with firms in this way the cost of insurance for under-25s things or are insurers themselves behind the curve? offer customers competitively priced the insurance policy wording unit at gives the regulator the information is eye-wateringly high. “Insurance IoT-based products. “The biggest bar- Hogan Lovells, is seeing an increase in INVESTMENT LANDSCAPE FOR INSURTECH it needs to tailor its regulations to is cost driven, and there are a lot of rier in telematics is the cost of data demand for insurance products to be the new business models. Collaborative Disruptive things you can do with different seg- collection,” says Mr Cavanagh. “Clear- designed on a modular basis, allowing Alongside the Innovation Hub, the ments to reward loyalty, aid retention ly the young driver segment is a big customers to purchase just the cover FCA is actively considering issues and make it a fun experience, but success in the UK, but it helps the busi- they need at a price which is calcu- such as big data to understand the these things are modified factors,” CONSUMERS’ WILLINGNESS TO SHARE DATA WITH INSURANCE COMPANIES result,” explains Mr Macgregor. “But ness case that the cost of young driver lated on the basis of actual customer 2014 44% 56% use of data by firms better, and how says Selim Cavanagh, vice president to get to that trusted position you do insurance is relatively high compared data. Customers are no longer inter- this affects consumer outcomes Willing of telematics at Wunelli. “At the end of Not willing need to invest in brand, and show to the norm. Therefore, there’s enough ested in annual policies which might and competition. the day motor insurance is a compul- you are acting and behaving honestly money to pay to install a device that cover them for risks they do not run. 2015 70% 30% Even more noteworthy is the FCA’s sory purchase and we all know from Driving with your customers’ data.” will collect the most data.” international engagement. It has behaviour aggregator research that 90 per cent of This is best achieved through a car- Smartphone apps are one way of 0 0.5 1 1.5 2 2.5 3 co-operation agreements with a buyers go for the quote which ranks at rot rather than stick approach to risk. reducing the cost burden. However, BIG DATA number of overseas regulators (Aus- 02 $BN the top of the aggregator site, because Customers who are penalised with there are limitations to the level and tralia, Singapore and Korea), with the Health data Source: Accenture cost is the most important factor.” curfews and higher premiums will accuracy of data that can be collected As the FCA (Financial Conduct Au- aim of promoting the UK as a centre Safety is important, of course, par- be less incentivised to part with their this way. “There is such a variation thority), the UK’s conduct regulator, for innovation in financial services. ticularly for young drivers and their data than those whose behaviours of different products available,” says has said, big data “can be used by These activities are in stark con - parents. Research suggests the exist- Exercise data are reinforced through “positive Ms Halkett. “And there’s not a simple firms to transform how consumers inspections for claims purposes. As WHO ARE THE often funded by venture capitalists. trast to other regulators around ence of a telematics device can reduce messaging”, says Mr Macgregor. And solution for data portability. We are deal with insurance firms, allowing insurers amass more and more data, DISRUPTORS? What they might be lacking in expe- the world. Lawyers in Hogan the risk of accidents by up to 30 per perhaps surprisingly, less is more talking to other insurers about that, firms to develop new products as in particular from connected devic- rience, they make up for in agility. Lovells’ international insurance cent. “The risk we write isn’t the risk we Home water- from a feedback perspective. “The but because there are so many differ- well as reducing form-filling, stream- es, data analytics tools allow insurers Not who you might think. While there The ability for technology to shake practice have remarked on the flow information keep, we make our drivers safer still,” more information you communicate ent models for telematics, it’s really lining sales and claims processes”. It to use their data in a smart way and are many startups vying for a piece up the insurance distribution chain progressive steps being taken by says Charlotte Halkett, group market- to your customer about their digital not simple. What we do with our data also allows insurers to price risk more gain valuable insights into customer of the pie, much of the innovation is has attracted non-insurance brands the FCA compared with those in ing actuary at insurethebox. “Safer Personal behaviour, the greater the risk is in is completely different from what an accurately. This is a major opportuni- behaviour and trends. Often, cloud being driven by incumbents: large, into parts of the market too. Insur- their jurisdictions. There are few driving is fewer accidents and the way finance details turning people off,” he explains. “It app provider would do.” ty for insurers, which they are seek- computing underpins the use of often global players in the insurance ers and intermediaries are facing off local regulators that are taking as we operate is to reward them for that.” may feel a bit too much like big broth- Mr Cavanagh concludes: “Seventy ing to capitalise on through the use these other technologies. And not markets. All the major insurer groups to major players from other areas, pro-active an approach as the UK Brand is expected to play a progres- er is watching and people are gener- eight per cent of motorists think the of technology: telematics in motor forgetting blockchain technology, have their own accelerators or incu- including technology providers, and regulators. However, as already Purchasing sively more important role in encour- data ally not that interested.” price they pay for insurance should insurance; wearable tech in life and which has the potential to transform bators, mentoring and investing in in- manufacturers of cars and consum- mentioned, some other jurisdic- aging individuals to share their data. Rewards offered by health, motor be linked to driving behaviour. There illness insurance; intelligent home the insurance industry, but which innovative ideas either for products or er electronics. While some incum- tions are co-operating with the But a generation that has grown com- and home insurers need to vary de- are some structural changes needed technologies for property insurance. surers and reinsurers are just begin- means of distribution. Many reinsur- bents view this advancement as a FCA and positive steps are also fortable with sharing data with trust- Check-in data pending on the customer. While a in the insurance industry for that to ning to consider seriously. ers are investing heavily in these sorts threat, others have been welcoming being taken in Hong Kong. In the on social media ed brands, such as Facebook, Amazon young inexperienced driver may ap- happen with pricing, but customers of ventures because they see the the opportunities this could bring United States, a House Bill was and Google, may not feel the same preciate constructive feedback on their are very clear about what they want, 03 NEW TECHNOLOGY mining of the data that they have ac- and otherwise unlikely partnerships introduced in September with the way about its insurance carriers. Status updates and driving behaviour, this is far less likely and for me that feels like a win-win. I 04 AVAILABILITY OF CAPITAL cess to over broad market segments have been forming. expressly stated aim of keeping the “Insurers like the IoT because it cre- photos on social media to be appreciated by a seasoned motor- don’t think the whole market will go The new technology available to insur- as key to their future success. One of US from losing financial innovators ates an opportunity to have a more ist. Here, discounts and other benefits, telematics next year – it won’t be one ers and intermediaries is revolutionis- A feature of the insurtech phe- the challenges, however, is the cultur- to the UK’s regulatory sandbox. frequent advisory relationship with such as accident response, emergency big bang, but there will be constant ing the way they run their businesses. nomenon is the mountain of capital al shift that is needed for a tradition- It is clear that we are witnessing a Internet browsing the customer that they don’t have history breakdown assistance and fraud pre- significant growth.” Artificial intelligence technology, available from interested venture ally risk-averse organisation to truly watershed in both the insurance in- today, hopefully reinforcing brand vention, could be more compelling for such as robo-advisers and chatbots, capital and private equity firms as embrace innovation and creativity. The scale and pace of change in dustry and the relevant regulation. and with it customer retention. And the customer. can increase efficiency and improve well as established insurance mar- Alongside the might of the in- 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Share this article online via the industry presents a significant that promotes good risk behaviours, But what if the barriers to adoption of raconteur.net customer experience. Drones have ket players. This is fuelling a boom cumbent insurance and reinsurance For more information please visit which is good for the underwriting Source: Celent 2016 wearables and IoT-connected devices the potential to cut costs involved in in innovative startups. groups are the innovative startups, challenge for the regulators www.hoganlovells.com 04 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR xx12 / 10xx / 2016 xxxx raconteur.net FUTURE OF INSURANCEXXXX 052

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insurance providers. It is a vision the mindset. E T S dustry presents a significant challenge

L Y ers are willing to share so much data are experienced and business savvy better, smarter service. “People are B tion well and protecting consumers. about themselves. and many are investing in IoT to dis- frustrated with a clunky process for FCA In order to do this and ensure that FINANCIAL CONDUCT Telematics, or black box insurance, cover what is really possible.” buying insurance, and want an easier AUTHORITY regulation remains relevant to the has steadily grown market share in Kevin Roberts, broker and affinity and quicker process through simple new normal, it initiated Project Inno- the young driver segment, where cus- Track drivers to cut director at Legal & General, thinks digital channels,” says John Salmon, a 27 vate in 2014, including an Innovation tomers are happy to have their driv- that ultimately the challenge for technology partner at Hogan Lovells. Hub, which Mr Salmon describes as N NG I VES ing behaviour monitored in return insurance players is to work collab- Second, a larger proportion of con- I TM “extensive ‘sandbox’ testing, ena- W E O N R for lower premiums. But it has yet to oratively as new technology emerg- T sumers fall into Generation Y or the G bling innovative insurance business- make significant inroads into other the cost of policies es. “Finding solutions together that millennial generation: these individu- es to take part in assessments of how market segments. For consumers, it’s ensures data and technology can be als are less likely to own property or they meet regulation, without fear a question of “what’s in it for me”, says used when required is paramount. We cars, are less attracted by life assur- of penalty”. It promises to provide Jamie Macgregor, senior vice presi- Are consumers reluctant to adopt telematics, wearables must remain curious and entrepre- ance and are looking for more tailored fast, frank feedback on the regula- dent of Celent’s Insurance Practice. neurial,” he says. cover they can buy easily and quickly. 2014 2015 2016 tory implications of financial firms’ A lower premium is the first answer, and other insurance products based on the internet of However, high expenses are a major They are attracted by the sharing technological development. Work- particularly for young drivers where impediment for insurers seeking to economy. Helen Chapman, who runs Source: CB insights ing closely with firms in this way the cost of insurance for under-25s things or are insurers themselves behind the curve? offer customers competitively priced the insurance policy wording unit at gives the regulator the information is eye-wateringly high. “Insurance IoT-based products. “The biggest bar- Hogan Lovells, is seeing an increase in INVESTMENT LANDSCAPE FOR INSURTECH it needs to tailor its regulations to is cost driven, and there are a lot of rier in telematics is the cost of data demand for insurance products to be the new business models. Collaborative Disruptive things you can do with different seg- collection,” says Mr Cavanagh. “Clear- designed on a modular basis, allowing Alongside the Innovation Hub, the ments to reward loyalty, aid retention ly the young driver segment is a big customers to purchase just the cover FCA is actively considering issues and make it a fun experience, but success in the UK, but it helps the busi- they need at a price which is calcu- such as big data to understand the these things are modified factors,” CONSUMERS’ WILLINGNESS TO SHARE DATA WITH INSURANCE COMPANIES result,” explains Mr Macgregor. “But ness case that the cost of young driver lated on the basis of actual customer 2014 44% 56% use of data by firms better, and how says Selim Cavanagh, vice president to get to that trusted position you do insurance is relatively high compared data. Customers are no longer inter- this affects consumer outcomes Willing of telematics at Wunelli. “At the end of Not willing need to invest in brand, and show to the norm. Therefore, there’s enough ested in annual policies which might and competition. the day motor insurance is a compul- you are acting and behaving honestly money to pay to install a device that cover them for risks they do not run. 2015 70% 30% Even more noteworthy is the FCA’s sory purchase and we all know from Driving with your customers’ data.” will collect the most data.” international engagement. It has behaviour aggregator research that 90 per cent of This is best achieved through a car- Smartphone apps are one way of 0 0.5 1 1.5 2 2.5 3 co-operation agreements with a buyers go for the quote which ranks at rot rather than stick approach to risk. reducing the cost burden. However, BIG DATA number of overseas regulators (Aus- 02 $BN the top of the aggregator site, because Customers who are penalised with there are limitations to the level and tralia, Singapore and Korea), with the Health data Source: Accenture cost is the most important factor.” curfews and higher premiums will accuracy of data that can be collected As the FCA (Financial Conduct Au- aim of promoting the UK as a centre Safety is important, of course, par- be less incentivised to part with their this way. “There is such a variation thority), the UK’s conduct regulator, for innovation in financial services. ticularly for young drivers and their data than those whose behaviours of different products available,” says has said, big data “can be used by These activities are in stark con - parents. Research suggests the exist- Exercise data are reinforced through “positive Ms Halkett. “And there’s not a simple firms to transform how consumers inspections for claims purposes. As WHO ARE THE often funded by venture capitalists. trast to other regulators around ence of a telematics device can reduce messaging”, says Mr Macgregor. And solution for data portability. We are deal with insurance firms, allowing insurers amass more and more data, DISRUPTORS? What they might be lacking in expe- the world. Lawyers in Hogan the risk of accidents by up to 30 per perhaps surprisingly, less is more talking to other insurers about that, firms to develop new products as in particular from connected devic- rience, they make up for in agility. Lovells’ international insurance cent. “The risk we write isn’t the risk we Home water- from a feedback perspective. “The but because there are so many differ- well as reducing form-filling, stream- es, data analytics tools allow insurers Not who you might think. While there The ability for technology to shake practice have remarked on the flow information keep, we make our drivers safer still,” more information you communicate ent models for telematics, it’s really lining sales and claims processes”. It to use their data in a smart way and are many startups vying for a piece up the insurance distribution chain progressive steps being taken by says Charlotte Halkett, group market- to your customer about their digital not simple. What we do with our data also allows insurers to price risk more gain valuable insights into customer of the pie, much of the innovation is has attracted non-insurance brands the FCA compared with those in ing actuary at insurethebox. “Safer Personal behaviour, the greater the risk is in is completely different from what an accurately. This is a major opportuni- behaviour and trends. Often, cloud being driven by incumbents: large, into parts of the market too. Insur- their jurisdictions. There are few driving is fewer accidents and the way finance details turning people off,” he explains. “It app provider would do.” ty for insurers, which they are seek- computing underpins the use of often global players in the insurance ers and intermediaries are facing off local regulators that are taking as we operate is to reward them for that.” may feel a bit too much like big broth- Mr Cavanagh concludes: “Seventy ing to capitalise on through the use these other technologies. And not markets. All the major insurer groups to major players from other areas, pro-active an approach as the UK Brand is expected to play a progres- er is watching and people are gener- eight per cent of motorists think the of technology: telematics in motor forgetting blockchain technology, have their own accelerators or incu- including technology providers, and regulators. However, as already Purchasing sively more important role in encour- data ally not that interested.” price they pay for insurance should insurance; wearable tech in life and which has the potential to transform bators, mentoring and investing in in- manufacturers of cars and consum- mentioned, some other jurisdic- aging individuals to share their data. Rewards offered by health, motor be linked to driving behaviour. There illness insurance; intelligent home the insurance industry, but which innovative ideas either for products or er electronics. While some incum- tions are co-operating with the But a generation that has grown com- and home insurers need to vary de- are some structural changes needed technologies for property insurance. surers and reinsurers are just begin- means of distribution. Many reinsur- bents view this advancement as a FCA and positive steps are also fortable with sharing data with trust- Check-in data pending on the customer. While a in the insurance industry for that to ning to consider seriously. ers are investing heavily in these sorts threat, others have been welcoming being taken in Hong Kong. In the on social media ed brands, such as Facebook, Amazon young inexperienced driver may ap- happen with pricing, but customers of ventures because they see the the opportunities this could bring United States, a House Bill was and Google, may not feel the same preciate constructive feedback on their are very clear about what they want, 03 NEW TECHNOLOGY mining of the data that they have ac- and otherwise unlikely partnerships introduced in September with the way about its insurance carriers. Status updates and driving behaviour, this is far less likely and for me that feels like a win-win. I 04 AVAILABILITY OF CAPITAL cess to over broad market segments have been forming. expressly stated aim of keeping the “Insurers like the IoT because it cre- photos on social media to be appreciated by a seasoned motor- don’t think the whole market will go The new technology available to insur- as key to their future success. One of US from losing financial innovators ates an opportunity to have a more ist. Here, discounts and other benefits, telematics next year – it won’t be one ers and intermediaries is revolutionis- A feature of the insurtech phe- the challenges, however, is the cultur- to the UK’s regulatory sandbox. frequent advisory relationship with such as accident response, emergency big bang, but there will be constant ing the way they run their businesses. nomenon is the mountain of capital al shift that is needed for a tradition- It is clear that we are witnessing a Internet browsing the customer that they don’t have history breakdown assistance and fraud pre- significant growth.” Artificial intelligence technology, available from interested venture ally risk-averse organisation to truly watershed in both the insurance in- today, hopefully reinforcing brand vention, could be more compelling for such as robo-advisers and chatbots, capital and private equity firms as embrace innovation and creativity. The scale and pace of change in dustry and the relevant regulation. and with it customer retention. And the customer. can increase efficiency and improve well as established insurance mar- Alongside the might of the in- 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Share this article online via the industry presents a significant that promotes good risk behaviours, But what if the barriers to adoption of raconteur.net customer experience. Drones have ket players. This is fuelling a boom cumbent insurance and reinsurance For more information please visit which is good for the underwriting Source: Celent 2016 wearables and IoT-connected devices the potential to cut costs involved in in innovative startups. groups are the innovative startups, challenge for the regulators www.hoganlovells.com 06 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR xx12 / 10xx / 2016 xxxx raconteur.net FUTURE OF INSURANCEXXXX 072

COMMERCIALCOMMERCIAL FEATURE FEATURE OPINION COLUMN Innovation for the Can Lemonade be toast of the industry? LIFEGENIE IS OUT customer’s good Innovation, essential for the insurance industry to adapt and prosper, must come from within, but also by bringing in outsiders with a new approach to the business OF THE BOTTLE Regardless of technical innovation, A new web-based service can analyse existing customer data ethical standards must remain and prepare a personalised life insurance quote to match today’s relevant to the insurance industry INNOVATION CULTURE society and appealing to the increas- fast-moving digital world and meaningful to customers CLARE GASCOIGNE ingly millennial workforce.” Deloitte argues the industry needs to design training programmes that SIAN FISHER month ago, a new start- better match the way younger people Chief executive up was launched in New learn, using claims scenarios, ca- Chartered Insurance Institute York. It was funded by Se- tastrophe situations, department of Aquoia Capital, which put insurance presentations and agency in a cool $13 million, one of its larg- sales simulations, which would ac- Just as spe- ing price to include ir- est-ever seed investments. celerate performance faster than the cies evolve, relevant cover, even if And the innovative new venture more traditional learning methods. so too do it appears to answer that caught the attention of one It’s an innovative concept we can all markets, products the customer’s pri- of the world’s leading venture drink to – even if only in lemonade. and professions. mary demand. capitalists? An insurance company People often con- Even though at called Lemonade. Share this article online via fuse evolution with its heart risk-pool- “What’s happening in the indus- raconteur.net progress and see a ing is very simple, try is a massive wake-up call,” says successful species as modern insurance Andrew Brem, chief digital officer if it were the result of a can seem complex, of Aviva. “The concept of insurtech designed process with a confusing and hard for really took off last year.” TOP 10 TRENDS SHAPING predefined outcome. It is easy customers to engage with. Lemonade may be the latest dis- ABOVE Shai Wininger (left) and Daniel INSURANCE IN 2016 to assume that all evolution is posi- So it’s harder for customers to see rupter in an industry that is still Schreiber, co-founders of Lemonade, tive, rather than random adaptation where innovation benefits them. more likely to be thought of as tra- the world’s first P2P insurance company INCREASED USE to suit the prevailing environment. So we need simple standards that ditional, but is unlikely to be the BELOW Screenshot of the Lemonade

