ONE is proud to be part of the global insurtech landscape, helping to shape and build the future of insurance using technology and data in ways that truly innovate and add value to people’s lives all over the world.
However, we are not alone in this, there are many excellent insurtech companies and innovators who share our vision and we believe it is important to promote external ideas, opinions and experiences on our journey to changing insurance for the better.
With the above in mind, we sat down with Robin Kiera and picked his brains on his thoughts on the future of insurance.
Dr. Robin Kiera: One of Germanys Top insurtech influencers and insurance industry experts. Speaker, author and blogger. Over 12 years, Robin gained experience in leading large transformation projects at corporations and helping startups to scale and optimize structures. He worked at companies such as Allianz and Goodgame Studios.
The future of insurance in just 3 words?
Digital, customer-centric, ecosystem.
What do you think of the current state of the insurance industry?
At a first glance, the industry is stronger than ever. We see traditional insurers with record breaking revenues – despite low interest rates, regulation and digitalisation. But this first impression is dangerously misleading. Having worked at several incumbent insurers, I saw how dramatic the internal situation, (especially technological, organisational and cultural), of a lot of companies is.
Let’s have a closer look at the German market: Here most insurers had impressive success over the last decades with a strict focus on physical point of sales and a network of sales agents and brokers. IT was not at the core of the business model but considered a service department and cost centre. In an era of industrialisation and not-cross linked data processing, this led to great success. In the era of changing customer expectations, rising digital industries and cross-linked computer power with unprecedented possibilities to provide the customer with exciting products and services, insurers need to modernise technologically, organisationally and culturally – radically!
The rise of insurtech companies shows clearly that the traditional players seem not to satisfy the current market demands. This rise of new players shows that there is a vacuum. Maybe we have not seen a big disruption in the market yet, but in-depth analysis and the reaction of some insurers show, that the market is beginning to change.
To sum up: I think the industry has not been so exciting for a long time and we will see drastic changes – and improvements for the customer and therefore society.
What are your thoughts on the new greenfield fully licensed full stack insurers?
We see now the second wave of insurtechs companies and the next phase in the insurtech evolution. First some bold founders and investors took on the insurance industry by focusing on a small parts of the value chain or a niche. Now after it has been proven that there is a vacuum in the market we see more and more fully licensed full stack insurers.
What are your thoughts on the new insurers using an MGA model?
We have seen some exciting insurtechs using the MGA mode. I believe there is no right or wrong here. All approaches will contribute to improving the industry. In the long run though, as soon as insurtechs using a MGA model gain enough traction, I bet most will pass along the value then and become fully licensed insurers or buy traditional companies as shell insurers.
For insurers it will be a long-term survival strategy.
Regarding the large established incumbent insurers, what do they have to do to stay relevant over the next 10 years?
Traditional insurers, in almost all countries, still possess 99% of the market. They are in a very strong position, because new entrants need to acquire customers from scratch.
I sometimes have the impression that this undeniable strength misleads senior insurance management to the conclusion that the storm of digitalisation and insurtechs will pass, as so much has passed the industry in the last 100 years.
But this change is different from others before. We see a radical change in customer behaviour and radical changes in almost all other industries. In the end, insurers, as most traditional companies, have two options: One, radically digitalise and become tech companies much like Google, Facebook or Amazon.
Two, they can choose to wait and see and be insignificant in the midterm, because sooner or later other companies will provide better products and services that todays customers demand.
To avoid downfall, traditional insurers need to: Radically put tech in the core of the company – and provide customers with the (mostly digital) products and services they desire and boost productivity and automatisation internally in order to stay competitive.
Radically introduce agile methods and processes into the company in order to become faster.
Radically change the traditional top down and zero tolerance culture into an open fail-fast, fail-often, fail-cheap culture.
Radically enable the workforce: educate the existing workforce where possible rejuvenate the workforce by massively hiring digital natives, massively replace large parts of management (including board members) with agile leaders with experience in the digital industry.
To be honest. I believe incumbent insurers possess a brilliant starting point. If they could quickly combine their centuries of experience of risk management, terabytes of data and professionalism, with a radical technological, organisational and cultural transformation into digital tech companies, they could fend off insurtechs and tech companies.
From a customer’s perspective, what are the big changes coming to insurance in the next 10 years?
Transparency of products and services will dramatically rise so that the customer can make better choices. Companies that don’t add value to the market but live off of in-transparency will disappear. Profitability will increase again and customers will experience lower prices.
Insurance and banks will provide customers with products and services that enable regular people to use tools – such as financial analysis, automated financial actions and financial planning – that nowadays only corporations or family offices can use. Customers will gain insights into their personal risk and financial situation easier and maybe finance and insurance will stop being necessary evils but become fun topics at the dinner table again.
How do you see the usage and collection of data impacting underwriting & risk over the next 10 years?
Daniel Schreiber (CEO of Lemonade Inc.) just stated at the Silicon Valley Insurtech Accelerator Summit that 6 months after launch they possess less accurate risk and claim models than traditional insurers. He pointed out that within 12 months they will have better ones than most players of the 100 year+ old industry. He underlined how they use data analysis and big data in underwriting, risk and claim management.
I have the feeling that the future is already here. Already, insurtechs are able to do things considered impossible in the past. In 10 years time we will see underwriting processes at the speed of light, unimaginable risk assessment and an implosion of fraud in claims. All of this if regulators don’t over-regulate.
How much of a role do regulatory authorities have to play in the development & innovation of the insurance industry?
Germany has one of the most strict industry regulatory agency’s on the planet: The Bundesanstalt für Finanzdienstleistungsaufsicht (nickname: Bafin).
On the one hand the Bafin seems to be very open to new players who promise better products and services to the customer. Let’s not forget, that we had massive scandals in the last decades and thousands of formal complaints of costumers to the Bafin each year – a large part justified. Therefore the Bafin and agencies in other countries will have an interest in giving new players a chance, if it benefits the customer.
On the other hand, it’s always possible that individual regulators hinder certain developments, but PSD2 in Europe has shown that regulators can also push the door open for innovation. Who would have thought that politics would force the powerful banks to open their systems to anyone a few years ago?
Therefore, maybe and hopefully, the regulatory authorities will support progress in the interest of the customer as shown in the financial sector.
Customers want personalised protection, but this individual focused risk analysis & pricing could be seen to be at odds with the traditional actuary measurement of risk in society. How do you feel this issue will be addressed over the next 5-10 years?
Mortality tables, for example, have been the base of life insurances for decades. In times of big data and predictive data analysis I can’t understand why talented experts such as actuaries inside traditional insurers have not fundamentally changed the way they measure risk already.
The application of advanced digital big data analysis, personalised protection and individualised products and prices could be one of the starting points for a disruption in the industry. To put this into reality is, due to the complexity of the market, is very hard. Nevertheless, the first insurtech, tech company or first moving incumbent that cracks the code to better analyse and predict risk and individualise products, will disrupt the market.
My final point: Insurance and finance have never been so exciting and full of opportunities. Let’s seize the moment.