Insurance digitalization an opportunity, not a threat
While there’s plenty of hype and money behind the insurtech revolution, carriers are enthusiastic about digital transformation and won’t be caught by surprise as their industry evolves.
That’s how David Connolly, leader of the global insurance digital practice for EY, sees the state of the sector. He says that there are many areas that insurers can begin the digitalization journey, but all companies are working hard toward that goal.
“You can do this incrementally or you can do it aggressively,” he says. “If you like what you see and you think there’s a lot of opportunities here to transform, but your legacy environment won’t allow it, there is a series of options.”
Though there are a number of insurtechs targeting different segments of the industry for disruption, most of them are not planning to go down the road of becoming a full-fledged insurer, Connolly adds. That means the threat that insurers could be pushed out is low, and it allows carriers to identify partners or acquisition targets in order to bring innovations into their enterprise.
“There’s so much venture being pushed into the sector, creating lots of innovation, but the insurance startups that disrupt will get acquired,” Connolly says. “We’re already seeing the more progressive innovative startups say, ‘I can make more money if I license out my product.’ There’s no single startup that I think is positioned with a product set that is going to run over the incumbents.”
In fact, a willing organization that has an open mind about digitalization can replicate many of the innovations that insurtechs are churning out, Connolly says, as long as they stay within intellectual property laws. With the right technology investments and sufficient resources things like policies of unusual durations or coverage for new kinds of risks is something that existing carriers can implement quickly.
“It’s all good inspiration that will get absorbed by the big companies, and the ones that jump on will get even bigger,” he says.
Areas of focus
Connolly recently authored a paper for EY titled “Digital Transformation in Insurance.” The paper lays out several pathways insurance companies can take on to get to the next level of digitalization, with a focus on seven technologies in particular:
- Big data and analytics
- Internet of things
- Voice biometrics and analysis
- Drones and satellites
Each technology is evaluated for benefits in six areas:
- Speed to market
- Customer experience management
- Cost reduction
- Sales productivity
- Underwriting efficiency
- Claims efficiency
Three of the technologies, including omnichannel and big data and analytics, were identified as being beneficial in all six key areas. The third was blockchain, which is mature from a technology perspective, Connolly says, but insurers are still looking for applications.
“Blockchain is the hammer that people are running around looking to hit something with,” he explains, but the potential is high: “Parties that would not likely trust each other [can work together because] blockchain enables that trust.”