Lemonade OF INTERNET OF But innovation doesn’t need to customers can understand and last. According to the Association of app, powered by an AI chatbot 1 THINGS BY INSURERS growing gap in the insur- tion and speedily puts together an LifeGenie can be deployed any- be random. Just like evolution, it is care about, and which establish a British Insurers (ABI), the insurtech ance advice market has left offer that is tailored to them. It can where – wherever the greatest num- driven by environmental pressure level playing field for insurers and financing trend is about to explode Changing the culture of an indus- but we are reinventing the entirety Risk game into schools and colleg- A millions of people under- be used as part of a face-to-face ber of pertinent clicks are found to differentiate and successful inno- insurance brokers. This provides a from $197.1 million in 2013, $556.5 try from traditional to innovative of Aviva and The Garage gives every- es, and launching a new appren- served when it comes to life cover meeting, a visit to a customer-fac- – whether in a branch, via an e-mail vations will breed followers. But we context and environment for prior- million in 2014 and $831.5 million in is not easy. But according to Jean- one the licence to come out of their ticeship website. AUTO INSURERS and their wider financial protec- ing website or a targeted e-mail campaign or on a website, offering a 2 SHIFTING TOWARDS can choose the types of innovation itising innovation. the first five months of 2015. François Gasc of Accenture: “If shells,” says Aviva’s Mr Brem. “There’s been a real recognition USAGE-BASED tion needs. campaign, providing an illustrative click through to an insurer’s website we want to encourage, rather than And it means companies with Writing about the changing long-established carriers are going Key to changing the culture is that we need a more diverse work- INSURANCE Banks have retreated from offer- price at the touch of a button. for a more detailed quote. leaving it to random chance. technological skills can collaborate world, assistant director and head to succeed in an increasingly digital bringing in talent from outside force, more and better talent,” says ing face-to-face advice, mortgage Ian Teague, iPipeline UK managing Mr Teague says the financial servic- Insurance began in the 17th centu- with companies with financial and of strategy at the trade body, Matt market, they have to become inno- the industry. “We have recruited PwC’s Mr Howe. “We’re starting to advisers have less time available director, says: “As a business you es sector has invested a lot of time ry as a very simple concept. A single customer skills with a common un- vators. Fence-sitters and imitators digital designers, user experience see that building it ourselves is not USING BIG DATA to talk about life insurance and a already know a lot about your cus- and money in building attractive and ship owner couldn’t risk their entire derstanding of what the solution just won’t make the grade.” and interface designers, custom- the best way forward.” 3 TO IMPROVE CLAIM growing number of independent tomer and we can help use that to user-friendly websites, but some- PROCESSING livelihood on the chance of a ship- needs to look like for the customer. So how do you innovate in a ma- er analysis experts, innovation A well thought out intern pro- CAPABILITIES financial advisers are more fo - put together an accurate offer, in an where along the way has lost sight of wreck, so they would pool the risk Industries that we tend to think of ture and traditional industry? Mr experts – historically not peo- gramme can reap significant bene- cused on higher-net-worth clients. instant, that is relevant to them. the need to drive customer traffic to with a wider group. That was truly as innovative also tend to be the ones If long-established Gasc has a checklist that includes ple we have had in our business,” fits, but bringing in people with skills About 8.5 million UK adults with “For instance, as a bank, you those sites in the first place. innovative, transparent and suited with customers who are involved in carriers are going shaking up the leadership, securing he adds. from outside the insurance sector is a ENTRY OF NON- dependents do not have any life might be talking to them about “We can provide a nudge to cus- all the parties involved. the innovation process. Being open funding, thinking like a startup, Aviva is not alone. Indeed, the en- cultural shift that applies at every lev- 4 TRADITIONAL FIRMS cover in place. The result is that their mortgage application, a finan- tomers and to advisers to have that The pooling of risk is still at the source requires common, transpar- to succeed in an investing in startups, bringing in tire insurance industry is having a el. Chief executive of Legal & General, IN INSURANCE consumers are exposing them- cial review or setting up their own conversation about the benefits of heart of all insurance, but it has iter- ent standards. Of course, not all in- increasingly digital new talent and changing process- rethink about its talent pool. It re- Nigel Wilson, was chairman at retail- selves and their families to signif - business, while as a financial adviser life cover, and a realistic illustra- atively developed to meet customer novation is technological, far from it, market, they es. But it’s easier said than done; cently joined an initiative, HeForShe, er Halfords, while Stephen Hester at icant risk of financial ruin as they you might be talking about pen- tion of the cost,” he adds. demand for new types of cover, ways and nor should the new way of doing there is pushback, as with any ma- created by UN Women, that aims to RSA Insurance Group was previously fail to take out life, critical illness sions or inheritance tax planning. Given the financial pressures have to become INCREASED USE of buying and servicing. Regulation things be chosen ‘because we can’. jor cultural shift, if innovation is to improve gender parity. Speaking at chief executive at RBS bank. 5 OF AERIAL AND or income protection cover. many businesses are under, Mr has established safety nets and True innovation starts with an innovators be embraced. the launch, Huw Evans, the ABI’s di- It is critical that the innovation DIGITAL IMAGERY The question is how can the fi - Teague recognises they are cau- professional standards have given insight into what the customer ac- One way is to start afresh complete- rector general, said: “We have a huge culture stems from the highest nancial services industry reach out tious about additional investment, those working in the profession a tually wants or needs, then moves ly. Friendsurance, a German compa- amount to do to ensure we attract point; 87 per cent of respondents in to those customers it has failed but he stresses that LifeGenie, framework to work within and the to finding a way to achieve that. ny, was one of the earliest to translate women to our industry and keep a 2015 Deloitte survey agreed that to engage. delivered through a software- expertise to do it properly. The customer is, of course, always Cullen, says: “The moment is fast the concept of the sharing economy them here. Improving our sector’s leadership was important. Yet only FOCUS ON Specialist software provider As a business you as-a-service (SaaS) model, is a 6 GAMIFICATION The future of insurance will doubt- right. But for the customer to know approaching when Silicon Valley into peer-to-peer insurance, setting diversity and inclusion is vital to our 33 per cent believed their leader- OF PROCESSES iPipeline believes the solution lies already know a lot about cost-effective way of engaging less look different from today. There what they want, simple, transparent throws everything at scaling an in- up in 2010. But you don’t need an en- future success, not a ‘nice to have’.” ship pipelines were ready, giving in using digital technology to un- with customers and one that com- will be new things to insure and new products, processes and informa- novative insurance business to the tirely new company to innovate; the Elsewhere, the Chartered Insur- a clear indication that the indus- lock customer data and nudge your customer and we plements rather than replaces ex- ways of insuring them. But we have tion are needed, and that’s down to mass market.” big UK insurers are setting up inno- ance Institute has been working on try still has work to do to navigate them to explore their protection can help use that to put isting sales processes. the opportunity to set the standards the professionals to make happen. Insurance, of course, is not the vation hubs, such as Liverpool Vic- making insurance more attractive the challenges. INCREASED needs at the relevant time. It has been designed to be agile DEMAND FOR by which success should be meas- As a professional body, the Char- first industry to be disrupted and it toria’s UX Lab, which tests the user to school-leavers, taking a Discover Moreover, the same survey found 7 together an accurate CYBER INSURANCE The company has developed and flexible, allowing users to adopt ured and help encourage innovation tered Insurance Institute has a re- is customers, who have learnt new experience. Set up like a consumer’s that only a third of insurance com- LifeGenie, a data-driven approach of er, in an instant, that a test-and-learn approach as they that takes us in that direction. sponsibility enshrined in a Royal ways of interacting with businesses living room, it allows the insurer to panies consider their organisations that allows financial institutions to is relevant to them figure out the best way of reaching What do standards look like for Charter to “secure and justify the con- and are partly driving the change. trial a digital experience under “nor- ready with the skills and abilities re- change dramatically the way con- existing and new customers, and of-

something such as insurance? They fidence of the public” in insurance. There have been some regulatory mal” conditions, when distracted by Lemonade quired to meet their business needs. EMERGENCE sumers can be introduced to and fers them the capacity to increase are not the same as regulations. One way of doing that is to make sure pressures encouraging the industry television or other people. It’s not only a question of bringing 8 OF PEER-TO-PEER engage with their protection needs, scale when appropriate. INSURANCE Standards need to complement regu- that anyone employed in the profes- to make their services focus more Meanwhile, Aviva has set up The in outsiders, but developing existing triggering them to take action. “However, as we all know, after Mr Teague says: “LifeGenie can lations; they form the basis for a pro- sion, who designs, sells, services or ad- on the customer and there have Garage, a digital hub based in Hox- staff to meet the needs and expecta- Its starting point is the recogni- a lengthy chat about a mortgage, help nudge customers to get them gressive, customer-focused ethical vises on insurance products, has the been business pressures, as com- ton, east London; there is also a Ga- tions of millennials. tion that the internet is part of the it can be difficult to find more on the journey to buying life cover approach, rather than an enforced right expertise to do that competently. parison websites drive down mar- rage in Singapore. It has deliberately “Two thirds of insurance compa- USAGE OF fabric of daily life, for shopping, time to talk about life insurance. and, if the experience is engaging set of minimum requirements. But critically it also means setting gins and make insurance increas- gone for an urban, post-industrial nies surveyed indicated that they 9 MHEALTH APPS banking and leisure, where users LifeGenie automates the transition and relevant, we know that it will Without clear standards, innova- and driving an ethical approach for ingly competitive. feel: bare brick walls, sofas made out saw their capabilities as ‘weak’ when BY INSURERS expect a quick and simple process into a protection conversation, result in better conversion rates.” tion doesn’t automatically benefit the those professionals to sign up to. Our Such disruption is prompting a lot of pallets, heating and ventilation it comes to providing social or mo- that provides a personalised solu - saving the adviser and client valu- customer. Even where it ostensibly re- challenge is to make sure those eth- of soul-searching in the industry, pipes on show. Working methods are bile learning, or using advanced me- tion to meet their needs. able time.” To find out more visit sponds to a customer demand, such as ical standards remain relevant and which is often considered to be one of informal, with small teams looking dia, such as gaming or simulation,” Yet, traditional methods for sell - There are millions of financial FOCUS ON www.ipipeline.com/uk or e-mail to reduce prices, it needs to be joined meaningful to customers today and the slowest to adopt innovative new to test and bring products to market according to a Deloitte report, Hu- 10 CUSTOMER- ing life insurance have not kept interactions conducted every Ian Teague at [email protected] up with a holistic understanding of in the future, regardless of the techno- ideas and techniques. “The industry quickly; the suit-and-tie mentality is man capital trends in the insurance ADHERENCE APPS up with the pace of change year where better tools could the entire customer offering. Cutting logical advances that shape is very aware of the problems and the not in evidence. industry. It says: “These tools are vi- in technology. aid discussion on protection, and price by removing cover or reducing the look of the products and opportunities,” says Jonathon Howe, “It had to be a greenfield site, set up tal to real-time learning, matching A web-based service, LifeGenie enable a quick and smooth pur- service standards is as bad as increas- services customers see. UK insurance leader at PwC. separately to give it space to breathe, the pace of life-business for today’s Source: Capgemini 2016 uses existing customer informa- chasing process. 06 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR xx12 / 10xx / 2016 xxxx raconteur.net FUTURE OF INSURANCEXXXX 072

something such as insurance? They fidence of the public” in insurance. There have been some regulatory mal” conditions, when distracted by Lemonade quired to meet their business needs. EMERGENCE sumers can be introduced to and fers them the capacity to increase are not the same as regulations. One way of doing that is to make sure pressures encouraging the industry television or other people. It’s not only a question of bringing 8 OF PEER-TO-PEER engage with their protection needs, scale when appropriate. INSURANCE Standards need to complement regu- that anyone employed in the profes- to make their services focus more Meanwhile, Aviva has set up The in outsiders, but developing existing triggering them to take action. “However, as we all know, after Mr Teague says: “LifeGenie can lations; they form the basis for a pro- sion, who designs, sells, services or ad- on the customer and there have Garage, a digital hub based in Hox- staff to meet the needs and expecta- Its starting point is the recogni- a lengthy chat about a mortgage, help nudge customers to get them gressive, customer-focused ethical vises on insurance products, has the been business pressures, as com- ton, east London; there is also a Ga- tions of millennials. tion that the internet is part of the it can be difficult to find more on the journey to buying life cover approach, rather than an enforced right expertise to do that competently. parison websites drive down mar- rage in Singapore. It has deliberately “Two thirds of insurance compa- USAGE OF fabric of daily life, for shopping, time to talk about life insurance. and, if the experience is engaging set of minimum requirements. But critically it also means setting gins and make insurance increas- gone for an urban, post-industrial nies surveyed indicated that they 9 MHEALTH APPS banking and leisure, where users LifeGenie automates the transition and relevant, we know that it will Without clear standards, innova- and driving an ethical approach for ingly competitive. feel: bare brick walls, sofas made out saw their capabilities as ‘weak’ when BY INSURERS expect a quick and simple process into a protection conversation, result in better conversion rates.” tion doesn’t automatically benefit the those professionals to sign up to. Our Such disruption is prompting a lot of pallets, heating and ventilation it comes to providing social or mo- that provides a personalised solu - saving the adviser and client valu- customer. Even where it ostensibly re- challenge is to make sure those eth- of soul-searching in the industry, pipes on show. Working methods are bile learning, or using advanced me- tion to meet their needs. able time.” To find out more visit sponds to a customer demand, such as ical standards remain relevant and which is often considered to be one of informal, with small teams looking dia, such as gaming or simulation,” Yet, traditional methods for sell - There are millions of financial FOCUS ON www.ipipeline.com/uk or e-mail to reduce prices, it needs to be joined meaningful to customers today and the slowest to adopt innovative new to test and bring products to market according to a Deloitte report, Hu- 10 CUSTOMER- ing life insurance have not kept interactions conducted every Ian Teague at [email protected] up with a holistic understanding of in the future, regardless of the techno- ideas and techniques. “The industry quickly; the suit-and-tie mentality is man capital trends in the insurance ADHERENCE APPS up with the pace of change year where better tools could the entire customer offering. Cutting logical advances that shape is very aware of the problems and the not in evidence. industry. It says: “These tools are vi- in technology. aid discussion on protection, and price by removing cover or reducing the look of the products and opportunities,” says Jonathon Howe, “It had to be a greenfield site, set up tal to real-time learning, matching A web-based service, LifeGenie enable a quick and smooth pur- service standards is as bad as increas- services customers see. UK insurance leader at PwC. separately to give it space to breathe, the pace of life-business for today’s Source: Capgemini 2016 uses existing customer informa- chasing process. 08 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR 12 / 10 / 2016 raconteur.net FUTURE OF INSURANCE 09

Needed change is comi ng but it’s slow arriving Embrace New ideas are melting the permafrost on a frozen industry and, despite a glacial pace of change, disruption is trickling down Innovation

NEW ENTRANTS FUTURE OF INSURANCE

DAN BARNES Friendsurance

Muller Beukes Edvardsen (MBE) is a onsultancy PwC has found 40% that while 74 per cent of of UK insurers are specialist consultancy with a reputation for insurance companies be- already partnering Clieve at least some part with non-insurance insight and innovation within the financial of their business is at risk of dis- companies or ruption, 32 per cent do not engage regard this as a services sector. We excel at successfully with financial technology (fintech) high priority firms on any level. The report notes delivering projects in technology solutions, that insurance is heavily reliant on actuarial & risk management and operational call centres – 78 per cent of clients contact companies by phone – and 46% excellence, helping our clients become more yet, despite a high expectation of are working changing customer habits, they are with startups efficient, effective and profitable. “reluctant to establish strong rela- and external tionships with fintechs” lagging the partners or have banking sector by some measure. prioritised this Economic pressures may change this. As the capacity to capture data in the car and at home through tele- Source: Accenture 2016 matics allows real-time analysis of risk, there may well be a further market, there are other challenges. tightening of revenue streams in the Ms L’Hostis says: “Some startups future. Insurers are beginning to have very niche use-cases and start at look at prevention over protection, a small scale one, for example in the making the capacity to analyse data Employees at German insurer US they begin in just one state before Friendsurance, which gives cashback in real time more important. to customers with no claims and expanding. They start at a small level Yet there appears to be a mismatch reduced cashback for small claims and try to rescale, which proves to be in the amount of insurance-based fin- quite challenging. In a way they don’t tech activity taking place relative to there is far too much capacity,” that while traditional insurers have can thereby reduce premiums. It pose a threat to insurance companies the insurance need, says Tony Boobi- says Adrian Rands, chief executive a limited use of digital technologies, can make a difference.” yet, but they are opening the market er, author of the book Analytics for In- at QuanTemplate, a fintech firm some are engaging in order to pro- In the UK, firms have faced dis- and contributing to its shape.” surance: The Real Business of Big Data. founded in 2012 focused on pool- vide better customer engagement. ruption from new business models The nature of insurance pay-outs “Insurance places much more While traditional ing, normalising and analysing “We see it to offer more relevance, before: direct insurance in the 1990s and the potential delays that can focus on the whole concept of new insurers have a data. “There are more insurers than tailored on demand insurance cov- and in the last decade insurance stem from disputes is another factor, offerings and on better data and an- limited use of there are clients and so there is a lot erage,” she says. “Not a huge number comparison websites have driven for instance claims for asbestos-re- alytics than the fintech companies digital technologies, of pricing pressure, so making an need this, but some do, such as Trōv, margins lower. Yet having bought lated cases can have assets held are providing,” he says. “It’s inter- underwriting profit is also incredi- which provides it for small assets British price comparison site Be- against them for 20 years without esting that insurers have recognised some are engaging bly challenging.” like electronics. That is something atThatQuote.com in 2011, Google a pay-out. Also, policies may only that all this data is out there, both in order to provide Equally, the insurance business that could reshape the whole indus- found not every model can be driven be changed annually at most. That structured within their organisation better customer is not homogeneous. Products span try in the future.” further, especially where the agree- makes the window for disruption and unstructured, but haven’t really time periods from that of a holiday Trōv, founded in 2012 as an inven- ment of the industry is needed. quite small. Scaling and distribution figured out the best way of getting engagement to that of a lifetime with enormous- tory app for a phone, is launching were a big topic for Friendsurance, value from that data.” ly varied values and conditions sur- on-demand insurance for items for says Mr Kunde, where the slow-mov- The insurance business model is rounding a pay-out. While that may fixed periods of time by partnering ing nature of competitors proved to more straightforward than the lab- that model is under pressure. The be less complex than capital mar- with insurers SunCorp in the United slow the pace of change, rather than yrinthine capital markets, in which investment return is close to drying kets, it certainly creates opportuni- States and AXA in the UK, providing As new ideas filter slowing the competition. regulatory change is creating multi- up as negative rates and volatile sec- ties for disruption. the insurance part based on valua- “In a way you could expect it ple points of opportunity for nimble ondary markets challenge valuation Fintechs typically work either by tions carried via the app. It is expect- down through the makes it easier to break into, but tech startups with a good idea. Insur- of the long-term investment instru- augmenting a traditional player or by ed to launch in the US in 2017. business, it is likely actually everybody is slow,” he says. ance businesses traditionally make ments traditionally used. competing with it. Aurélie L’Hostis, Other firms are rivalling tradi- change will occur “The carrier is slow, but still they Passionate about adding profit through both investment and “Scrutiny is on the underwriting analyst for e-business and channel tional players. Friendsurance.com and those firms have a lot of money and the competi- profitable underwriting. However, side and this comes at a time where strategy at Forrester Research, notes has launched a peer-to-peer (P2P) tion is high. And on the other hand, value to your business insurance product in Germany that driving innovation the customer is slow so it’s really groups customers into pools, with can control the difficult to activate customers and AREAS WHERE INSURERS SEE THE MOST IMPACT FROM FINTECH cashback for pools with no claims direction of acquire them.” and reduced cashback for small Nevertheless, as new ideas filter Meet changing customer needs claims, which are paid for out of the that change down through the business, it is with new offering pools. Claims that go beyond the likely change will occur and those Leverage existing data and analytics pool size are settled by the main in- firms driving innovation can con- to generate deep risk insights surance firm. Google Compare, as the service trol the direction of that change, New approaches to underwrite “We looked at insurance and saw a was branded and brought to the US, says Mr Rands. risk and predict losses huge opportunity because there was was discontinued as a business line “I wouldn’t say that [insurers] are Enhance interactions and build so little change and so little innova- in March this year. One source noted looking to react very quickly, it’s not trusted relationships tion that our hunch was there must that the impact of price comparison something insurers do,” he says. “But be a ton of things one can do better,” on UK margins may have dissuaded the message now is very consistent Enable the business with sophisticated operational capabilities says chief executive and co-founder US insurers from contributing, where across the industry that the reform of Tim Kunde. “We were able to make a UK institutions had originally per- the way in which they trade is neces- Efficiently leverage ecosystem and market resources connection between insurance and ceived it as a way to expand market sary and technology is going to be the social networks, and that’s how we share online. “No one buys the more way in which they evolve.” Other developed our P2P approach. expensive quotes regardless of the Use the QR “With this we have a lever to drive concept of service,” says Mr Rands. Share this article online via 0% 10% 20% 30% 40% 50% 60% 70% 80% in and make a change. The peer-to- For firms trying to disrupt without raconteur.net code to find Source: PwC 2016 peer approach can reduce costs and the co-operation of the insurance out more. www.mbe-intl.com 08 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR 12 / 10 / 2016 raconteur.net FUTURE OF INSURANCE 09

