Time for insurance to move into the future

Some things will change in the future – a good old-fashioned November flu will always remain the same.

As you peacefully convalesce the afternoon away, your trusty, diligent, reliable smart phone starts to put the pieces together. You left the office early, but there is no event in your calendar. Your wearable device registered little movement, high temperature. When you wake to make a cup of tea, your health app is waiting with a gentle message: “have you got the flu? can I recommend your favourite chicken soup?”

You press OK and your devices take over. The phone pings the fridge, the fridge checks the freezer, the freezer talks to the supermarket, the supermarket responds to the affirmative and voila. Around eight o’clock, you shuffle sniffling to the door where a friendly delivery guy hands you a bag with the ingredients for a weekend supply of your favourite chicken soup.

I can easily see myself in this future. The internet of things, wearable devices, big data, mobile communications – these are not in the realm of science fiction anymore and there are smart companies out there pulling the smart devices together into a smart future.

I believe that our industry can find a place in this future. In fact, I believe it must. As people digitise more of their lives, they also build trust with the technologies that makes their lives easier.

The recipe for success in the data and technology driven future will not be as simple as the magic chicken soup for a winter sniffle. On the one hand, the fact that we have great technology does not mean that we will automatically better understand the people who buy cover. However, it will help us to put the right offer in a place where they will be looking for it.

Insurance industry will need to find the knack of creating products that combine new media and new ways of using data

The insurance industry will also need to find the knack of creating products that combine new media and new ways of using data.

This may not necessarily be as invasive as the health app of the future that pings you to ask about ordering chicken soup – but it may very well be showing customers the value of healthy efforts to their insurance policy.

Then there is the way products reach customers. Currently, we are very good at serving the affluent part of the market, especially for those that can afford to pay the distribution costs as a fee, or wrapped into their premiums. I do not think the type of advisory services that serve the top of the market can serve the vast number of people out there who are in the middle market. The key areas for protection here will be providing access and increased operational efficiency, especially around underwriting.

In a market where we have been doing the same thing for a long time, we need to find ways to create agility and product creativity. The fact is that there are very large parts of the market that could be better protected – and who most likely would take out cover – if only we were making it easier for these customers to feel comfortable with the product.

Making use of data is one of the keys to making sure we are a part of this future. It can enable us to integrate cover into people’s lives, enabling awareness and choices. Here, I am not sure the industry can do it alone.

We will need strong creative partnerships. There is much more to be done in tapping expertise outside our own companies and industry. Many insurers turn to their reinsurers, with expect advice and expertise being sought beyond risk management and into areas of consumer behaviour.

One area that has the potential to drive the revolution is predictive modelling, which can ease the underwriting process and get customers on risk quickly. Behavioural economics can also play a role in improving the context in which people think about protection. Then of course, there is the area of digital consumer engagement, where we better inspire people to buy insurance and as a result, close protection gaps.

Being a first-mover in the insurance industry bears inherent risks. However, the value of getting it right, of being the first provider who can provide the right product as easy as chicken soup, will be enormous. The protection gap for mortality insurance in the UK alone is well over £2,000bn. That is a lot of business and a lot of new customers who can be brought within the insurance safety net.

It might be a bit far-fetched to expect people to trust their fridge for financial planning – but making sure we are on the wave as the technology moves forward will make it a lot more likely that future customers are still in the equation.

Paul Hately is global head of Swiss Re Protection partners and board member of iptiQ.