Technology in Insurance: Both Disruptor & Solution
At the 2017 Advisen Casualty Insights Conference, a panel discussed how new technology and the customer-driven revolution is shaping the insurance sector.
The panel included:
- Meredith Bullock – Senior Vice President, Berkshire Hathaway (moderator)
- Bob Reville – President and CEO, Praedicat
- Michael Ian Coles – Chairman and CEO, Cedent
- Shannon Totten – SVP Casualty Insurance Practice Leader Bermuda, Endurance
- Jim Keating – Founder, Chairman and CEO, Keating Companies
The insurance market has not been the quickest adopter of technology, but progress is being made. Personal lines are leading the way as ease of use is a big factor in customer satisfaction.
The casualty insurance market has a lot of old problems that could be addressed by technology. However, modeling does not work as well in the casualty marketplace compared to the property marketplace because the human behavior element of casualty is difficult to predict. Some of the biggest problems we have are definitional. The definition of “occurrence” varies by carrier. New exposures are constantly arising and we are challenged by this. Carriers are challenged to identify what are the true emerging risks and providing coverage, rather than responding with exclusions.
One area very ripe for innovation is the quote, bind and policy delivery process. Why can’t there be a single portal to input all data that all markets can access? Brokers are releasing their own solutions using portals, but there is no one in a position to push a global solution in this area.
There is potential for much more automation on the underwriting side as well. Currently, there is more data available than ever before, and carriers can use this data to make underwriting decisions. This could ultimately lead to a decrease in the need for underwriters.
The regulatory nature of the insurance industry impacts the ability to utilize new technologies. With insurance being regulated in the states, you have 50 different sets of regulators to work with to get new things improved. Some insuretech companies have run afoul with regulators because they were not in full compliance with various state regulations.
There is a lot of money being invested right now into insuretech companies who are focused on adding efficiency to insurance carrier processes. Not the customer experience, but the actual operations of the carriers. Some of this technology could be substantially disruptive. In fact, machine learning will be completing tasks previously performed by individuals in a fraction of the time. This disruption will impact both the claim side and underwriting side. We could see it in practice within the next three years.
The reinsurance industry is working on models to develop named peril coverage to provide very narrow coverage to very specific risks. This could allow insureds to purchase less umbrella coverage for all risks and, instead, tailor their coverage to meet their specific needs.
The long-tail nature of many casualty lines provides a significant amount of information that can be utilized in identifying things that will increase claim exposures so that actions can be taken to mitigate those exposures. The long-tail also allows time to “steer the ship” on the claims to achieve the better outcomes.
We are in an interesting time in the casualty right now as emerging risks (cyber) are creating more exposures than that of long-established risks. Will the marketplace respond in providing the coverages that insureds need, or will insureds need to set up pooling arrangements to provide the cover that is not sufficiently available in the commercial marketplace?