Needed change is comi ng but it’s slow arriving Embrace New ideas are melting the permafrost on a frozen industry and, despite a glacial pace of change, disruption is trickling down Innovation

NEW ENTRANTS FUTURE OF INSURANCE

DAN BARNES Friendsurance

Muller Beukes Edvardsen (MBE) is a onsultancy PwC has found 40% that while 74 per cent of of UK insurers are specialist consultancy with a reputation for insurance companies be- already partnering Clieve at least some part with non-insurance insight and innovation within the financial of their business is at risk of dis- companies or ruption, 32 per cent do not engage regard this as a services sector. We excel at successfully with financial technology (fintech) high priority firms on any level. The report notes delivering projects in technology solutions, that insurance is heavily reliant on actuarial & risk management and operational call centres – 78 per cent of clients contact companies by phone – and 46% excellence, helping our clients become more yet, despite a high expectation of are working changing customer habits, they are with startups efficient, effective and profitable. “reluctant to establish strong rela- and external tionships with fintechs” lagging the partners or have banking sector by some measure. prioritised this Economic pressures may change this. As the capacity to capture data in the car and at home through tele- Source: Accenture 2016 matics allows real-time analysis of risk, there may well be a further market, there are other challenges. tightening of revenue streams in the Ms L’Hostis says: “Some startups future. Insurers are beginning to have very niche use-cases and start at look at prevention over protection, a small scale one, for example in the making the capacity to analyse data Employees at German insurer US they begin in just one state before Friendsurance, which gives cashback in real time more important. to customers with no claims and expanding. They start at a small level Yet there appears to be a mismatch reduced cashback for small claims and try to rescale, which proves to be in the amount of insurance-based fin- quite challenging. In a way they don’t tech activity taking place relative to there is far too much capacity,” that while traditional insurers have can thereby reduce premiums. It pose a threat to insurance companies the insurance need, says Tony Boobi- says Adrian Rands, chief executive a limited use of digital technologies, can make a difference.” yet, but they are opening the market er, author of the book Analytics for In- at QuanTemplate, a fintech firm some are engaging in order to pro- In the UK, firms have faced dis- and contributing to its shape.” surance: The Real Business of Big Data. founded in 2012 focused on pool- vide better customer engagement. ruption from new business models The nature of insurance pay-outs “Insurance places much more While traditional ing, normalising and analysing “We see it to offer more relevance, before: direct insurance in the 1990s and the potential delays that can focus on the whole concept of new insurers have a data. “There are more insurers than tailored on demand insurance cov- and in the last decade insurance stem from disputes is another factor, offerings and on better data and an- limited use of there are clients and so there is a lot erage,” she says. “Not a huge number comparison websites have driven for instance claims for asbestos-re- alytics than the fintech companies digital technologies, of pricing pressure, so making an need this, but some do, such as Trōv, margins lower. Yet having bought lated cases can have assets held are providing,” he says. “It’s inter- underwriting profit is also incredi- which provides it for small assets British price comparison site Be- against them for 20 years without esting that insurers have recognised some are engaging bly challenging.” like electronics. That is something atThatQuote.com in 2011, Google a pay-out. Also, policies may only that all this data is out there, both in order to provide Equally, the insurance business that could reshape the whole indus- found not every model can be driven be changed annually at most. That structured within their organisation better customer is not homogeneous. Products span try in the future.” further, especially where the agree- makes the window for disruption and unstructured, but haven’t really time periods from that of a holiday Trōv, founded in 2012 as an inven- ment of the industry is needed. quite small. Scaling and distribution figured out the best way of getting engagement to that of a lifetime with enormous- tory app for a phone, is launching were a big topic for Friendsurance, value from that data.” ly varied values and conditions sur- on-demand insurance for items for says Mr Kunde, where the slow-mov- The insurance business model is rounding a pay-out. While that may fixed periods of time by partnering ing nature of competitors proved to more straightforward than the lab- that model is under pressure. The be less complex than capital mar- with insurers SunCorp in the United slow the pace of change, rather than yrinthine capital markets, in which investment return is close to drying kets, it certainly creates opportuni- States and AXA in the UK, providing As new ideas filter slowing the competition. regulatory change is creating multi- up as negative rates and volatile sec- ties for disruption. the insurance part based on valua- “In a way you could expect it ple points of opportunity for nimble ondary markets challenge valuation Fintechs typically work either by tions carried via the app. It is expect- down through the makes it easier to break into, but tech startups with a good idea. Insur- of the long-term investment instru- augmenting a traditional player or by ed to launch in the US in 2017. business, it is likely actually everybody is slow,” he says. ance businesses traditionally make ments traditionally used. competing with it. Aurélie L’Hostis, Other firms are rivalling tradi- change will occur “The carrier is slow, but still they Passionate about adding profit through both investment and “Scrutiny is on the underwriting analyst for e-business and channel tional players. Friendsurance.com and those firms have a lot of money and the competi- profitable underwriting. However, side and this comes at a time where strategy at Forrester Research, notes has launched a peer-to-peer (P2P) tion is high. And on the other hand, value to your business insurance product in Germany that driving innovation the customer is slow so it’s really groups customers into pools, with can control the difficult to activate customers and AREAS WHERE INSURERS SEE THE MOST IMPACT FROM FINTECH cashback for pools with no claims direction of acquire them.” and reduced cashback for small Nevertheless, as new ideas filter Meet changing customer needs claims, which are paid for out of the that change down through the business, it is with new offering pools. Claims that go beyond the likely change will occur and those Leverage existing data and analytics pool size are settled by the main in- firms driving innovation can con- to generate deep risk insights surance firm. Google Compare, as the service trol the direction of that change, New approaches to underwrite “We looked at insurance and saw a was branded and brought to the US, says Mr Rands. risk and predict losses huge opportunity because there was was discontinued as a business line “I wouldn’t say that [insurers] are Enhance interactions and build so little change and so little innova- in March this year. One source noted looking to react very quickly, it’s not trusted relationships tion that our hunch was there must that the impact of price comparison something insurers do,” he says. “But be a ton of things one can do better,” on UK margins may have dissuaded the message now is very consistent Enable the business with sophisticated operational capabilities says chief executive and co-founder US insurers from contributing, where across the industry that the reform of Tim Kunde. “We were able to make a UK institutions had originally per- the way in which they trade is neces- Efficiently leverage ecosystem and market resources connection between insurance and ceived it as a way to expand market sary and technology is going to be the social networks, and that’s how we share online. “No one buys the more way in which they evolve.” Other developed our P2P approach. expensive quotes regardless of the Use the QR “With this we have a lever to drive concept of service,” says Mr Rands. Share this article online via 0% 10% 20% 30% 40% 50% 60% 70% 80% in and make a change. The peer-to- For firms trying to disrupt without raconteur.net code to find Source: PwC 2016 peer approach can reduce costs and the co-operation of the insurance out more. www.mbe-intl.com 10 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR 12 / 10 / 2016 raconteur.net FUTURE OF INSURANCE 11

Insurers are working hard to meet the changing demands of the modern consumer, although cost, value for money and accessibility are key factors that still determine the customer experience The leaders are developing Improving KNOW YOUR CUSTOMER deeper, more personal and longer-lasting relationships by MOST IMPORTANT ATTRIBUTES OF CUSTOMER EXPERIENCE COMPARED WITH PERFORMANCE Average performance median TOP REASONS FOR CLOSING OR REPLACING using their digital capabilities to image and GLOBAL CONSUMER SURVEY OF GENERAL INSURANCE PROVIDERS Average importance median A POLICY gain an enhanced knowledge of GLOBAL SURVEY OF INSURANCE CUSTOMERS TYPE OF ATTRIBUTE Staff engagement Brand value and reputation Value for money Executional excellence Ease of doing business Personalised offering Accessibility their customers BY INSURANCE TYPE LIFE AUTO HOME 60 service… LOW HIGH IMPORTANCE IMPORTANCE Cost/terms 50% 57% 59% PERFORMS 03 PERFORMS WELL WELL Technology and new platforms offer 06 sensor attached to their car or home, “Given the inextricable link be- 13 02 Policy benefits/ if it meant a reduction in premiums. tween physical risks and financial 05 coverage 47% 42% 48% According to David Law, insurance risks, insurers have always had an insurers the opportunity to get closer 11 50 08 global leader, at PwC: “Technology interest in their customers mitigat- 16 12 01 to their customers, and provide a 14 10 is going to be an important part of ing risk in order to minimise finan- 18 Recommended insurers’ ability to capture and an- cial losses, but until now have not 04 07 by broker/friends 38% 29% 39% personalised and improved service 23 17 alyse new sources of customer data often been in a position to help. The 20 15 and develop deeper relationships. connected world will change this,” 19 09 Frequency/ Yet, the real differentiator is how ef- says the ABI. 22 relevance of 28% 16% 34% communication fectively this information is turned To do this better, insurers will into insights and a readiness to lead need to form partnerships with 40 24 the innovations in the marketplace.” other companies. Insurers are CUSTOMER EXPERIENCE Level of service starting to develop closer ties with in their life. They want an unprec- received 28% 26% 31% Challengers such as InShared CLARE GASCOIGNE edented level of choice; they want 26 have prompted existing insurers car manufacturers, offering lower price transparency; they want im- to raise their game. Flexibility and premiums for customers who opt

mediate answers to questions. PERFORMANCE (%) 28 21 Policy did not personalisation are the watchwords for safety features such as self-park- align to my life 26% 14% 26% here can’t be many people Dutch general insurer InShared 25 circumstances as companies learn to use custom- ing. The internet of things brings who want to be insurance was one of the first of the new breed 29 27 er information better, not just to more change; Aviva, for example, salesmen when they grow of companies to be a fully digital in- cut costs by reducing premiums, has linked up with HomeServe, to Research up. Train drivers, yes; surer, offering a virtual assistant on 30 % % % but to change behaviour and in- trial LeakBot, a device that will T I conducted 25 20 30 chefs, perhaps; DJs and Olympic its website from 2012 that answers 30 crease loyalty. spot water leaks. Given that the gold medalists, understandable. 56 per cent of the company’s non- But none of this detracts from the insurance industry handled water Experienced But insurers? claims customer contacts. From need for real humans. Accenture’s damage claims worth £650 mil- LOW HIGH personal/family 24% 11% 25% Perhaps one reason is that most initial quote to making a claim to IMPORTANCE IMPORTANCE milestones Mr Cusano says: “Technology will lion last year, it could make quite of us only encounter insurers when booking any necessary repairs, PERFORMS PERFORMS change many insurance jobs and a difference. we have a problem. Research from everything can be done online, POORLY POORLY even eliminate some. But a much So far, so traditional; much of Accenture shows that nearly a third which keeps costs low and makes Brand reputation 24% 17% 29% bigger trend is the support that tech- the data gleaned from social inter- (30 per cent) of insurance customers the customer feel in control. 20 30 40 50 60 70 80 nologies like artificial intelligence action is simply helping insurers have not had a positive experience. But established insurers have been will provide, enabling insurance to price their products and target The industry is well aware of the slower to meet the challenges of this IMPORTANCE (%) Did not like the professionals to spend less time on way it was handled 22% 18% 26% problem. According to the Associ- brave new world, hampered partly ATTRIBUTES routine admin tasks and more on ation of British Insurers (ABI): “For by legacy systems, and the costs of adding value: engaging with cus- an industry full of people passion- updating and upgrading, as well as Value for money A company I know Ease of getting Consistency of service – Rewards my choice Source: EY 2015 tomers, solving problems, making ate about making a difference for partly by a lack of understanding 01 06 will deliver 11 issues/queries/ 16 continuity in communications 21 Rewards my loyalty 26 to do business with better decisions.” 68% complaints resolved or interactions the company customers, it is extremely disap- of what is required. “Their focus on After all, all the data in the world per cent of INSURANCE CUSTOMERS WHO HAD A consumers would pointing that the sector has so badly risk, ratings and products means Staff who are honest Getting things right Speed of making an Ability to get in contact Availability of services is of no use if it isn’t analysed and A brand that inspires me POSITIVE EXPERIENCE BY COUNTRY be willing to failed to secure their trust.” that their understanding of their 02 and tell the truth 07 the first time 12 inquiry/transaction 17 with the company with 22 around the clock 27 if that analysis isn’t converted into SURVEY OF INSURANCE CUSTOMERS IN 30 COUNTRIES download and use So what can be done to improve the customers lags behind the advanced short wait times action. So the trick for insurance an app from their customer experience? Digital tech- techniques being developed by inter- companies now is to translate data insurance provider Staff who consistently Speed when resolving Staff who are Trust in the brand to do Choices/options available Physical proximity/ease TOP 5 nology has been cited as the answer net and telecommunications busi- 03 follow through on 08 a complaint/resolving 13 knowledgeable 18 the right thing 23 for communications 28 of access of a company patterns into better products and Source: PwC to solve not only some of the con- nesses,” according to a report from their promises a query services for their customers – and sumer’s most hated aspects of insur- PwC, Insurance 2020. “Most insurers 01 AUSTRIA 64.9% that’s where humans come in. ance, such as the speed of a claim, are still primarily focused on e-com- A company that puts Trust that the brand Staff with a Trust that the brand A company that is well Appearance and “People are being deployed in the risks better. Instead of the 04 the customer first 09 delivers on its promises 14 positive attitude 19 understands my needs 24 regarded in the media 29 operations of a website but more importantly to offer new merce, doing what they do already, higher value roles that include more cost of risk being spread through experiences that will change how we but digitally. 02 UNITED STATES 58.5% customer contact than ever before,” a wide population, it will be borne look at insurance. “The leaders are developing deeper, 05 Quality of advice and 10 Speed of service 15 Having services and 20 Offers products and 25 Availability of rewards 30 Ambience of decor of says Mr Cusano. “They like that.” by the individual displaying the “Digital transformation isn’t simply more personal and longer-lasting rela- service offers products that are easy services that can be tailored and promotions a branch/store It means an about-turn in how insur- risky behaviour. to understand to my specific needs about insurers making better use tionships by using their digital capabil- 03 BELGIUM 57.7% ers have operated historically. Instead But insurers will also be able to of technology,” says John Cusano, ities to gain an enhanced knowledge of Source: 2015 Customer Experience Barometer, KPMG of developing and selling products, it develop services that reward not senior managing director, global in- their customers.” means working backwards from cus- only through lower-priced premi- surance industry, at Accenture. “It’s As insurance has become increas- 04 AUSTRALIA 57.1% tomer needs and expectations – and ums, but by taking a leaf out of re- about enabling their people to ac- ingly commoditised and consumer PREFERRED CHANNELS FOR COMMUNICATION WITH INSURER (%) FACTORS THAT WOULD HELP INSURERS IMPROVE that requires the right people. tailers’ books and developing, for complish more with technology.” decisions increasingly price driven, According to the ABI: “Insurers example, loyalty programmes that GLOBAL SURVEY OF INSURANCE CUSTOMERS CUSTOMER EXPERIENCE (%) The digitisation of insurance has insurers have found margins squeezed 05 FRANCE 56.8% will become real-time risk consult- allow more regular interaction Digital E-mail Telephone GLOBAL SURVEY OF INSURANCE CUSTOMERS been happening for some time. Con- and customer engagement decreasing. ants. Through big data and the in- than the once-a-year renewal. PwC sumers, evermore demanding of ev- That digitisation is what custom- creasing prevalence of connected research suggests that more than er-higher standards of service, are ers want is not in doubt; 79 per cent BOTTOM 5 sensors in our lives – the internet of half of global participants would be RESEARCH ACCESSIBILITY looking for the same kind of expe- of consumers worldwide say they things – customers and insurers will prepared to provide their insurer rience they can now find elsewhere will use a digital channel for insur- be able to constantly share insights with additional personal and life- TAILOR TO 26 SPAIN 39.2% ance interactions over the next few QUOTE CUSTOMER NEEDS with each other.” style information to enable them years, according to a 2015 report So your insurer might be warn- to seek the best deal for relevant from consultants Bain & Co. What ing you about skipping a red light; services on the customers’ behalf, PURCHASE CONTENT EXPLANATION 27 TAIWAN 37.7% has been missing from some insur- pointing out that you forgot to lock moving insurers from reactive ers is a recognition that going digital the front door; even spotting a po- to proactive. VARIETY OF INSURANCE Instead of RENEW is an opportunity to win back the SERVICES/PRODUCTS 28 HONG KONG 37.6% tential medical condition before it So insurers will move from being developing and reputation, loyalty and engagement develops into something danger- salesmen focusing on the benefits of losses of the past few years. ous. Of course, insurers have been a product to consultants focusing on selling products, AMEND MORE ONLINE ACCESS So, digitisation can lead to more pricing according to personalised an outcome for the customer. Now 29 CHINA 37.3% it means working engagement with the customer. risk for decades, as smokers and who wants to be an insurer when LOYALTY POINTS FOR backwards from PwC research found that 68 per cent CLAIM CONSUMER STORES newly qualified male drivers will they grow up? of consumers would be willing to testify; but the digital world will customer needs 30 SOUTH KOREA 33.6% and expectations download and use an app from their 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 help break down the personalisa- Share this article online via insurance provider; two-thirds (67 tion further and potentially change raconteur.net per cent) would be willing to have a Source: PwC 2014 Source: PwC 2014 Source: Capgemini 2016 the riskier behaviour. 10 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR 12 / 10 / 2016 raconteur.net FUTURE OF INSURANCE 11

