The Insurance Industry has a long history. It is known for its size and stability. As far as only the US industry is concerned, its net premiums written reached $1.2 trillion in 2015, and at present, it employs over 2.5 million people.
Despite of its size and stability, the disruption is on the horizon now. The industry is changing much faster than what we have experienced ever. Globally, over 2.5 billion dollars have been invested in 74 InsureTech deals in 2015, and similar trend continues in 2016 as well. The Insurance companies are investing through their corporate VCs (Venture Capital), as well as through Innovation/Digital groups. According to IDC spending guide, the fastest IoT spending growth is forecasted to be in Insurance (31.8% CAGR). Just recently, Hartford Steam Boiler (HSB) announced that their pilot program with Church Mutual would prevent losses by leveraging IoT sensor technology. Some carriers such as Rural Community Insurance Services (RCIS), an agriculture insurance carrier, is accepting sensor data to meet compliance and reporting requirements.
With all this happening around us, let’s see what the connected insurance world will look like after 10 years from now?
Distribution Mix: The internet will take over distribution from the agents and MGAs. Insurance industry’s ‘Amazon’ may rise over the competitors, and will dominate the market. Most insurance policies will get embedded in the ‘products’ itself. The insurance carriers will be at the backend of most distribution channels. The agents, however, will not vanish altogether. The complex, high premium coverages will still be handled by agents.
Robot Advisors: Siri or Alexa will advise you on your insurance coverages. Progressive’s Flo and Geico’s gecko will be the robots in your App, who will help you select your coverages.
Product-Services Mix: As millenials start buying homes and start their businesses, more and more products will be technology and data-driven. At the higher end of the markets, such as high net worth, business insurance, insurance companies will play a role of ‘peace of mind’ service provider, and not just indemnifier. Insurance companies will provide inspection, cyber security, and loss prevention services.
On-demand Coverage: As the ‘sharing economy’ grows, most coverage will tend to be on-demand and per usage.
Zero questions on submission: You just click a button to start your coverage. No questions asked. The insurance companies will have all your data from the ‘googles’ of the world.
Smart Contracts: Your insurance policy will be a smart contract in blockchain, and will be automatically enforced. No more hiring a lawyer and fighting insurance companies for claims.
Zero touch Claims: You don’t need to apply for claims in most cases. Your claim will be automatically processed after the loss event.
What do you think of these predictions? Many are predicting demise of the agents, but when a related question was asked to the industry veteran, Brian Duperreault, CEO, Hamilton Insurance Group, at InsureTech Connect Conference, he made a very interesting comment – “Do not underestimate the tenacity of the agents”. They exist because customers want them. Many customers may prefer ‘Trust’ and ‘Advise’, over ‘Price’ and ‘Convenience’. May be these trends will force carriers and agents be more tech-savvy and efficient, and everybody will co-exist within a connected ecosystem.