The insurance industry is well known for its cautious approach to risk-taking in general. But that approach needs to change, and quickly, industry professionals were told on the opening day of the Entrepreneurial Insurance Symposium Sept. 6 in Dallas.
“InsurTech is the new dot-com,” said Richard Kerr, chairman and CEO of MarketScout and founder of the symposium. “Like the dot-com era, we have a fear of being left behind. In my company, we’re looking at technology, but carefully.” He urged the audience to investigate technology and be prepared to change sooner rather than later or risk being left behind like traditional stock brokers or Blockbuster Video stores.
Be open to technology
V.J. Dowling, the managing partner of Dowling & Partners Securities, said, “We don’t believe that P&C insurance is going to be Uber-ized, but don’t get complacent.” He believes that the insurance technology (InsurTech) era is different than the dot-com era because technology itself is different. The current crop of insurance company CEOs are much younger — in their 40s and 50s — and more open to adopting technology.
Dowling reviewed the history of the computer and observed that “Modern Bermuda wouldn’t be here without the microcomputer.” Now, he says, cloud computing allows smart people to build an insurance company from scratch.”
Technology will allow future claims to be all triage as the “routine” claims will be processed automatically, Dowling said. Insurance companies have to ask themselves “How do I position myself in this new world?” to avoid being left out or left behind.
Innovate inside the company
Ted Stuckey, head of the Global Innovation Lab for QBE Insurance, explained that true innovation has to come from within the company, and it requires skills, capacity and resources. He advised the audience to start by learning from colleagues about the problems that have to be solved. Often, technology professionals present a solution that doesn’t really fit.
Stuckey also said that it’s important to ask how disruption will affect us before you can determine the direction to take. He offered these tips on how to be effective as an innovation partner within your company:
- Be an expert.
- Say no.
- Fuel, not funnel.
- Spending money isn’t innovative.
Presenter Kate Sampson has gone from her role as Lyft's broker at Marsh to Lyft's vice president of risk solutions. (Photo: AP/Josh Edelman)
Look for a ‘Lyft’
In discussing “The Future of Insurance in the Age of Disruption,” Lyft’s vice president of risk solutions Kate Sampson explained that she started as the company’s outside insurance broker while she was at Marsh. Sampson and Lyft founders Logan Green and John Zimmer expected that insurance coverage would start with surplus lines insurers, then personal auto insurers would develop products for Lyft’s drivers and commercial insurers would develop products for the sharing economy.
Currently, Sampson said, Lyft is in more than 350 cities, but the sharing economy remains challenging for commercial insurance because companies don’t have years of data to use to price risk. She would like the drivers to be able to buy endorsements to their personal auto policies, but these endorsements generally aren’t available because of regulation.
Sampson pointed out that Lyft and Uber together represent 0.2% of the three trillion miles driven in the U.S. annually. As autonomous vehicles become more common, she sees car travel evolving to “Transportation as a Service.” She predicted that drivers will rent the vehicle they need when they need it, for example, an autonomous SUV for a weekend trip, and pay for it on a mileage subscription plan that includes the appropriate insurance.
Innovation is ‘oxygen’
Jill Beggs, head of new strategic markets for Munich Reinsurance America, Inc., and Sophia C. Yen, head of U.S. insurance strategy and operations at KPMG, participated in a panel moderated by Richard Kerr, titled “Innovators Unplugged.”
When asked about bots, Yen said “Don’t be afraid of bots. Use them to do something repetitive, and save your employees for tasks that require human brains.”
Beggs agreed, explaining that “What can’t be automated will become even more valuable.” Human intervention is still needed, she said, primarily in the claims process.
“Innovation goes far beyond a new product,” Beggs said. Companies need a new mindset and need to look at data differently.
“Be bold,” Yen said, “Don’t be afraid to fail.” In her company, she asks her team “What do we need to do to wreck this? How do we disrupt the status quo?”
Yen added, “Don’t be afraid to cannibalize yourself. It’s the best way to make new things.”
Beggs urged the audience to think differently and talk to people in other industries. “Avoid the echo effect,” she said.
“Innovation is oxygen,” Yen concluded. “It’s the minor tweaks to something you do every day that makes things better.”
Sophia Yen of KPMG and Barbara Bufkin of Assurant in the audience at the Entrepreneurial Insurance Symposium 2017. (Photo: Photography by Eileen)
Views of the sharing economy
Barbara Bufkin, executive head of business development for Assurant, moderated a panel discussion on the sharing economy, focused on consumption-based insurance and its components including technology and sustainability.
Gabriel Fox, vice president of Hamilton USA, Bernie Horovitz, CEO of Y-Risk, Chris Moore, senior liability writer for Apollo Syndicate Management, and John Peters, chief underwriting officer for Lemonade, discussed the challenges facing the sharing economy and how insurers can manage the risks.
Moore observed that very few of the companies that have emerged in the sharing economy have dedicated, experienced risk managers. Instead, they’re trying to build a new culture of trust.
Horovitz noted that millennials don’t accumulate things, rather “They want to gather up experiences, and they live in the moment.” That led Horovitz to the idea that “I want to insure the moment.”
“There’s a lot of distress between policyholders and insurance companies,” Peters said. “No one reads their policy and if they do, they can’t understand it.” Lemonade is trying to make insurance more understandable and accessible to customers, and like other online companies, they use a chat bot. “Ours is named Maya and she has a personality,” he explained, “She’s so popular that people hit on her, and ask her for dates.”
Turning more serious, Peters said that he has found regulators to be “speed bumps” not roadblocks to expanding Lemonade across the country. Once regulators understand what Lemonade is all about, they’ve been understanding.
Horovitz pointed out that one obstacle insurance innovators face is that the infrastructure hasn’t caught up with regulators. In one state, a client couldn’t register his car because the motor vehicle department hadn’t listed the company in its database of approved insurers.
“The sharing economy is a human-based market,” Fox said. It’s important to get all parties together, he added, but it takes more time than expected.
Flying cars and automation
Bill Hartnett, president of Hartnett Advisors, wrapped up Day 1 by addressing the topic of “Flying Cars, Automation & What It All Means.” He sees autonomous vehicles coming soon, and it will change personal auto insurance dramatically. Personal Auto will diminish as risk is transferred to motor vehicle manufacturers based on products liability. “Most people in the industry who are writing Personal Auto aren’t planning for it,” he added.
Turning to innovation in the trucking industry, Hartnett said that “Uber is going after the logistics industry with Uber Freight.” Between Uber’s business model and autonomous trucks, it’s not just truck drivers whose jobs are going away. “Have you thought about the impact on workers’ comp?” he asked. “Premiums will be down as entire categories of jobs will disappear.”
Hartnett concluded by saying that “All technologies feed on each other and blend together.” The years of data that the insurance industry has accumulated should be used for the customer’s benefit. That’s the best way to succeed.