mediate answers to questions. PERFORMANCE (%) 28 21 Policy did not personalisation are the watchwords for safety features such as self-park- align to my life 26% 14% 26% here can’t be many people Dutch general insurer InShared 25 circumstances as companies learn to use custom- ing. The internet of things brings who want to be insurance was one of the first of the new breed 29 27 er information better, not just to more change; Aviva, for example, salesmen when they grow of companies to be a fully digital in- cut costs by reducing premiums, has linked up with HomeServe, to Research up. Train drivers, yes; surer, offering a virtual assistant on 30 % % % but to change behaviour and in- trial LeakBot, a device that will T I conducted 25 20 30 chefs, perhaps; DJs and Olympic its website from 2012 that answers 30 crease loyalty. spot water leaks. Given that the gold medalists, understandable. 56 per cent of the company’s non- But none of this detracts from the insurance industry handled water Experienced But insurers? claims customer contacts. From need for real humans. Accenture’s damage claims worth £650 mil- LOW HIGH personal/family 24% 11% 25% Perhaps one reason is that most initial quote to making a claim to IMPORTANCE IMPORTANCE milestones Mr Cusano says: “Technology will lion last year, it could make quite of us only encounter insurers when booking any necessary repairs, PERFORMS PERFORMS change many insurance jobs and a difference. we have a problem. Research from everything can be done online, POORLY POORLY even eliminate some. But a much So far, so traditional; much of Accenture shows that nearly a third which keeps costs low and makes Brand reputation 24% 17% 29% bigger trend is the support that tech- the data gleaned from social inter- (30 per cent) of insurance customers the customer feel in control. 20 30 40 50 60 70 80 nologies like artificial intelligence action is simply helping insurers have not had a positive experience. But established insurers have been will provide, enabling insurance to price their products and target The industry is well aware of the slower to meet the challenges of this IMPORTANCE (%) Did not like the professionals to spend less time on way it was handled 22% 18% 26% problem. According to the Associ- brave new world, hampered partly ATTRIBUTES routine admin tasks and more on ation of British Insurers (ABI): “For by legacy systems, and the costs of adding value: engaging with cus- an industry full of people passion- updating and upgrading, as well as Value for money A company I know Ease of getting Consistency of service – Rewards my choice Source: EY 2015 tomers, solving problems, making ate about making a difference for partly by a lack of understanding 01 06 will deliver 11 issues/queries/ 16 continuity in communications 21 Rewards my loyalty 26 to do business with better decisions.” 68% complaints resolved or interactions the company customers, it is extremely disap- of what is required. “Their focus on After all, all the data in the world per cent of INSURANCE CUSTOMERS WHO HAD A consumers would pointing that the sector has so badly risk, ratings and products means Staff who are honest Getting things right Speed of making an Ability to get in contact Availability of services is of no use if it isn’t analysed and A brand that inspires me POSITIVE EXPERIENCE BY COUNTRY be willing to failed to secure their trust.” that their understanding of their 02 and tell the truth 07 the first time 12 inquiry/transaction 17 with the company with 22 around the clock 27 if that analysis isn’t converted into SURVEY OF INSURANCE CUSTOMERS IN 30 COUNTRIES download and use So what can be done to improve the customers lags behind the advanced short wait times action. So the trick for insurance an app from their customer experience? Digital tech- techniques being developed by inter- companies now is to translate data insurance provider Staff who consistently Speed when resolving Staff who are Trust in the brand to do Choices/options available Physical proximity/ease TOP 5 nology has been cited as the answer net and telecommunications busi- 03 follow through on 08 a complaint/resolving 13 knowledgeable 18 the right thing 23 for communications 28 of access of a company patterns into better products and Source: PwC to solve not only some of the con- nesses,” according to a report from their promises a query services for their customers – and sumer’s most hated aspects of insur- PwC, Insurance 2020. “Most insurers 01 AUSTRIA 64.9% that’s where humans come in. ance, such as the speed of a claim, are still primarily focused on e-com- A company that puts Trust that the brand Staff with a Trust that the brand A company that is well Appearance and “People are being deployed in the risks better. Instead of the 04 the customer first 09 delivers on its promises 14 positive attitude 19 understands my needs 24 regarded in the media 29 operations of a website but more importantly to offer new merce, doing what they do already, higher value roles that include more cost of risk being spread through experiences that will change how we but digitally. 02 UNITED STATES 58.5% customer contact than ever before,” a wide population, it will be borne look at insurance. “The leaders are developing deeper, 05 Quality of advice and 10 Speed of service 15 Having services and 20 Offers products and 25 Availability of rewards 30 Ambience of decor of says Mr Cusano. “They like that.” by the individual displaying the “Digital transformation isn’t simply more personal and longer-lasting rela- service offers products that are easy services that can be tailored and promotions a branch/store It means an about-turn in how insur- risky behaviour. to understand to my specific needs about insurers making better use tionships by using their digital capabil- 03 BELGIUM 57.7% ers have operated historically. Instead But insurers will also be able to of technology,” says John Cusano, ities to gain an enhanced knowledge of Source: 2015 Customer Experience Barometer, KPMG of developing and selling products, it develop services that reward not senior managing director, global in- their customers.” means working backwards from cus- only through lower-priced premi- surance industry, at Accenture. “It’s As insurance has become increas- 04 AUSTRALIA 57.1% tomer needs and expectations – and ums, but by taking a leaf out of re- about enabling their people to ac- ingly commoditised and consumer PREFERRED CHANNELS FOR COMMUNICATION WITH INSURER (%) FACTORS THAT WOULD HELP INSURERS IMPROVE that requires the right people. tailers’ books and developing, for complish more with technology.” decisions increasingly price driven, According to the ABI: “Insurers example, loyalty programmes that GLOBAL SURVEY OF INSURANCE CUSTOMERS CUSTOMER EXPERIENCE (%) The digitisation of insurance has insurers have found margins squeezed 05 FRANCE 56.8% will become real-time risk consult- allow more regular interaction Digital E-mail Telephone GLOBAL SURVEY OF INSURANCE CUSTOMERS been happening for some time. Con- and customer engagement decreasing. ants. Through big data and the in- than the once-a-year renewal. PwC sumers, evermore demanding of ev- That digitisation is what custom- creasing prevalence of connected research suggests that more than er-higher standards of service, are ers want is not in doubt; 79 per cent BOTTOM 5 sensors in our lives – the internet of half of global participants would be RESEARCH ACCESSIBILITY looking for the same kind of expe- of consumers worldwide say they things – customers and insurers will prepared to provide their insurer rience they can now find elsewhere will use a digital channel for insur- be able to constantly share insights with additional personal and life- TAILOR TO 26 SPAIN 39.2% ance interactions over the next few QUOTE CUSTOMER NEEDS with each other.” style information to enable them years, according to a 2015 report So your insurer might be warn- to seek the best deal for relevant from consultants Bain & Co. What ing you about skipping a red light; services on the customers’ behalf, PURCHASE CONTENT EXPLANATION 27 TAIWAN 37.7% has been missing from some insur- pointing out that you forgot to lock moving insurers from reactive ers is a recognition that going digital the front door; even spotting a po- to proactive. VARIETY OF INSURANCE Instead of RENEW is an opportunity to win back the SERVICES/PRODUCTS 28 HONG KONG 37.6% tential medical condition before it So insurers will move from being developing and reputation, loyalty and engagement develops into something danger- salesmen focusing on the benefits of losses of the past few years. ous. Of course, insurers have been a product to consultants focusing on selling products, AMEND MORE ONLINE ACCESS So, digitisation can lead to more pricing according to personalised an outcome for the customer. Now 29 CHINA 37.3% it means working engagement with the customer. risk for decades, as smokers and who wants to be an insurer when LOYALTY POINTS FOR backwards from PwC research found that 68 per cent CLAIM CONSUMER STORES newly qualified male drivers will they grow up? of consumers would be willing to testify; but the digital world will customer needs 30 SOUTH KOREA 33.6% and expectations download and use an app from their 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 help break down the personalisa- Share this article online via insurance provider; two-thirds (67 tion further and potentially change raconteur.net per cent) would be willing to have a Source: PwC 2014 Source: PwC 2014 Source: Capgemini 2016 the riskier behaviour. RACONTEUR xx xx xxxx 12raconteur.netFUTURE OF INSURANCE raconteur.netXXXX 2 12 / 10 / 2016 RACONTEUR RACONTEUR 12 / 10 / 2016 raconteur.net FUTURE OF INSURANCE 13

COMMERCIALCOMMERCIAL FEATURE FEATURE OPINION COLUMN CONNECTING THE Machines assess risk and detect fraud Digital insurance: INSURANCE ECOSYSTEM Machines that learn from data have the pot ential to transform insurance processes and counter fraud the view from Asia Asia is an increasingly attractive Insurtech needs one final ingredient to thrive – data infrastructure, insurance market poised to make a MACHINE-LEARNING says Adrian Rands, chief executive of QuanTemplate, specialists in DAVEY WINDER greater impact on the world stage insurance data integration and analytics formal branch of arti- HUGH TERRY ficial intelligence, machine-learning builds Founder and managing director The Digital Insurer Asystems that learn direct- ly from the data they are fed and By 2030, Asia tal insurance licences effectively program themselves to is expected and a more evolved analyse that data and make accurate to be home online fulfillment predictions. Having already helped for two thirds of capability than in hile chairing the London multiple business sectors create the world’s middle most other coun- Market Group, Steve Hearn, new models and drive competitive class and is already tries. WeChat, a Warticulated a view held by advantage, now it’s the turn of the the leader in the complete ecosys- many in insurance that there is a insurance industry. use of smartphones. tem allowing con- “relentless march of technology and So just how is machine-learn- So what are the pros- textual ads, mes- an ever-increasing amount of data”, ing changing the way insurers do pects for digital insur- saging and in-app adding that he was convinced “true business? “It gives insurers three ance in Asia? payment and fulfillment, specialty insurance business requires an distinct advantages,” explains Max The face-to-face sale of in- is proving to be an excellent intense exchange of information and Richter, managing director in Ac- dividual insurance through tied enabler for digital insurance. cumulative underwriting expertise”. centure’s UK insurance analytics agency and bancassurance partner- Zhong An has led the way with a His comments made two years ago group. “The first is to mine greater ships between banks and insurance shipping returns insurance offering in the influential Boston Consulting volumes of data, the second to scale companies is dominant in Asia. for users of TaoBao (similar to eBay) Group London Matters report pre- analytics across the organisation Existing insurers face a range of that resulted in the acquisition of empted the technology revolution by working smarter and faster, and fundamental challenges including more than 150 million customers and in insurance, on the cusp of which lastly by answering more complex to learn from those by applying en- to reduce injuries and employers tified 33 per cent more claims in a bination of FICO predictive analyt- the economics surrounding distri- the sale of more than 600 million the industry stands today. The tools hanced scoring and process methods to improve operational efficiency. fraud ring in the first 200 claims ics, link analysis and business rules bution and the relatively slow move policies in its first 18 months. It suc- to enable this revolution are in distribution of insurance products; for throughout the claims life cycle.” “HCS’s technology can detect when they reviewed.” Further, in the have found up to 50 per cent more away from bundled products, such cessfully raised $500 million in 2015, place: efficient distribution through example by connecting insurers to the Beyond traditional data sources, a worker carries too much weight, first nine days after deploying ma- fraud over a traditional, rules-based as endowments. For now growth and has launched innovative and an- innovative web-based platforms; No single tool from internet-of-things where products can machine-learning is also opening makes a bad bend or enters an area chine-learning and predictive ana- system,” he adds. rates and profits remain impressive. alytics-priced digital products across predictive analytics engines that be created to leverage the enormous As machines learn the analytic doors to new informa- that puts them at risk of injury,” lytics to try and combat insurance Established insurers are moving a number of lines of business. drive pricing and risk selection; and this insurtech box has reserves of generated data. more about us, tion. “With the advent of telematics, says Mr Hirst. All of which helps fraud, a large auto insurer found Share this article online via to reinvent these channels and Asia analyst Paul Schulte, author market data feeds which expand each the power to transform Second is risk analysis and wearables, and other sensor and create new efficiencies in the un- more than £250,000 in suspected raconteur.net make them more appropriate. This of the recent report The Insurance company’s knowledge beyond their management. By exploring and they are able to remote monitoring technologies, derwriting process. fraud, says Mr Horwitz. “The com- is a transformation that starts with Asteroid: An Extinction Event?, says: own experience. the market, but exploiting the historical data predict our risk more information will be collected So why isn’t everyone using it? existing business practices and ”In China we are seeing almost No single tool from this insurtech together they do unleashed in the federated data profiles at much about our behaviours and habits, Are all insurers aware of, and open adds in digital components with the perfect conditions for disruption – box has the power to transform the model, underwriters can assess such as how you drive your car or to, the impact of machine-learning APPLYING MACHINE-LEARNING TO FRAUD aim of improving the customer ex- tech-savvy and well-funded inter- market, but together they do. The risk at a much more granular level greater accuracy how much exercise you do,” says as a new way of risk-pricing and perience and making a step-change net companies such as Alibaba and challenge is linking them through a With an estimated 388,000 risk and to identify the specific drivers of and granularity Heidi O’Leary, principal consultant loss estimation? “Like any new in efficiency; in short, driving up Tencent are reinventing insurance common language, which will allow claim bordereaux being shared between profit and loss. Companies such as than was possible with Market Gravity. technology this will require sig- are valid. It consists of pre- revenue while reducing unit costs. models from a digital-first perspec- insurers to bring all three elements these parties each year, the amount of Logical Glue for credit risk and Shift “As machines learn more about us, nificant innovation both from a processing (normalisation, AIA, one of the world’s largest life tive in a supportive regulatory en- together to empower their expert disparate data is growing exponentially. Technologies for claimant fraud are before they are able to predict our risk pro- practical development through to dimension reduction, image insurance companies, headquar- vironment. These models could be underwriters. With no common standard applied already doing this, but the sector files at much greater accuracy and changing organisational culture,” processing if you are using tered in Hong Kong, has made signif- exported around the world faster Insurers have shared risk across the market, the number of data has real difficulty taking advantage granularity than was possible be- says Rod Bryson, principal, wealth, photos and so on), learning icant investments in the digitisation than expected.” information since the 18th century. schemas is vast, and this incompatibility of these advances because insurers questions from ‘will this customer fore. This will lead to more person- long-term savings and insurance, (supervised and unsupervised) of its agency salesforce and more With so much untapped market po- But today the vast experience of the makes it nearly impossible for companies cannot shoehorn their data into leave me at renewal?’ to ‘what can I alised insurance products and allow with Capgemini. and error analysis (precision, than 30,000 policies are now sold on tential in Asia, historically insurance insurance sector cannot be harvested to test insurtech systems quickly insurtech systems. do about it?’” insurers to offer other value-adding “For a sector built on underwriters recall, overfitting, test/ a digital, paperless basis each month chief executives would have been for analysis because the market is a and efficiently. A future where the data As such it is quickly becoming products, such as getting the car ser- and actuaries, and overall prudent cross validation). across more than ten countries using comfortable saying they are focused modern Babel through its reliance on The solution adopted by some translation challenges are overcome an essential tool for the insurance viced before it breaks down.” decision-making, such an approach “The prediction phase uses a proprietary point-of-sales tablet. on driving growth through tradi- multiple incompatible data schemas. insurers is a federated data model, means digital distribution will sector, specifically enabling com- Another area where wearables will not happen overnight, but the Cindy Maike, general manager the model from the learning Mark Tucker, AIA’s group chief tional models. Until recently interest Insurers receive risk data in thousands which converts all the data received extend beyond pioneering motor panies to yield higher predictive and machine-learning meet is on transformation is almost inevita- of insurance at Hortonworks, phase and applies it to new data executive, says: “The iPOS tablet in digital disruption was pretty low. of incompatible formats with 148 from distribution agents into aggregators into every segment accuracy as it can fit more flexible the building site. Ashley Hirst, ble in the longer term.” Those who tells how machine-learning can which is deployed for detecting initiative has allowed us to connect But, as we close out 2016, it is a rare insurers, 4,389 agents and 242 brokers one common format compatible of insurance. Predictive analytics and complex models. As opposed chief operating officer and chief un- can experiment, at least in the be applied in the real world of and flagging fraud. digitally to all our advisers and cus- insurance company indeed that has in the network of trading parties in with their analytics systems. will sit alongside actuarial analysis to traditional statistical methods, derwriting officer at AIG, says: “AIG short term, may have the greatest insurance fraud detection: “The continuous learning tomers. The benefits are far beyond not developed and activated some Lloyd’s and the London Market alone. This fourth insurtech tool solves and capital modelling. Market data machine-learning takes advantage has invested in Human Condition chance to succeed in this arena. “It’s “Using machine-learning, phase is when your models are improved policy issuance as we now form of digital strategy. the incompatibility problem by feeds will flow harmoniously to help of the power of data analytics and is Safety (HCS), an early-stage compa- not about building the capability insurers can load claims continuously recalibrated with have better channels of communi- Simon Phipps, head of insurance harmonising data and linking the companies’ benchmark their own capable of computing seemingly un- ny matching wearable technology or technology, it’s about how and data of all types into a huge new data and behaviours. cation, access to more data, better advisory at KPMG China, says: “We THE LONDON MARKET members of the network. experience. Data will be captured at related datasets whether structured, with artificial intelligence.” This where in the business do you start to repository, often called a “In addition, using graph and more consistent customer en- are seeing a wave of change build- It allows insurers to exploit source, wherever a policy originates, semi-structured or unstructured. is a platform that enables workers apply it,” says Mr Bryson. data lake. This method differs analytics with Apache Spark/ gagement methods, as well as the ing across the sector, and increas- insurtech distribution by enriching and immediately converted into a “Insurers have introduced ma- And if it is applied, will the appli- from traditional predictive GraphX is a newer method ability to do more transactions in ing interest in creating and devel- 388k each company’s private cache of risk form useful to all. chine-learning algorithms primar- cation of machine-learning be able models, which only leverage being leveraged as it enables real time, more accurately and at oping new partnerships to exploit risk and claim information with data from trading The result will be insurance ily to handle risk similarity ana- to deliver a measurable decline in structured data. Claims notes, the usage of neural network much lower cost.” the opportunities for digital insur- bordereaux partners and independent market products that are cheaper and lytics, risk appetite and premium human fraud? George Robbins, Eu- diaries and documents are and social networks which is Do existing insurers have time to ance. To stay relevant, the mind- feeds. The resulting trove can be more appropriate for the customer, leakage,” says Hortonworks general rope, Middle East and Africa vice key in discovering fraud and key in claims fraud analysis. retool their models? New entrants sets of the existing players need to run through predictive systems that bespoke even. Ultimately, a manager of insurance, Cindy Maike. president for commercial solutions, developing fraud models. In This method is becoming are challenging incumbents with keep moving from “how do we do 4,389 provide more sophisticated ways to networked data grid will allow the “It is also widely used to aid the fre- at BAE Systems Applied Intelli- case of fraud detection, the quite popular compared with greenfield initiatives leveraging this?” to “how can we do this with agents assess and monitor the value of each free flow of trading information quency and severity of claims, man- gence, is in no doubt. “Our custom- procedure would consist of traditional claims scoring large customer databases from es- others to get further, faster, more and every risk dynamically, whether between any partners in the age expenses, subrogation (general ers often detect twice as much fraud a learning phase, prediction or business rules as these tablished brands outside the indus- cheaply, together”. 242 on or off the books, and to feed it ecosystem. The London Insurance insurance), litigation and fraud.” 82% using a combination of complex an- phase and continuous methods may result in too try. Asset-light infrastructure is Asia is a highly attractive insurance brokers back to distribution partners. Market is celebrating its 328th year One of the most impactful ma- of global insurers agree alytical and machine-learning tech- learning phase. many false positives and it being deployed quickly using digi- market with opportunities for local This approach allows insurers to as a highly sociable network, but chine-learning use-cases is the abil- AI-driven automation niques,” he says. “The learning phase is when allows insurance companies to tal-first principles that resonate with insurers, multinational and non-tra- identify past patterns within the data before digitisation is possible the ity to learn from audits of closed will be seamlessly Scott Horwitz, senior director in you are learning from training visualise fraud patterns more 21st-century consumer expecta- ditional new entrants to thrive. The and use these insights to forecast trading data must be unlocked. claims. “Claim audits are traditional- embedded into every insurance solutions, at global an- data or claims which are quickly compared with those tions and in our increasingly smart- region will more than punch its 148 aspect of business over insurers future underwriting performance. ly a manual process by nature,” says the next five years alytics company FICO, says: “One fraudulent and those which traditional scoring models.” phone-enabled world. weight on the world stage The impact of insurtech will be For more information please visit Ms Maike. “Machine-learning tech- of our clients doubled the amount In China new entrants have been in the years ahead – and in felt in two key areas. Firstly in the www.quantemplate.com niques provide an uplift in the ability Source: Accenture 2016 of fraud dollars detected and iden- able to take advantage of new digi- many cases it already is. RACONTEUR xx xx xxxx 12raconteur.netFUTURE OF INSURANCE raconteur.netXXXX 2 12 / 10 / 2016 RACONTEUR RACONTEUR 12 / 10 / 2016 raconteur.net FUTURE OF INSURANCE 13

COMMERCIALCOMMERCIAL FEATURE FEATURE OPINION COLUMN CONNECTING THE Machines assess risk and detect fraud Digital insurance: INSURANCE ECOSYSTEM Machines that learn from data have the pot ential to transform insurance processes and counter fraud the view from Asia Asia is an increasingly attractive Insurtech needs one final ingredient to thrive – data infrastructure, insurance market poised to make a MACHINE-LEARNING says Adrian Rands, chief executive of QuanTemplate, specialists in DAVEY WINDER greater impact on the world stage insurance data integration and analytics formal branch of arti- HUGH TERRY ficial intelligence, machine-learning builds Founder and managing director The Digital Insurer Asystems that learn direct- ly from the data they are fed and By 2030, Asia tal insurance licences effectively program themselves to is expected and a more evolved analyse that data and make accurate to be home online fulfillment predictions. Having already helped for two thirds of capability than in hile chairing the London multiple business sectors create the world’s middle most other coun- Market Group, Steve Hearn, new models and drive competitive class and is already tries. WeChat, a Warticulated a view held by advantage, now it’s the turn of the the leader in the complete ecosys- many in insurance that there is a insurance industry. use of smartphones. tem allowing con- “relentless march of technology and So just how is machine-learn- So what are the pros- textual ads, mes- an ever-increasing amount of data”, ing changing the way insurers do pects for digital insur- saging and in-app adding that he was convinced “true business? “It gives insurers three ance in Asia? payment and fulfillment, specialty insurance business requires an distinct advantages,” explains Max The face-to-face sale of in- is proving to be an excellent intense exchange of information and Richter, managing director in Ac- dividual insurance through tied enabler for digital insurance. cumulative underwriting expertise”. centure’s UK insurance analytics agency and bancassurance partner- Zhong An has led the way with a His comments made two years ago group. “The first is to mine greater ships between banks and insurance shipping returns insurance offering in the influential Boston Consulting volumes of data, the second to scale companies is dominant in Asia. for users of TaoBao (similar to eBay) Group London Matters report pre- analytics across the organisation Existing insurers face a range of that resulted in the acquisition of empted the technology revolution by working smarter and faster, and fundamental challenges including more than 150 million customers and in insurance, on the cusp of which lastly by answering more complex to learn from those by applying en- to reduce injuries and employers tified 33 per cent more claims in a bination of FICO predictive analyt- the economics surrounding distri- the sale of more than 600 million the industry stands today. The tools hanced scoring and process methods to improve operational efficiency. fraud ring in the first 200 claims ics, link analysis and business rules bution and the relatively slow move policies in its first 18 months. It suc- to enable this revolution are in distribution of insurance products; for throughout the claims life cycle.” “HCS’s technology can detect when they reviewed.” Further, in the have found up to 50 per cent more away from bundled products, such cessfully raised $500 million in 2015, place: efficient distribution through example by connecting insurers to the Beyond traditional data sources, a worker carries too much weight, first nine days after deploying ma- fraud over a traditional, rules-based as endowments. For now growth and has launched innovative and an- innovative web-based platforms; No single tool from internet-of-things where products can machine-learning is also opening makes a bad bend or enters an area chine-learning and predictive ana- system,” he adds. rates and profits remain impressive. alytics-priced digital products across predictive analytics engines that be created to leverage the enormous As machines learn the analytic doors to new informa- that puts them at risk of injury,” lytics to try and combat insurance Established insurers are moving a number of lines of business. drive pricing and risk selection; and this insurtech box has reserves of generated data. more about us, tion. “With the advent of telematics, says Mr Hirst. All of which helps fraud, a large auto insurer found Share this article online via to reinvent these channels and Asia analyst Paul Schulte, author market data feeds which expand each the power to transform Second is risk analysis and wearables, and other sensor and create new efficiencies in the un- more than £250,000 in suspected raconteur.net make them more appropriate. This of the recent report The Insurance company’s knowledge beyond their management. By exploring and they are able to remote monitoring technologies, derwriting process. fraud, says Mr Horwitz. “The com- is a transformation that starts with Asteroid: An Extinction Event?, says: own experience. the market, but exploiting the historical data predict our risk more information will be collected So why isn’t everyone using it? existing business practices and ”In China we are seeing almost No single tool from this insurtech together they do unleashed in the federated data profiles at much about our behaviours and habits, Are all insurers aware of, and open adds in digital components with the perfect conditions for disruption – box has the power to transform the model, underwriters can assess such as how you drive your car or to, the impact of machine-learning APPLYING MACHINE-LEARNING TO FRAUD aim of improving the customer ex- tech-savvy and well-funded inter- market, but together they do. The risk at a much more granular level greater accuracy how much exercise you do,” says as a new way of risk-pricing and perience and making a step-change net companies such as Alibaba and challenge is linking them through a With an estimated 388,000 risk and to identify the specific drivers of and granularity Heidi O’Leary, principal consultant loss estimation? “Like any new in efficiency; in short, driving up Tencent are reinventing insurance common language, which will allow claim bordereaux being shared between profit and loss. Companies such as than was possible with Market Gravity. technology this will require sig- are valid. It consists of pre- revenue while reducing unit costs. models from a digital-first perspec- insurers to bring all three elements these parties each year, the amount of Logical Glue for credit risk and Shift “As machines learn more about us, nificant innovation both from a processing (normalisation, AIA, one of the world’s largest life tive in a supportive regulatory en- together to empower their expert disparate data is growing exponentially. Technologies for claimant fraud are before they are able to predict our risk pro- practical development through to dimension reduction, image insurance companies, headquar- vironment. These models could be underwriters. With no common standard applied already doing this, but the sector files at much greater accuracy and changing organisational culture,” processing if you are using tered in Hong Kong, has made signif- exported around the world faster Insurers have shared risk across the market, the number of data has real difficulty taking advantage granularity than was possible be- says Rod Bryson, principal, wealth, photos and so on), learning icant investments in the digitisation than expected.” information since the 18th century. schemas is vast, and this incompatibility of these advances because insurers questions from ‘will this customer fore. This will lead to more person- long-term savings and insurance, (supervised and unsupervised) of its agency salesforce and more With so much untapped market po- But today the vast experience of the makes it nearly impossible for companies cannot shoehorn their data into leave me at renewal?’ to ‘what can I alised insurance products and allow with Capgemini. and error analysis (precision, than 30,000 policies are now sold on tential in Asia, historically insurance insurance sector cannot be harvested to test insurtech systems quickly insurtech systems. do about it?’” insurers to offer other value-adding “For a sector built on underwriters recall, overfitting, test/ a digital, paperless basis each month chief executives would have been for analysis because the market is a and efficiently. A future where the data As such it is quickly becoming products, such as getting the car ser- and actuaries, and overall prudent cross validation). across more than ten countries using comfortable saying they are focused modern Babel through its reliance on The solution adopted by some translation challenges are overcome an essential tool for the insurance viced before it breaks down.” decision-making, such an approach “The prediction phase uses a proprietary point-of-sales tablet. on driving growth through tradi- multiple incompatible data schemas. insurers is a federated data model, means digital distribution will sector, specifically enabling com- Another area where wearables will not happen overnight, but the Cindy Maike, general manager the model from the learning Mark Tucker, AIA’s group chief tional models. Until recently interest Insurers receive risk data in thousands which converts all the data received extend beyond pioneering motor panies to yield higher predictive and machine-learning meet is on transformation is almost inevita- of insurance at Hortonworks, phase and applies it to new data executive, says: “The iPOS tablet in digital disruption was pretty low. of incompatible formats with 148 from distribution agents into aggregators into every segment accuracy as it can fit more flexible the building site. Ashley Hirst, ble in the longer term.” Those who tells how machine-learning can which is deployed for detecting initiative has allowed us to connect But, as we close out 2016, it is a rare insurers, 4,389 agents and 242 brokers one common format compatible of insurance. Predictive analytics and complex models. As opposed chief operating officer and chief un- can experiment, at least in the be applied in the real world of and flagging fraud. digitally to all our advisers and cus- insurance company indeed that has in the network of trading parties in with their analytics systems. will sit alongside actuarial analysis to traditional statistical methods, derwriting officer at AIG, says: “AIG short term, may have the greatest insurance fraud detection: “The continuous learning tomers. The benefits are far beyond not developed and activated some Lloyd’s and the London Market alone. This fourth insurtech tool solves and capital modelling. Market data machine-learning takes advantage has invested in Human Condition chance to succeed in this arena. “It’s “Using machine-learning, phase is when your models are improved policy issuance as we now form of digital strategy. the incompatibility problem by feeds will flow harmoniously to help of the power of data analytics and is Safety (HCS), an early-stage compa- not about building the capability insurers can load claims continuously recalibrated with have better channels of communi- Simon Phipps, head of insurance harmonising data and linking the companies’ benchmark their own capable of computing seemingly un- ny matching wearable technology or technology, it’s about how and data of all types into a huge new data and behaviours. cation, access to more data, better advisory at KPMG China, says: “We THE LONDON MARKET members of the network. experience. Data will be captured at related datasets whether structured, with artificial intelligence.” This where in the business do you start to repository, often called a “In addition, using graph and more consistent customer en- are seeing a wave of change build- It allows insurers to exploit source, wherever a policy originates, semi-structured or unstructured. is a platform that enables workers apply it,” says Mr Bryson. data lake. This method differs analytics with Apache Spark/ gagement methods, as well as the ing across the sector, and increas- insurtech distribution by enriching and immediately converted into a “Insurers have introduced ma- And if it is applied, will the appli- from traditional predictive GraphX is a newer method ability to do more transactions in ing interest in creating and devel- 388k each company’s private cache of risk form useful to all. chine-learning algorithms primar- cation of machine-learning be able models, which only leverage being leveraged as it enables real time, more accurately and at oping new partnerships to exploit risk and claim information with data from trading The result will be insurance ily to handle risk similarity ana- to deliver a measurable decline in structured data. Claims notes, the usage of neural network much lower cost.” the opportunities for digital insur- bordereaux partners and independent market products that are cheaper and lytics, risk appetite and premium human fraud? George Robbins, Eu- diaries and documents are and social networks which is Do existing insurers have time to ance. To stay relevant, the mind- feeds. The resulting trove can be more appropriate for the customer, leakage,” says Hortonworks general rope, Middle East and Africa vice key in discovering fraud and key in claims fraud analysis. retool their models? New entrants sets of the existing players need to run through predictive systems that bespoke even. Ultimately, a manager of insurance, Cindy Maike. president for commercial solutions, developing fraud models. In This method is becoming are challenging incumbents with keep moving from “how do we do 4,389 provide more sophisticated ways to networked data grid will allow the “It is also widely used to aid the fre- at BAE Systems Applied Intelli- case of fraud detection, the quite popular compared with greenfield initiatives leveraging this?” to “how can we do this with agents assess and monitor the value of each free flow of trading information quency and severity of claims, man- gence, is in no doubt. “Our custom- procedure would consist of traditional claims scoring large customer databases from es- others to get further, faster, more and every risk dynamically, whether between any partners in the age expenses, subrogation (general ers often detect twice as much fraud a learning phase, prediction or business rules as these tablished brands outside the indus- cheaply, together”. 242 on or off the books, and to feed it ecosystem. The London Insurance insurance), litigation and fraud.” 82% using a combination of complex an- phase and continuous methods may result in too try. Asset-light infrastructure is Asia is a highly attractive insurance brokers back to distribution partners. Market is celebrating its 328th year One of the most impactful ma- of global insurers agree alytical and machine-learning tech- learning phase. many false positives and it being deployed quickly using digi- market with opportunities for local This approach allows insurers to as a highly sociable network, but chine-learning use-cases is the abil- AI-driven automation niques,” he says. “The learning phase is when allows insurance companies to tal-first principles that resonate with insurers, multinational and non-tra- identify past patterns within the data before digitisation is possible the ity to learn from audits of closed will be seamlessly Scott Horwitz, senior director in you are learning from training visualise fraud patterns more 21st-century consumer expecta- ditional new entrants to thrive. The and use these insights to forecast trading data must be unlocked. claims. “Claim audits are traditional- embedded into every insurance solutions, at global an- data or claims which are quickly compared with those tions and in our increasingly smart- region will more than punch its 148 aspect of business over insurers future underwriting performance. ly a manual process by nature,” says the next five years alytics company FICO, says: “One fraudulent and those which traditional scoring models.” phone-enabled world. weight on the world stage The impact of insurtech will be For more information please visit Ms Maike. “Machine-learning tech- of our clients doubled the amount In China new entrants have been in the years ahead – and in felt in two key areas. Firstly in the www.quantemplate.com niques provide an uplift in the ability Source: Accenture 2016 of fraud dollars detected and iden- able to take advantage of new digi- many cases it already is. 14 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR xx12 / 10xx / 2016 xxxx raconteur.net FUTURE OF INSURANCEXXXX 152

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are about extracting extortion pay- ments or stealing data to sell on,” UK COMPANIES’ STATUS says Mr Carr. “Criminals are typical- ON CYBER INSURANCE TRANSFORMING INSURANCE ly not going to be perpetrating some- SURVEY OF RISK AND FINANCE thing that could turn into a systemic

GTS Productions/Shutterstock GTS PROFESSIONALS IN MEDIUM attack. However, politically moti- TO LARGE CORPORATIONS vated attackers might be much more WITH EFFECTIVE USE OF DATA interested in causing systemic damage because their motivation isn’t monetary, except maybe to wreck Despite advances in technology, the insurance industry still struggles with the sheer volume and complexity of data. Simple the economy of the country or re- Has bought gion they were attacking.” cyber insurance 20.6% changes and the use of new software can help organisations understand their business and meet regulatory requirements, says Supervisory control and data acquisition systems used by industrial Richard Brown, director at VIPR and utility companies are typically not connected to the internet, a Is in the process practice known as “air gapping”. But of buying 8.9% this defence could be obsolete in the cyber insurance future. “One of the hot uses of IoT is sensors that allow you to manage power usage more optimally,” says Mr Carr. “That means you have sen- Is seeking sors on the power meters of homes quotations for 26.5% and businesses talking to the power cyber insurance generation stations.” he insurance industry is not In the Lloyd’s market alone there are However, the ongoing concern for the only business to struggle around 4,000 coverholders operating the vast majority of businesses will with understanding its data. globally and between them they sell Has no plans T continue to be data protection and But the sheer volume of information millions of policies annually. This to buy cyber business continuity, says Joshua Gold- insurance 26.5% hitting insurers’ desktops on a daily means a huge amount of data is fed Multiplying risks in an farb, vice president and chief technol- basis means it cannot ignore the back to the Lloyd’s carriers, requiring ogy officer of emerging technologies at importance of acting now to embrace extensive analysis and checking. cyber security and malware protection the latest technology in order to get One of the difficulties faced firm FireEye. “One of the biggest risks to grips with the issue. is that there is currently little organisations face these days is the The industry faces an important standardisation of this data, so it is expanding cyberspace Don’t know theft of sensitive confidential and pro- 17.6% question around managing delegated presented to the market in multiple prietary information,” he says. “Theft authorities, which have served the formats. This makes it extremely A more connected world is increasingly vulnerable to hackers of data can cause brand damage, loss insurance sector well for many difficult to analyse and check without of revenue, lawsuits and fines for vio- years, but can be hard to monitor. advanced software tools. motivated by malice, greed or political power, and inflicting physical, lating privacy laws. Source: SANS 2016 With delegated authorities, the Thousands of spreadsheets are being “It is a risk that can be mitigated underwriters “give away their pen” presented each month, containing financial and reputational damage in various ways. But what people ing threat environment. If one of the and allow third parties to write risks on information on premiums written, sometimes forget is that attackers objectives of future cyber attackers their behalf. Such third parties, called premiums paid and claims made. All of are continuously evolving. Lately is to cause property damage, bod- coverholders, operate throughout this needs to be cleansed, validated and they’ve been doing quite a lot of at- ily harm, pollution or widespread the world writing business in their checked against the contract terms to tacks to compromise user creden- power outages, it could mean insur- local markets on behalf of Lloyd’s and ensure that the coverholder is abiding tials, allowing them to masquerade ance claims are made under more the company market. by the agreement between itself and CYBER RISK surers is that many IoT devices are corporate system. “They had the vul- ABOVE as a legitimate user.” traditional classes of business, in- Without proper controls working the insurer. HELEN YATES not designed with security in mind. nerability not in their own system, Last December’s Cyber crime is set to be worth $2.1 cluding commercial and residential with delegated authorities can pose Each spreadsheet can contain “Up until recent times connected but in the system of their heating cyber attack on trillion by 2019, according to Juni- property, motor, environmental, risks because of a lack of knowledge thousands of rows of data with multiple devices tended to be things that we and ventilation supply company,” ex- Ukraine’s power per Research. In addition to data business interruption, general and or visibility over the business. An columns, so a single document could hen two hacking ex- took some effort to defend – desktop plains Graeme King, senior cyber un- grid and subse- theft, 2016 has seen the proliferation professional liability, and accident in-depth understanding of the data contain millions of individual cells of quent blackout perts demonstrated to a and laptop computers, even mobile derwriter at Allianz Global Corporate of cyber extortion. The cryptolock- and health. produced by these coverholders is data. It is an impossible task for the demonstrate the WIRED journalist how phones and certainly servers,” says & Specialty (AGCS). “By exploiting emerging threat er gang is understood to have made While some cyber products offer needed. Having proper systems in human brain to absorb and check. Wthey could access the Mr Carr. “When you start connecting that vulnerability they got in.” emanating from a more than $30 million in 2015 using cover for physical damage, this is place not only ensures restraint over Fortunately, there are now a few the proper controls are in place to computer system of the Jeep Chero- thermostats and refrigerators there’s As the Jeep hacking stunt demon- connected world relatively simple ransomware. not yet widespread and current- the business written, but also enables software solutions that can help manage risk. kee he was driving, it highlighted a strated, another emerging threat “The insurance industry in the ly cyber exposures are not being an understanding of where the risks solve this issue. VIPR’s Intrali system The quote and bind solutions enable worrying threat in an increasingly emanating from a connected world UK is ready for this, but the clients priced into other insurance policies. lie and where the profits or losses are enables data to be mapped to a VIPR’s Intrali system coverholders to transact business in connected world. Through malicious is actual physical harm arising from are not yet buying the product in “You either need to start adding cy- being made. common standard, so spreadsheets enables data to real time, with automatic production code, the hackers were able to control an intrusion. Potential scenarios their droves. Had there been wide- ber to all classes or introducing cy- can be imported into the system, and be mapped to a of compliant documents including everything from the air conditioning Cyber insurance range from individual attacks, such spread uptake of insurance to date ber exclusions and expanding cyber automatically cleansed, checked and quote sheets, policy documents and music to the vehicle’s steering, providers will as tampering with the thermostat at we would have had a much bigger policies to encompass physical dam- formatted. As a result, data can be common standard and endorsements. Renewals can brakes and transmission. continuously need to a food or pharmaceutical warehouse handle on the scale of this problem. age and bodily injury,” says Argo quickly and easily interrogated. be automated and any mid-term As the internet of things (IoT) and causing spoilage of perishable An insurance policy would proba- Group’s Mr Carr. 58 On its way through the system, the adjustments can be calculated at the takes off it will inevitably introduce adapt their products goods, through to major incidents, bly help an awful lot of these com- Insurance buyers may well prefer Lloyd’s data can also be validated against Without the right technology touch of a button because all the new cyber vulnerabilities, says Mi- and services to the such as taking down a power grid. panies, enabling them to identify the former. The latter is prefera- managing the contract terms so that any in place, the traditional insurers necessary data is contained within agents chael Carr, technology practice lead- changing threat In 2014, a blast furnace at a Ger- where that threat is coming from, ble from an insurer’s perspective, breaches such as limit or aggregate will also find themselves under the online system. er at Argo Group. “The biggest con- man steel mill suffered massive plug the gap, restore the data and se- as with the first scenario there is violations can be highlighted. Now increasing threat from new entrants These changes also give comfort cern with IoT is you have masses of environment damage after cyber attackers cure their systems from more of the a possibility that a single piece of widely used in the Lloyd’s market for that embrace the latest technology to the regulators that business is well multiplication of the attack surface. breached the mill’s control system. same,” says Mr King at AGCS. malware could end up triggering insurance, the system can also be from the start. This will give those controlled and everything is being Every connected device is a point of This, along with politically moti- The impending European Com- coverage for six different contracts 4,132 applied to help any other industry new entrants a leading edge in terms carried out in a compliant manner. entry into a network,” he warns. a real question if those things are vated attacks such as the Ukraine mission’s General Data Protection for the same insured. “Whereas if Lloyd’s cleanse, validate and standardise of understanding their business, and The insurance market is starting to Technology research firm Gartner going to be engineered securely or if power grid attack of December 2015 Regulation and headline-hitting data all the cyber stuff was in the cyber coverholders large sets of disorganised and non- in creating operating efficiencies embrace technology, albeit slowly, forecasts that 20.8 billion connected they could become the weak link.” and 2010 stuxnet attack on Bushehr breach exposés will continue to drive policy, I’d at least be prepared to standard data. and more competitive pricing for and we believe the will is there to things will be in use worldwide by 2020, The data breach at Target in 2014 Nuclear Power Plant in Iran, demon- greater demand for cyber cover. Mr manage my total exposure – I don’t This detailed understanding of the consumer. support these changes. Costly IT up from 6.4 billion today. It also antic- offers an example of how such weak strate these scenarios are not just King says: “That’s when you’ll see think the industry has figured this information not only makes sense A good example of this is MGAM, failures in the past cannot be allowed ipates that up to 20 per cent of annual links can be exploited. The personal the stuff of Hollywood blockbusters. the real upswing, as media headlines out yet,” Mr Carr concludes. 300k from a business perspective, but a new managing general agent, to stifle future innovation and should security budgets will go towards ad- data of more than 100 million in- They also indicate the potential start causing people embarrassment.” estimated annual is now essential in order to satisfy which has recently worked with VIPR not be used as an excuse for inertia. dressing compromises in IoT security. dividuals was compromised after for systemic risk in a world where Cyber insurance providers will Share this article online via bordereaux volume the ever-increasing oversight from to implement technology across Software has moved on in leaps The difficulty for security experts, hackers used stolen credentials from everything is connected. “Most cy- continuously need to adapt their raconteur.net being submitted regulators and to comply with the the whole range of its business and bounds over recent years, and corporates, IT departments and in- a contractor to access the retailer’s ber attacks carried out by criminals products and services to the chang- to Lloyd’s latest reporting requirements. from bordereaux to coverholder processes that were challenging a In insurance, without using such management, accounting systems, few years ago can now be achieved ABOVE must embrace the new systems, not systems, it is difficult to understand and online quote and bind platforms. with ease. Richard Brown only to satisfy the regulators, but how companies will comply with the Not only does this work give Ultimately, companies have to Director also to improve their operations TOP Billions new Solvency II Pillar 3 requirements MGAM an in-depth understanding innovate in order to survive. Those VIPR and survive the onslaught of ADJUSTMENTS 1 2 3 4 5 of individual that mandate advanced and timely of its business, but it also now has that lag behind risk the same fate innovative competitors. FIRMS HAD cells of data reporting. The requirements come the ability to roll out new lines of that befell Woolworths, Polaroid TO MAKE TO Implement or update Acquire additional Adopt a formal Implement a data or Update existing policies/processes technical controls risk assessment/ information-governance technical controls into full force next January, with business to coverholders quickly and and Kodak. Change is inevitable, so To find out more about VIPR’s OBTAIN CYBER strong penalties for non-compliance. efficiently, in the knowledge that companies must adapt. Businesses solutions visit www.viprsolutions.com INSURANCE management practice programme 14 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR xx12 / 10xx / 2016 xxxx raconteur.net FUTURE OF INSURANCEXXXX 152

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GTS Productions/Shutterstock GTS PROFESSIONALS IN MEDIUM attack. However, politically moti- TO LARGE CORPORATIONS vated attackers might be much more WITH EFFECTIVE USE OF DATA interested in causing systemic damage because their motivation isn’t monetary, except maybe to wreck Despite advances in technology, the insurance industry still struggles with the sheer volume and complexity of data. Simple the economy of the country or re- Has bought gion they were attacking.” cyber insurance 20.6% changes and the use of new software can help organisations understand their business and meet regulatory requirements, says Supervisory control and data acquisition systems used by industrial Richard Brown, director at VIPR and utility companies are typically not connected to the internet, a Is in the process practice known as “air gapping”. But of buying 8.9% this defence could be obsolete in the cyber insurance future. “One of the hot uses of IoT is sensors that allow you to manage power usage more optimally,” says Mr Carr. “That means you have sen- Is seeking sors on the power meters of homes quotations for 26.5% and businesses talking to the power cyber insurance generation stations.” he insurance industry is not In the Lloyd’s market alone there are However, the ongoing concern for the only business to struggle around 4,000 coverholders operating the vast majority of businesses will with understanding its data. globally and between them they sell Has no plans T continue to be data protection and But the sheer volume of information millions of policies annually. This to buy cyber business continuity, says Joshua Gold- insurance 26.5% hitting insurers’ desktops on a daily means a huge amount of data is fed Multiplying risks in an farb, vice president and chief technol- basis means it cannot ignore the back to the Lloyd’s carriers, requiring ogy officer of emerging technologies at importance of acting now to embrace extensive analysis and checking. cyber security and malware protection the latest technology in order to get One of the difficulties faced firm FireEye. “One of the biggest risks to grips with the issue. is that there is currently little organisations face these days is the The industry faces an important standardisation of this data, so it is expanding cyberspace Don’t know theft of sensitive confidential and pro- 17.6% question around managing delegated presented to the market in multiple prietary information,” he says. “Theft authorities, which have served the formats. This makes it extremely A more connected world is increasingly vulnerable to hackers of data can cause brand damage, loss insurance sector well for many difficult to analyse and check without of revenue, lawsuits and fines for vio- years, but can be hard to monitor. advanced software tools. motivated by malice, greed or political power, and inflicting physical, lating privacy laws. Source: SANS 2016 With delegated authorities, the Thousands of spreadsheets are being “It is a risk that can be mitigated underwriters “give away their pen” presented each month, containing financial and reputational damage in various ways. But what people ing threat environment. If one of the and allow third parties to write risks on information on premiums written, sometimes forget is that attackers objectives of future cyber attackers their behalf. Such third parties, called premiums paid and claims made. All of are continuously evolving. Lately is to cause property damage, bod- coverholders, operate throughout this needs to be cleansed, validated and they’ve been doing quite a lot of at- ily harm, pollution or widespread the world writing business in their checked against the contract terms to tacks to compromise user creden- power outages, it could mean insur- local markets on behalf of Lloyd’s and ensure that the coverholder is abiding tials, allowing them to masquerade ance claims are made under more the company market. by the agreement between itself and CYBER RISK surers is that many IoT devices are corporate system. “They had the vul- ABOVE as a legitimate user.” traditional classes of business, in- Without proper controls working the insurer. HELEN YATES not designed with security in mind. nerability not in their own system, Last December’s Cyber crime is set to be worth $2.1 cluding commercial and residential with delegated authorities can pose Each spreadsheet can contain “Up until recent times connected but in the system of their heating cyber attack on trillion by 2019, according to Juni- property, motor, environmental, risks because of a lack of knowledge thousands of rows of data with multiple devices tended to be things that we and ventilation supply company,” ex- Ukraine’s power per Research. In addition to data business interruption, general and or visibility over the business. An columns, so a single document could hen two hacking ex- took some effort to defend – desktop plains Graeme King, senior cyber un- grid and subse- theft, 2016 has seen the proliferation professional liability, and accident in-depth understanding of the data contain millions of individual cells of quent blackout perts demonstrated to a and laptop computers, even mobile derwriter at Allianz Global Corporate of cyber extortion. The cryptolock- and health. produced by these coverholders is data. It is an impossible task for the demonstrate the WIRED journalist how phones and certainly servers,” says & Specialty (AGCS). “By exploiting emerging threat er gang is understood to have made While some cyber products offer needed. Having proper systems in human brain to absorb and check. Wthey could access the Mr Carr. “When you start connecting that vulnerability they got in.” emanating from a more than $30 million in 2015 using cover for physical damage, this is place not only ensures restraint over Fortunately, there are now a few the proper controls are in place to computer system of the Jeep Chero- thermostats and refrigerators there’s As the Jeep hacking stunt demon- connected world relatively simple ransomware. not yet widespread and current- the business written, but also enables software solutions that can help manage risk. kee he was driving, it highlighted a strated, another emerging threat “The insurance industry in the ly cyber exposures are not being an understanding of where the risks solve this issue. VIPR’s Intrali system The quote and bind solutions enable worrying threat in an increasingly emanating from a connected world UK is ready for this, but the clients priced into other insurance policies. lie and where the profits or losses are enables data to be mapped to a VIPR’s Intrali system coverholders to transact business in connected world. Through malicious is actual physical harm arising from are not yet buying the product in “You either need to start adding cy- being made. common standard, so spreadsheets enables data to real time, with automatic production code, the hackers were able to control an intrusion. Potential scenarios their droves. Had there been wide- ber to all classes or introducing cy- can be imported into the system, and be mapped to a of compliant documents including everything from the air conditioning Cyber insurance range from individual attacks, such spread uptake of insurance to date ber exclusions and expanding cyber automatically cleansed, checked and quote sheets, policy documents and music to the vehicle’s steering, providers will as tampering with the thermostat at we would have had a much bigger policies to encompass physical dam- formatted. As a result, data can be common standard and endorsements. Renewals can brakes and transmission. continuously need to a food or pharmaceutical warehouse handle on the scale of this problem. age and bodily injury,” says Argo quickly and easily interrogated. be automated and any mid-term As the internet of things (IoT) and causing spoilage of perishable An insurance policy would proba- Group’s Mr Carr. 58 On its way through the system, the adjustments can be calculated at the takes off it will inevitably introduce adapt their products goods, through to major incidents, bly help an awful lot of these com- Insurance buyers may well prefer Lloyd’s data can also be validated against Without the right technology touch of a button because all the new cyber vulnerabilities, says Mi- and services to the such as taking down a power grid. panies, enabling them to identify the former. The latter is prefera- managing the contract terms so that any in place, the traditional insurers necessary data is contained within agents chael Carr, technology practice lead- changing threat In 2014, a blast furnace at a Ger- where that threat is coming from, ble from an insurer’s perspective, breaches such as limit or aggregate will also find themselves under the online system. er at Argo Group. “The biggest con- man steel mill suffered massive plug the gap, restore the data and se- as with the first scenario there is violations can be highlighted. Now increasing threat from new entrants These changes also give comfort cern with IoT is you have masses of environment damage after cyber attackers cure their systems from more of the a possibility that a single piece of widely used in the Lloyd’s market for that embrace the latest technology to the regulators that business is well multiplication of the attack surface. breached the mill’s control system. same,” says Mr King at AGCS. malware could end up triggering insurance, the system can also be from the start. This will give those controlled and everything is being Every connected device is a point of This, along with politically moti- The impending European Com- coverage for six different contracts 4,132 applied to help any other industry new entrants a leading edge in terms carried out in a compliant manner. entry into a network,” he warns. a real question if those things are vated attacks such as the Ukraine mission’s General Data Protection for the same insured. “Whereas if Lloyd’s cleanse, validate and standardise of understanding their business, and The insurance market is starting to Technology research firm Gartner going to be engineered securely or if power grid attack of December 2015 Regulation and headline-hitting data all the cyber stuff was in the cyber coverholders large sets of disorganised and non- in creating operating efficiencies embrace technology, albeit slowly, forecasts that 20.8 billion connected they could become the weak link.” and 2010 stuxnet attack on Bushehr breach exposés will continue to drive policy, I’d at least be prepared to standard data. and more competitive pricing for and we believe the will is there to things will be in use worldwide by 2020, The data breach at Target in 2014 Nuclear Power Plant in Iran, demon- greater demand for cyber cover. Mr manage my total exposure – I don’t This detailed understanding of the consumer. support these changes. Costly IT up from 6.4 billion today. It also antic- offers an example of how such weak strate these scenarios are not just King says: “That’s when you’ll see think the industry has figured this information not only makes sense A good example of this is MGAM, failures in the past cannot be allowed ipates that up to 20 per cent of annual links can be exploited. The personal the stuff of Hollywood blockbusters. the real upswing, as media headlines out yet,” Mr Carr concludes. 300k from a business perspective, but a new managing general agent, to stifle future innovation and should security budgets will go towards ad- data of more than 100 million in- They also indicate the potential start causing people embarrassment.” estimated annual is now essential in order to satisfy which has recently worked with VIPR not be used as an excuse for inertia. dressing compromises in IoT security. dividuals was compromised after for systemic risk in a world where Cyber insurance providers will Share this article online via bordereaux volume the ever-increasing oversight from to implement technology across Software has moved on in leaps The difficulty for security experts, hackers used stolen credentials from everything is connected. “Most cy- continuously need to adapt their raconteur.net being submitted regulators and to comply with the the whole range of its business and bounds over recent years, and corporates, IT departments and in- a contractor to access the retailer’s ber attacks carried out by criminals products and services to the chang- to Lloyd’s latest reporting requirements. from bordereaux to coverholder processes that were challenging a In insurance, without using such management, accounting systems, few years ago can now be achieved ABOVE must embrace the new systems, not systems, it is difficult to understand and online quote and bind platforms. with ease. Richard Brown only to satisfy the regulators, but how companies will comply with the Not only does this work give Ultimately, companies have to Director also to improve their operations TOP Billions new Solvency II Pillar 3 requirements MGAM an in-depth understanding innovate in order to survive. Those VIPR and survive the onslaught of ADJUSTMENTS 1 2 3 4 5 of individual that mandate advanced and timely of its business, but it also now has that lag behind risk the same fate innovative competitors. FIRMS HAD cells of data reporting. The requirements come the ability to roll out new lines of that befell Woolworths, Polaroid TO MAKE TO Implement or update Acquire additional Adopt a formal Implement a data or Update existing policies/processes technical controls risk assessment/ information-governance technical controls into full force next January, with business to coverholders quickly and and Kodak. Change is inevitable, so To find out more about VIPR’s OBTAIN CYBER strong penalties for non-compliance. efficiently, in the knowledge that companies must adapt. Businesses solutions visit www.viprsolutions.com INSURANCE management practice programme 16RACONTEURFUTURE OFxx INSURANCE xx xxxx raconteur.net 12 / 10 / 2016 RACONTEURXXXX 2 RACONTEUR 12 / 10 / 2016 raconteur.net FUTURE OF INSURANCE 17

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small, typically less than 5 per cent “What it does do is potentially solarseven/Shutterstock of investment returns,” he says. “As make it more attractive to invest MOVING WITH THE TIMES: investment returns have declined, in sterling bonds or dollar bonds this proportion has increased sig- hedged back to sterling, but it hasn’t nificantly, in some cases eradicating been a major issue.” the investment return entirely.” Indeed, many insurers will have WHY LIFE INSURERS MUST ADAPT Mr Büsst says there have been a been aware of the potential issues number of regulatory hurdles for surrounding Brexit before the ref- insurers operating an asset manage- erendum campaign started. Insurers must harness technology to offer customers more and better insurance options, saysRoss Campbell, chief underwriter ment function or business, not only “In terms of Brexit-driven volatil- facing Solvency II, but a number of ity, insurers were well aware that of the Life-Health Research and Development Unit at Gen Re other European directives govern- the vote itself could influence bond ing trading securities and investing. yields, the price of assets such as “To date insurers appear to have equities and foreign exchange, and responded by aiming to increase some have sought to actively man- investment returns, rather than cut age their exposure ahead of the costs,” he says. vote,” says William Gibbons, direc- However, the move towards new tor in PwC’s insurance practice. asset classes has also increased the “Now the vote has taken place, insur- WILLINGNESS TO SHARE DATA WITH INSURER DESIRE TO PURCHASE INSURANCE USING SMARTPHONE level of expertise among insurers’ ers are considering the implications of Don’t own investment teams rather than Brexit and also quantitative easing for No Yes Would like to use Use know seeking third-party managers. investment markets going forwards, he insurance industry is not the “The increase in and whether to only business to struggle with use of new asset adjust their invest- 40% 38% 48% understanding its data. But the 77% classes and strat- ment exposures in T If the industry makes 25-34 sheer volume of information hitting egies has yet to Investing in the light of this.” insurers’ desktops on a daily basis better use of technology, 11% result in a signifi- Others in the in- means it cannot ignore the impor- cant move towards current environment dustry have con- it will make life insurance Difficult times for tance of acting now to embrace the more outsourcing; is a bit like eating in a sidered whether UK latest technology in order to get to accessible for large the main driver for voters’ rejection of 72% grips with the issue. any increase has restaurant where the the EU trading bloc numbers of people who 11% 17% Disruption and innovation will alter 35-44 insurers’ portfolios been the need to only items on the could signal the established business models indelibly. have none or too little 14% 12% access new invest- menu are rotting fish scrapping of inef- We understand this since reinsurance 49% ment expertise and fective and political 45% and mouldy cabbage was itself born out of innovation. As not to cut costs,” red tape holding 38% Low-yield markets have made it difficult for insurers to generate reliable specialist product providers and man- says Mr Büsst. – you eat it because back insurers from agers of biometric risk, Gen Re makes stay relevant. How we behave and 63% returns from their investment portfolios and increased pressure to The aftermath of you have to accessing some in- a significant contribution to the struc- interact with people must give cus- 45-54 this summer’s vote vestment products ture of today’s global reinsurance tomers easier access, greater trans- 8% ensure they have the right asset management strategy in place on the UK’s con- and strategies. markets. We recognise the way we go parency, and more integrated and tinued membership of the EU saw The current market environment about things must fit the times. flexible solutions. Customer expe- heightened volatility as investors also poses challenges for insurers Life insurers will soon find them- rience and behavioural economics around the world struggled to re- with their own in-house offerings, selves in a technological-shaped play a role. Among other things, this 57% spond to the result. particularly since the introduction of future that is customer-centric. Life means working with modern cus- 55+ Scott Eason, head of insurance pension freedoms with investors now insurance is not a simple transaction tomers’ demands for products that 8% INVESTMENT STRATEGIES their investments to make the books “Instead, we see a lot of interest consulting at London-based con- able to take greater control over who which perhaps explains why so many are geared around their preferences ROB LANGSTON balance. But low returns also mean a from insurers for multi-asset in- sultancy Barnett Waddingham, says manages their retirement savings. HEALTH HOME AUTOMOTIVE don’t bother with it. However, if the and how they live their lives. reach for yield in new strategies. vestment strategies. Insurers realise insurers were unlikely to have been “Successive waves of pension reform industry makes better use of tech- For example, we recognise fit- “Some of these strategies may they stand to benefit from greater severely affected by any fall in cur- have eroded the advantages that in- Source: Insurance Disrupted: General Insurance in a Connected World, Deloitte 2015 nology, it will make life insurance ac- ness wearables have a part to play in ith a number of chal- mean taking new risks, such as balance-sheet stability and en- rency following the Brexit vote. surance funds once had in pensions,” cessible for large numbers of people maintaining good health. It’s why re- lenges facing insurers crossing over from traditional fixed hanced returns over the long term, “Typically insurers will look at in- says Ed Jervis, insurance partner at who have none or too little. ward-for-fitness life insurance fran- digital lifestyle data from wearables possible. Blockchain technology will in the current market income into hard-currency emerg- together with the potential for lower vestment risks and classify them as consultancy EY. “Insurers are recog- The life insurance industry is gen- chises have become popular in several and phones. help insurers replace processes that Wenvironment, what ing market debt, high-yield and in- volatility and capital requirements.” rewarded or unrewarded,” he says. nising they have to take the pure-play erally seen as slow to initiate change markets. This is a clear sign of chang- Individuals will begin to develop need repeated paper transactions. can be done to ensure they continue come-oriented equities.” Russell Büsst, chief executive and “Things like interest rate risk and asset managers on at their own game or even resistant to it. More likely its ing times; it shows people will share rich intelligence about their every- Blockchain implements trusted and Personalised medical to deliver returns in all conditions? Richard Clarke, head of UK asset chief information officer at insur- currency risk are generally perceived with capital and fee-light investment well-established and successful work- with their insurer some personal data day health from data on exercise, secure transactions with less bureau- care increasingly “In this low-yield and volatile envi- management at consultancy KPMG, ance investment sector specialist by insurers as unrewarded risks: risks propositions that offer good perfor- ing practices make life insurers hesi- when it provides them an advantage, sleep, mood, diet, heart function cracy, and since it works to decen- ronment, it’s particularly important adds: “For some time, firms have Conning, says the increasing regula- that if they invest in or take a posi- mance potential across a range of risk tant to commit to new ways without such as a lowered insurance premium. and more. Personal information tralise administration, it is likely to be involves self-monitoring that we understand the risks we are been expanding their investment tory burden on insurers continues to tion in they will necessarily win. A profiles and time horizons.” knowing whether the new ones will be Personalised medical care in- like this is likely to prove as predic- integral to the business models of new with mobile apps in taking – how the assets backing our options, initially into things like debt play a part in investment decisions. majority of insurers will have curren- adequate and stand the test of time. creasingly involves self-monitoring tively powerful as the medical data entrants to the life insurance market. ‘mecosystems’ customers’ long-term expectations backed by real assets, but now we’re “Historically, the cost of running cy-hedged their assets anyway; you Share this article online via Contrary to opinion, life insurers are with mobile apps in “mecosystems” traditionally used by insurers. The Life insurance is sold predominant- might be impacted when markets increasingly seeing firms invest in either internal or external asset generally won’t find that they have raconteur.net just like any retailer, and keen for great- that give individual patients a hand development of a parallel source of ly via an advised sale through some move – and ensure we have real diver- long-term infrastructure and poten- management functions has been exposure to sterling having fallen. er engagement and sustained direct in maintaining or recovering their medical information means insur- kind of human intermediary whereas sification across geographies, sectors tially riskier real assets such as ear- relationships with their customers. health. People are also encouraged ance companies need to change the the future may see direct-to-cus- and industries, as well as the more tra- ly-development-phase property. It is important insurers do adapt to augment their electronic health questions they ask and where they tomer, affiliate or social media advice cess, waves of disruption and contin- ditional view of diversification across “Most firms are also continuing to to changes in technology merely records by filling the blanks be- obtain further evidence. being driven by some kind of robotic uous change should be expected. asset classes,” says Rachel Elwell, ‎in- drive profitability from third-party FALLOUT FROM BREXIT VOTE to avoid being left behind and to tween episodic doctor’s visits with People will begin to expect an in- algorithm. The adviser of the future It’s a fairly obvious point to make, vestment office and staff pensions di- asset growth. This involves develop- surer to access their data and to do will bring technology into their busi- but there isn’t one right answer. The rector at insurer Royal London. ing new solutions which match cli- something tailored specifically for nesses and propositions. future is about offering choice and “Good housekeeping: a focus on ent’s savings targets and attracting In addition to currency “If we are not able to access LIKELIHOOD TO PURCHASE INSURANCE FROM A TECHNOLOGY COMPANY them with it. Social networks will help If life insurers don’t make changes multiple pathways to it exist. Gen costs, hard work with our asset man- new talent.” fluctuations, longer-term the single market, either through people with mutually aligned interests that provide an enriched digital ex- Re’s flexible approach means we agers to identify and then make the In search of returns, insurers have concerns surrounding so-called passporting rights or other means, Generation Y Others and common risk factors to form peer- perience for people, then someone have no preconceptions about the most of opportunities, and strong increasingly turned to other as- passporting rights have rattled the inevitable consequences for 49% to-peer insurance pools. Knowledge else will. Technology will simplify our changes technology will bring to life governance to allow good deci- set classes and illiquid assets, and the UK insurance sector in the Lloyd’s and indeed other insurance 47.2% gained from consumer genetics tests transactions allowing us to embed insurance and we will continue to sion-making are also key.” brought investment activities in months since the Brexit vote, organisations will be that we will or much wider use of genomics in ourselves into the lives of customers work with multiple partners to help However, the difficulties faced in line with underwriting practices de- with the chairman of Lloyd’s transact the business onshore 38.6% 36.2% medicine could mean people are much as never before to support their fi- their visions for the future become growing portfolios and delivering veloped and regulated under the Eu- of London warning that the in the EU, and that obviously better equipped to make personal de- nancial and medical health. a reality. We believe competition returns has been a key concern for ropean Union Solvency II Directive. marketplace could shift parts will have an impact on London,” cisions about their insurability. We can predict a very different fu- within the industry enhances quali- insurers for some time. “Fixed income remains insurers’ of its business to Europe during he said at Lloyd’s annual dinner 25.2% 23.4% Disruption, though, won’t all hap- ture for life insurers. It’s a future with ty and it is imperative that we bring “Investing in the current environ- best friend, but they no longer want exit talks. last month. 19.6% pen at consumer level. To meet evolv- the customer at the centre, and will high-quality technical solutions to ment is a bit like eating in a restau- to shake the hand of some OECD John Nelsen, who has chaired While the larger firms with ing customer demands, life insurance be shaped by behavioural science and all our customers. rant where the only items on the [Organisation for Economic Co-op- Lloyd’s since 2011, has cautioned subsidiaries already on the 14% 12.5% 14.1% 11% companies also must undertake some gamification, with social and peer-to- menu are rotting fish and mouldy eration and Development] govern- that the loss of passporting Continent will likely see little 8.8% internal disruption. There are behind- peer networking and smart devices cabbage – you eat it because you ments,” says Colin Fitzgerald, head rights, which enable firms in impact, analysts warn that many Percentage of total customers the-scenes opportunities to harness all playing a part. While the basics un- Gen Re, a Berkshire Hathaway Com- have to,” says Doug Jones, chief of EMEA (Europe, Middle East and each EU member state to trade smaller players could be forced to technology in risk selection, admin- derpinning life insurance will remain pany, is one of the leading property/ executive of Charles Taylor Invest- Africa) institutional at Invesco. anywhere in the bloc without the relocate if the UK fails to secure GLOBAL NORTH EUROPE LATIN DEVELOPED DEVELOPING istration and claims processes to the in place for many years to come, how casualty and life/health reinsurers ment Management. “The big story within fixed income need for additional local licences, access to the EU single market in AMERICA AMERICA ASIA-PACIFIC ASIA-PACIFIC benefit of customers. people access it, the incentives it in the world, with a global network “Low returns on assets mean in- is the shunning of global govern- could have a big impact. a “hard” exit. Companies are automating repeti- provides and its cost will all be shaped of branch and subsidiary offices in surers have to focus more on their ment debt and the search for alter- Source: Capgemini Voice of the Customer Survey, Capgemini Financial Services analysis 2015 tive administrative tasks as quickly as by technology. It’s not a one-off pro- key reinsurance markets underwriting. They cannot rely on natives within core fixed income. 16RACONTEURFUTURE OFxx INSURANCE xx xxxx raconteur.net 12 / 10 / 2016 RACONTEURXXXX 2 RACONTEUR 12 / 10 / 2016 raconteur.net FUTURE OF INSURANCE 17

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small, typically less than 5 per cent “What it does do is potentially solarseven/Shutterstock of investment returns,” he says. “As make it more attractive to invest MOVING WITH THE TIMES: investment returns have declined, in sterling bonds or dollar bonds this proportion has increased sig- hedged back to sterling, but it hasn’t nificantly, in some cases eradicating been a major issue.” the investment return entirely.” Indeed, many insurers will have WHY LIFE INSURERS MUST ADAPT Mr Büsst says there have been a been aware of the potential issues number of regulatory hurdles for surrounding Brexit before the ref- insurers operating an asset manage- erendum campaign started. Insurers must harness technology to offer customers more and better insurance options, saysRoss Campbell, chief underwriter ment function or business, not only “In terms of Brexit-driven volatil- facing Solvency II, but a number of ity, insurers were well aware that of the Life-Health Research and Development Unit at Gen Re other European directives govern- the vote itself could influence bond ing trading securities and investing. yields, the price of assets such as “To date insurers appear to have equities and foreign exchange, and responded by aiming to increase some have sought to actively man- investment returns, rather than cut age their exposure ahead of the costs,” he says. vote,” says William Gibbons, direc- However, the move towards new tor in PwC’s insurance practice. asset classes has also increased the “Now the vote has taken place, insur- WILLINGNESS TO SHARE DATA WITH INSURER DESIRE TO PURCHASE INSURANCE USING SMARTPHONE level of expertise among insurers’ ers are considering the implications of Don’t own investment teams rather than Brexit and also quantitative easing for No Yes Would like to use Use know seeking third-party managers. investment markets going forwards, he insurance industry is not the “The increase in and whether to only business to struggle with use of new asset adjust their invest- 40% 38% 48% understanding its data. But the 77% classes and strat- ment exposures in T If the industry makes 25-34 sheer volume of information hitting egies has yet to Investing in the light of this.” insurers’ desktops on a daily basis better use of technology, 11% result in a signifi- Others in the in- means it cannot ignore the impor- cant move towards current environment dustry have con- it will make life insurance Difficult times for tance of acting now to embrace the more outsourcing; is a bit like eating in a sidered whether UK latest technology in order to get to accessible for large the main driver for voters’ rejection of 72% grips with the issue. any increase has restaurant where the the EU trading bloc numbers of people who 11% 17% Disruption and innovation will alter 35-44 insurers’ portfolios been the need to only items on the could signal the established business models indelibly. have none or too little 14% 12% access new invest- menu are rotting fish scrapping of inef- We understand this since reinsurance 49% ment expertise and fective and political 45% and mouldy cabbage was itself born out of innovation. As not to cut costs,” red tape holding 38% Low-yield markets have made it difficult for insurers to generate reliable specialist product providers and man- says Mr Büsst. – you eat it because back insurers from agers of biometric risk, Gen Re makes stay relevant. How we behave and 63% returns from their investment portfolios and increased pressure to The aftermath of you have to accessing some in- a significant contribution to the struc- interact with people must give cus- 45-54 this summer’s vote vestment products ture of today’s global reinsurance tomers easier access, greater trans- 8% ensure they have the right asset management strategy in place on the UK’s con- and strategies. markets. We recognise the way we go parency, and more integrated and tinued membership of the EU saw The current market environment about things must fit the times. flexible solutions. Customer expe- heightened volatility as investors also poses challenges for insurers Life insurers will soon find them- rience and behavioural economics around the world struggled to re- with their own in-house offerings, selves in a technological-shaped play a role. Among other things, this 57% spond to the result. particularly since the introduction of future that is customer-centric. Life means working with modern cus- 55+ Scott Eason, head of insurance pension freedoms with investors now insurance is not a simple transaction tomers’ demands for products that 8% INVESTMENT STRATEGIES their investments to make the books “Instead, we see a lot of interest consulting at London-based con- able to take greater control over who which perhaps explains why so many are geared around their preferences ROB LANGSTON balance. But low returns also mean a from insurers for multi-asset in- sultancy Barnett Waddingham, says manages their retirement savings. HEALTH HOME AUTOMOTIVE don’t bother with it. However, if the and how they live their lives. reach for yield in new strategies. vestment strategies. Insurers realise insurers were unlikely to have been “Successive waves of pension reform industry makes better use of tech- For example, we recognise fit- “Some of these strategies may they stand to benefit from greater severely affected by any fall in cur- have eroded the advantages that in- Source: Insurance Disrupted: General Insurance in a Connected World, Deloitte 2015 nology, it will make life insurance ac- ness wearables have a part to play in ith a number of chal- mean taking new risks, such as balance-sheet stability and en- rency following the Brexit vote. surance funds once had in pensions,” cessible for large numbers of people maintaining good health. It’s why re- lenges facing insurers crossing over from traditional fixed hanced returns over the long term, “Typically insurers will look at in- says Ed Jervis, insurance partner at who have none or too little. ward-for-fitness life insurance fran- digital lifestyle data from wearables possible. Blockchain technology will in the current market income into hard-currency emerg- together with the potential for lower vestment risks and classify them as consultancy EY. “Insurers are recog- The life insurance industry is gen- chises have become popular in several and phones. help insurers replace processes that Wenvironment, what ing market debt, high-yield and in- volatility and capital requirements.” rewarded or unrewarded,” he says. nising they have to take the pure-play erally seen as slow to initiate change markets. This is a clear sign of chang- Individuals will begin to develop need repeated paper transactions. can be done to ensure they continue come-oriented equities.” Russell Büsst, chief executive and “Things like interest rate risk and asset managers on at their own game or even resistant to it. More likely its ing times; it shows people will share rich intelligence about their every- Blockchain implements trusted and Personalised medical to deliver returns in all conditions? Richard Clarke, head of UK asset chief information officer at insur- currency risk are generally perceived with capital and fee-light investment well-established and successful work- with their insurer some personal data day health from data on exercise, secure transactions with less bureau- care increasingly “In this low-yield and volatile envi- management at consultancy KPMG, ance investment sector specialist by insurers as unrewarded risks: risks propositions that offer good perfor- ing practices make life insurers hesi- when it provides them an advantage, sleep, mood, diet, heart function cracy, and since it works to decen- ronment, it’s particularly important adds: “For some time, firms have Conning, says the increasing regula- that if they invest in or take a posi- mance potential across a range of risk tant to commit to new ways without such as a lowered insurance premium. and more. Personal information tralise administration, it is likely to be involves self-monitoring that we understand the risks we are been expanding their investment tory burden on insurers continues to tion in they will necessarily win. A profiles and time horizons.” knowing whether the new ones will be Personalised medical care in- like this is likely to prove as predic- integral to the business models of new with mobile apps in taking – how the assets backing our options, initially into things like debt play a part in investment decisions. majority of insurers will have curren- adequate and stand the test of time. creasingly involves self-monitoring tively powerful as the medical data entrants to the life insurance market. ‘mecosystems’ customers’ long-term expectations backed by real assets, but now we’re “Historically, the cost of running cy-hedged their assets anyway; you Share this article online via Contrary to opinion, life insurers are with mobile apps in “mecosystems” traditionally used by insurers. The Life insurance is sold predominant- might be impacted when markets increasingly seeing firms invest in either internal or external asset generally won’t find that they have raconteur.net just like any retailer, and keen for great- that give individual patients a hand development of a parallel source of ly via an advised sale through some move – and ensure we have real diver- long-term infrastructure and poten- management functions has been exposure to sterling having fallen. er engagement and sustained direct in maintaining or recovering their medical information means insur- kind of human intermediary whereas sification across geographies, sectors tially riskier real assets such as ear- relationships with their customers. health. People are also encouraged ance companies need to change the the future may see direct-to-cus- and industries, as well as the more tra- ly-development-phase property. It is important insurers do adapt to augment their electronic health questions they ask and where they tomer, affiliate or social media advice cess, waves of disruption and contin- ditional view of diversification across “Most firms are also continuing to to changes in technology merely records by filling the blanks be- obtain further evidence. being driven by some kind of robotic uous change should be expected. asset classes,” says Rachel Elwell, ‎in- drive profitability from third-party FALLOUT FROM BREXIT VOTE to avoid being left behind and to tween episodic doctor’s visits with People will begin to expect an in- algorithm. The adviser of the future It’s a fairly obvious point to make, vestment office and staff pensions di- asset growth. This involves develop- surer to access their data and to do will bring technology into their busi- but there isn’t one right answer. The rector at insurer Royal London. ing new solutions which match cli- something tailored specifically for nesses and propositions. future is about offering choice and “Good housekeeping: a focus on ent’s savings targets and attracting In addition to currency “If we are not able to access LIKELIHOOD TO PURCHASE INSURANCE FROM A TECHNOLOGY COMPANY them with it. Social networks will help If life insurers don’t make changes multiple pathways to it exist. Gen costs, hard work with our asset man- new talent.” fluctuations, longer-term the single market, either through people with mutually aligned interests that provide an enriched digital ex- Re’s flexible approach means we agers to identify and then make the In search of returns, insurers have concerns surrounding so-called passporting rights or other means, Generation Y Others and common risk factors to form peer- perience for people, then someone have no preconceptions about the most of opportunities, and strong increasingly turned to other as- passporting rights have rattled the inevitable consequences for 49% to-peer insurance pools. Knowledge else will. Technology will simplify our changes technology will bring to life governance to allow good deci- set classes and illiquid assets, and the UK insurance sector in the Lloyd’s and indeed other insurance 47.2% gained from consumer genetics tests transactions allowing us to embed insurance and we will continue to sion-making are also key.” brought investment activities in months since the Brexit vote, organisations will be that we will or much wider use of genomics in ourselves into the lives of customers work with multiple partners to help However, the difficulties faced in line with underwriting practices de- with the chairman of Lloyd’s transact the business onshore 38.6% 36.2% medicine could mean people are much as never before to support their fi- their visions for the future become growing portfolios and delivering veloped and regulated under the Eu- of London warning that the in the EU, and that obviously better equipped to make personal de- nancial and medical health. a reality. We believe competition returns has been a key concern for ropean Union Solvency II Directive. marketplace could shift parts will have an impact on London,” cisions about their insurability. We can predict a very different fu- within the industry enhances quali- insurers for some time. “Fixed income remains insurers’ of its business to Europe during he said at Lloyd’s annual dinner 25.2% 23.4% Disruption, though, won’t all hap- ture for life insurers. It’s a future with ty and it is imperative that we bring “Investing in the current environ- best friend, but they no longer want exit talks. last month. 19.6% pen at consumer level. To meet evolv- the customer at the centre, and will high-quality technical solutions to ment is a bit like eating in a restau- to shake the hand of some OECD John Nelsen, who has chaired While the larger firms with ing customer demands, life insurance be shaped by behavioural science and all our customers. rant where the only items on the [Organisation for Economic Co-op- Lloyd’s since 2011, has cautioned subsidiaries already on the 14% 12.5% 14.1% 11% companies also must undertake some gamification, with social and peer-to- menu are rotting fish and mouldy eration and Development] govern- that the loss of passporting Continent will likely see little 8.8% internal disruption. There are behind- peer networking and smart devices cabbage – you eat it because you ments,” says Colin Fitzgerald, head rights, which enable firms in impact, analysts warn that many Percentage of total customers the-scenes opportunities to harness all playing a part. While the basics un- Gen Re, a Berkshire Hathaway Com- have to,” says Doug Jones, chief of EMEA (Europe, Middle East and each EU member state to trade smaller players could be forced to technology in risk selection, admin- derpinning life insurance will remain pany, is one of the leading property/ executive of Charles Taylor Invest- Africa) institutional at Invesco. anywhere in the bloc without the relocate if the UK fails to secure GLOBAL NORTH EUROPE LATIN DEVELOPED DEVELOPING istration and claims processes to the in place for many years to come, how casualty and life/health reinsurers ment Management. “The big story within fixed income need for additional local licences, access to the EU single market in AMERICA AMERICA ASIA-PACIFIC ASIA-PACIFIC benefit of customers. people access it, the incentives it in the world, with a global network “Low returns on assets mean in- is the shunning of global govern- could have a big impact. a “hard” exit. Companies are automating repeti- provides and its cost will all be shaped of branch and subsidiary offices in surers have to focus more on their ment debt and the search for alter- Source: Capgemini Voice of the Customer Survey, Capgemini Financial Services analysis 2015 tive administrative tasks as quickly as by technology. It’s not a one-off pro- key reinsurance markets underwriting. They cannot rely on natives within core fixed income. 18 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR 12 / 10 / 2016 raconteur.net FUTURE OF INSURANCE 19

Blockchain POTENTIAL USES FOR BLOCKCHAIN IN INSURANCE

CONTACT LIFECYCLE KNOW YOUR CUSTOMER/ adoption will DOCUMENTATION ANTI-MONEY LAUNDERING CLAIMS MANAGEMENT INTER-FIRM ACCOUNTING

PROOF OF INSURANCE EXCESS OF LOSS strengthen REINSURANCE MULTINATIONAL ENTITY POLICIES the links in Source: Z/Yen/PwC 2016

pliance and efficiency costs have “Smart contracts on blockchain insurance... been predicted by researchers from technology could work specifically Goldman Sachs, Banco Santander around smaller value contracts; let’s and Barclays. The PwC-Z/Yen re- say you want to insure your phone Distributed ledger technology, known port echoes findings by both KPMG for a day or you don’t drive your car and auditors Deloitte that collab- very often so every time once a week as blockchain, could have the greatest oration, trial and experimenta- you use it you just insure your car for tion is vital for today’s wholesale that one trip,” he says. impact in the insurance sector once it insurers. Firms working together It is from this smaller starting to implement blockchain technol- point that the more complex us- is embraced by the major players ogy will reap the benefits, they es-cases will appear, Mr Halford- say, as their interactions become Thompson believes. SFIO CRACHO/ShutterstockSFIO more efficient. “In the asset trading side in insur- Despite the hype, it took more ance, we are seeing activity, in buy- than 12 months from the first ing and selling insurance contracts, names in banking to announce liabilities and so on,” he adds. “You BLOCKCHAIN Mr Hacker says the big question be- partnerships for can have smaller MARK TAYLOR ing asked in boardrooms is whether a Since 2014 AXA, Generali, Allianz, fore provide faster, more efficient, and tored in due to having streamlined a similar move by insurance con- company can afford not to invest and Lloyds of London, Mutual Insur- more accurate placements and claims and readily available records of any insurance players. tracts managed by in his view there is only one answer. ance and MetLife have also poured settlement, cutting expenses by 15 to individual logged. Such efficiencies Formerly at McK- smart contracts istorically slow to em- “The industry is built around more millions into blockchain research, 20 per cent, they say. can wipe billions off overheads, con- insey before join- Automation and and then the ability brace change, insurance centralised databases, big and fat determined to strengthen ties with “Because the record is fundamentally sultants at KPMG calculate. ing AIG, Mr Hirst’s smart contracts is to actually transfer is rapidly emerging databases, and blockchain is going consumers, regulators and each oth- public, it eliminates huge opportunities Despite his caution, Mr Hirst be- enthusiasm is certainly one area ownership of those Has the sector in which to the heart of this very inefficient, er as they seek to stamp out errors for corrupt or criminal behaviour,” says lieves big changes will come in waves, tempered by his I think we’ll see contracts, and so blockchain technology could have costly approach and promising enor- and improve efficiency. Mr Hirst. “It’s not like someone in a closed starting with greater levels of shared, experience and he you start to im- the most profound, transformation- mous change,” he says. PwC gives the example of claims re- room can change a record; the record private information between reinsur- believes it could be blockchain have a agine a powerful al and disruptive effect. For consumers, it could merely be corded on a blockchain validated by is public and that is potentially trans- ers to help consumers save time. at least a decade or big impact pattern emerging The revolutionary concept block- a time-saving exercise of not having the network, with only the valid being formative.” “A consumer wants to file private more before so there over time.” chain offers is at heart a simple to repeatedly enter details with a va- paid out. A blockchain would refuse An estimated 5 to 10 per cent of all information, but not have to do so 15 many fragmented In September, one method of recording and sharing riety of insurers. For actuaries, it of- multiple claims for the same incident, claims are fraudulent and, according times with 15 different companies,” interests are brought together. of Japan’s largest property insurers data. The distributed ledger tech- fers an indelible record of anything knowing what had already been acti- to the Federal Bureau of Investiga- he says. “They want to authenticate The second wave, the next great Sompo Japan Nipponkoa Holdings nology is a basic database updated they provide cover for; all traces of vated, and the smart contract would tions, this costs US non-health insur- themselves and log data on their car promise of the immutable distrib- announced development of a block- and approved by consensus of a the history of anything from land to pay out only on specific conditions ers alone more than $40 billion a year. driving, but not have to retype it, so uted ledger, lies in recording an un- chain platform for derivatives. It is public network. For insurance com- rare works of art to music. being met. An insurance contract Savings of expensive compliance it’s about doing the work once, shar- broken chain of events, he says. This working on a system for buying and panies this is a time-stamped and The proof of concept behind block- written on a blockchain would there- and sanctions checks can also be facing many times.” could be establishing the ownership selling insurance policies related to Investing for insurers is a whole tamper-proof historical record. chain gives an industry built on trust He believes the tipping point for of land or precious stones, for exam- natural disasters. A report in August by London evidence of data so accurate it threat- this use-case is near. “If one party ple. Mr Hirst believes this is a long- Last year, French insurance giant different breed of cat. think-tank Z/Yen and accounting ens to turn the sector on its head. And DEFINING BLOCKCHAIN creates the environment for that to term ideal for the insurance sector, Allianz unveiled a prototype plat- giant PwC put cost-savings for rein- yet with all this hype, perhaps so typ- happen, if two or three insurers will but one that could resonate much form for the exchange of catastro- MUTUAL DISTRIBUTED LEDGER surers who embrace blockchain at ical of insurance, there is scepticism. buy in and adopt that format to make further than the industry itself. phe bonds. At the time, Allianz said Conning focuses on investment solutions that meet $5-10 billion. The “simple” solution “It’s a very exciting technology that their customers lives easier, it could “If I have a chain-of-land sale it was studying the potential to in- suddenly has a huge prize dangling has this tantalising promise of being take off quite quickly,” he says. and the first time someone says crease the “reliability, controllabili- the specific needs of the insurance industry. before anyone who cracks it. able to do something dramatic; it has Blockchain collaborations are be- they aren’t recording on block- ty and speed” of such trades using a “The insurance industry cannot so much promise, but I haven’t seen coming commonplace. The finance chain, my history is no longer blockchain-based system. afford to lose out on an unprece- anyone come along and show us the sector, driven by Wall Street, knows 100 per cent liable,” he says. “But Professor Michael Mainelli, chair- Conning develops customised solutions for insurers designed to dented opportunity,” says Peter Holy Grail yet,” says Ashley Hirst Blockchains are Blockchains are inherently Blockchains are immutable, this and for the last 18 months block- there are countries in the world man and co-founder of Z/Yen, has Hacker, chief innovation officer chief operating officer and chief un- shared across multi-locational data so once a transaction is chain has been the hottest ticket in still building land registry sys- spent 20 years building hundreds optimise risk-adjusted returns whilst incorporating a broad range at London wholesale reinsurance derwriting officer at AIG in London. organisations, structures and any user can written it cannot be erased finance. There is hardly a major tems today and if they decide from of bespoke distributed ledgers for broker Ed. “Both in respect of the AIG’s European arm set up a sci- owned equally by keep his or her own copy, and, along with multiple bank not part of a consortium or an- day one to have a mandate on how the public and private sectors. Hav- of client-specific constraints including risk-based capital treatment, all and dominated thus providing resilience copies, this means that potential process optimisation and ence team, guided by Mr Hirst, to by no one and robustness the ledger’s integrity can nouncing partnerships and testing it will work, built on a blockchain, ing worked for two decades on what the structuring of new solutions, study how new technologies such as easily be proven with other institutions. that could be phenomenal.” is suddenly a zeitgeist, Professor income and earnings volatility, liquidity and taxes. Our deep this will lead to material savings for blockchain could improve the qual- Savings in the billions in back- This data accuracy ensures block- Mainelli offers a vision quite un- understanding of the needs of insurance companies, our expertise in the whole industry.” ity of data-driven decision-making. Source: Z/Yen/PwC 2016 end, know your customer, com- chain can be used to deliver smart like any other, something he saw contracts, programs which self-ex- coming back in 1995 when the first a wide range of asset classes, and extensive experience in strategic ecute when predefined conditions blockchain rolled off the Z/Yen pro- are met, according to Guy Hal- duction line. asset allocation help us to provide innovative strategies for our clients. ford-Thompson, chief executive of “It’s exciting, but not in the areas CONNect with Conning at [email protected] programmers Blockchain Tech Ltd. many people think,” he says. “For “Automation and smart contracts me wholesale insurance is some- Providing legal services with a fresh is certainly one area I think we’ll thing that could be profoundly see blockchain have a big impact,” changed, along with the insurance attitude and commercial approach he says. “I think it may take time of contract law. It’s data that should to get there, but insurance is one be in the public domain. You could for the insurance industry. of those industries that will see the almost see a situation in future most progress, the most change, where if you don’t put your records Over 150 clients and £1bn worth of deals. We are the firm of choice when it does adopt.” on a blockchain, they’re inadmissi- The Insurance Law Firm He sees a naturally hesitant indus- ble in a court of law.” for intermediated insurance businesses. try rapidly heating up, but believes the most radical change will initial- Share this article online via ly come in smaller value areas which raconteur.net +44 (0) 203 553 4888 ec3legal.com [email protected] @EC3Legal then increase over time. Learn more at conning.com Boston | Cologne | Hartford | Hong Kong | London | New York | Tokyo 18 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR RACONTEUR 12 / 10 / 2016 raconteur.net FUTURE OF INSURANCE 19

Blockchain POTENTIAL USES FOR BLOCKCHAIN IN INSURANCE

CONTACT LIFECYCLE KNOW YOUR CUSTOMER/ adoption will DOCUMENTATION ANTI-MONEY LAUNDERING CLAIMS MANAGEMENT INTER-FIRM ACCOUNTING

PROOF OF INSURANCE EXCESS OF LOSS strengthen REINSURANCE MULTINATIONAL ENTITY POLICIES the links in Source: Z/Yen/PwC 2016

pliance and efficiency costs have “Smart contracts on blockchain insurance... been predicted by researchers from technology could work specifically Goldman Sachs, Banco Santander around smaller value contracts; let’s and Barclays. The PwC-Z/Yen re- say you want to insure your phone Distributed ledger technology, known port echoes findings by both KPMG for a day or you don’t drive your car and auditors Deloitte that collab- very often so every time once a week as blockchain, could have the greatest oration, trial and experimenta- you use it you just insure your car for tion is vital for today’s wholesale that one trip,” he says. impact in the insurance sector once it insurers. Firms working together It is from this smaller starting to implement blockchain technol- point that the more complex us- is embraced by the major players ogy will reap the benefits, they es-cases will appear, Mr Halford- say, as their interactions become Thompson believes. SFIO CRACHO/ShutterstockSFIO more efficient. “In the asset trading side in insur- Despite the hype, it took more ance, we are seeing activity, in buy- than 12 months from the first ing and selling insurance contracts, names in banking to announce liabilities and so on,” he adds. “You BLOCKCHAIN Mr Hacker says the big question be- partnerships for can have smaller MARK TAYLOR ing asked in boardrooms is whether a Since 2014 AXA, Generali, Allianz, fore provide faster, more efficient, and tored in due to having streamlined a similar move by insurance con- company can afford not to invest and Lloyds of London, Mutual Insur- more accurate placements and claims and readily available records of any insurance players. tracts managed by in his view there is only one answer. ance and MetLife have also poured settlement, cutting expenses by 15 to individual logged. Such efficiencies Formerly at McK- smart contracts istorically slow to em- “The industry is built around more millions into blockchain research, 20 per cent, they say. can wipe billions off overheads, con- insey before join- Automation and and then the ability brace change, insurance centralised databases, big and fat determined to strengthen ties with “Because the record is fundamentally sultants at KPMG calculate. ing AIG, Mr Hirst’s smart contracts is to actually transfer is rapidly emerging databases, and blockchain is going consumers, regulators and each oth- public, it eliminates huge opportunities Despite his caution, Mr Hirst be- enthusiasm is certainly one area ownership of those Has the sector in which to the heart of this very inefficient, er as they seek to stamp out errors for corrupt or criminal behaviour,” says lieves big changes will come in waves, tempered by his I think we’ll see contracts, and so blockchain technology could have costly approach and promising enor- and improve efficiency. Mr Hirst. “It’s not like someone in a closed starting with greater levels of shared, experience and he you start to im- the most profound, transformation- mous change,” he says. PwC gives the example of claims re- room can change a record; the record private information between reinsur- believes it could be blockchain have a agine a powerful al and disruptive effect. For consumers, it could merely be corded on a blockchain validated by is public and that is potentially trans- ers to help consumers save time. at least a decade or big impact pattern emerging The revolutionary concept block- a time-saving exercise of not having the network, with only the valid being formative.” “A consumer wants to file private more before so there over time.” chain offers is at heart a simple to repeatedly enter details with a va- paid out. A blockchain would refuse An estimated 5 to 10 per cent of all information, but not have to do so 15 many fragmented In September, one method of recording and sharing riety of insurers. For actuaries, it of- multiple claims for the same incident, claims are fraudulent and, according times with 15 different companies,” interests are brought together. of Japan’s largest property insurers data. The distributed ledger tech- fers an indelible record of anything knowing what had already been acti- to the Federal Bureau of Investiga- he says. “They want to authenticate The second wave, the next great Sompo Japan Nipponkoa Holdings nology is a basic database updated they provide cover for; all traces of vated, and the smart contract would tions, this costs US non-health insur- themselves and log data on their car promise of the immutable distrib- announced development of a block- and approved by consensus of a the history of anything from land to pay out only on specific conditions ers alone more than $40 billion a year. driving, but not have to retype it, so uted ledger, lies in recording an un- chain platform for derivatives. It is public network. For insurance com- rare works of art to music. being met. An insurance contract Savings of expensive compliance it’s about doing the work once, shar- broken chain of events, he says. This working on a system for buying and panies this is a time-stamped and The proof of concept behind block- written on a blockchain would there- and sanctions checks can also be facing many times.” could be establishing the ownership selling insurance policies related to Investing for insurers is a whole tamper-proof historical record. chain gives an industry built on trust He believes the tipping point for of land or precious stones, for exam- natural disasters. A report in August by London evidence of data so accurate it threat- this use-case is near. “If one party ple. Mr Hirst believes this is a long- Last year, French insurance giant different breed of cat. think-tank Z/Yen and accounting ens to turn the sector on its head. And DEFINING BLOCKCHAIN creates the environment for that to term ideal for the insurance sector, Allianz unveiled a prototype plat- giant PwC put cost-savings for rein- yet with all this hype, perhaps so typ- happen, if two or three insurers will but one that could resonate much form for the exchange of catastro- MUTUAL DISTRIBUTED LEDGER surers who embrace blockchain at ical of insurance, there is scepticism. buy in and adopt that format to make further than the industry itself. phe bonds. At the time, Allianz said Conning focuses on investment solutions that meet $5-10 billion. The “simple” solution “It’s a very exciting technology that their customers lives easier, it could “If I have a chain-of-land sale it was studying the potential to in- suddenly has a huge prize dangling has this tantalising promise of being take off quite quickly,” he says. and the first time someone says crease the “reliability, controllabili- the specific needs of the insurance industry. before anyone who cracks it. able to do something dramatic; it has Blockchain collaborations are be- they aren’t recording on block- ty and speed” of such trades using a “The insurance industry cannot so much promise, but I haven’t seen coming commonplace. The finance chain, my history is no longer blockchain-based system. afford to lose out on an unprece- anyone come along and show us the sector, driven by Wall Street, knows 100 per cent liable,” he says. “But Professor Michael Mainelli, chair- Conning develops customised solutions for insurers designed to dented opportunity,” says Peter Holy Grail yet,” says Ashley Hirst Blockchains are Blockchains are inherently Blockchains are immutable, this and for the last 18 months block- there are countries in the world man and co-founder of Z/Yen, has Hacker, chief innovation officer chief operating officer and chief un- shared across multi-locational data so once a transaction is chain has been the hottest ticket in still building land registry sys- spent 20 years building hundreds optimise risk-adjusted returns whilst incorporating a broad range at London wholesale reinsurance derwriting officer at AIG in London. organisations, structures and any user can written it cannot be erased finance. There is hardly a major tems today and if they decide from of bespoke distributed ledgers for broker Ed. “Both in respect of the AIG’s European arm set up a sci- owned equally by keep his or her own copy, and, along with multiple bank not part of a consortium or an- day one to have a mandate on how the public and private sectors. Hav- of client-specific constraints including risk-based capital treatment, all and dominated thus providing resilience copies, this means that potential process optimisation and ence team, guided by Mr Hirst, to by no one and robustness the ledger’s integrity can nouncing partnerships and testing it will work, built on a blockchain, ing worked for two decades on what the structuring of new solutions, study how new technologies such as easily be proven with other institutions. that could be phenomenal.” is suddenly a zeitgeist, Professor income and earnings volatility, liquidity and taxes. Our deep this will lead to material savings for blockchain could improve the qual- Savings in the billions in back- This data accuracy ensures block- Mainelli offers a vision quite un- understanding of the needs of insurance companies, our expertise in the whole industry.” ity of data-driven decision-making. Source: Z/Yen/PwC 2016 end, know your customer, com- chain can be used to deliver smart like any other, something he saw contracts, programs which self-ex- coming back in 1995 when the first a wide range of asset classes, and extensive experience in strategic ecute when predefined conditions blockchain rolled off the Z/Yen pro- are met, according to Guy Hal- duction line. asset allocation help us to provide innovative strategies for our clients. ford-Thompson, chief executive of “It’s exciting, but not in the areas CONNect with Conning at [email protected] programmers Blockchain Tech Ltd. many people think,” he says. “For “Automation and smart contracts me wholesale insurance is some- Providing legal services with a fresh is certainly one area I think we’ll thing that could be profoundly see blockchain have a big impact,” changed, along with the insurance attitude and commercial approach he says. “I think it may take time of contract law. It’s data that should to get there, but insurance is one be in the public domain. You could for the insurance industry. of those industries that will see the almost see a situation in future most progress, the most change, where if you don’t put your records Over 150 clients and £1bn worth of deals. We are the firm of choice when it does adopt.” on a blockchain, they’re inadmissi- The Insurance Law Firm He sees a naturally hesitant indus- ble in a court of law.” for intermediated insurance businesses. try rapidly heating up, but believes the most radical change will initial- Share this article online via ly come in smaller value areas which raconteur.net +44 (0) 203 553 4888 ec3legal.com [email protected] @EC3Legal then increase over time. Learn more at conning.com Boston | Cologne | Hartford | Hong Kong | London | New York | Tokyo 20 FUTURE OF INSURANCE raconteur.net 12 / 10 / 2016 RACONTEUR

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