At DIA Amsterdam 2022 Philip Lobatto, Microsoft Insurance Lead Western-Europe, shared how mega trends impact the insurance industry. In this article, he shares his view on the insurance market and Microsoft’s vision on how to act.  

Who is Microsoft? 

“Microsoft’s mission is to empower every person and every organization on the planet to achieve more. We’re a global company that is active worldwide and across all markets.  

With our innovative technology platform, Microsoft supports insurers across the globe to address changing customer expectations; implement new regulations; improve business processes and create a great customer and employee experience in a secure and compliant way.  

Together with our network of over 500.000 partners, we support solutions and digital business models across all parts of the value chain including marketing, sales, distribution, pricing, underwriting, claims handling, fraud detection, services, investment management and policy administration.” 

Talking megatrends, what is your view? 

“The world is currently in a phase of great change. particularly from a geopolitical-, cultural-, environmental- as well as economic perspective.  

Key mega trends impacting the industry are shown in the scheme below and include: 

These mega trends can be embraced by insurers and insurtechs to grow and transform their businesses. Each of them can be seen either as a threat or as an opportunity to advance to the future. By embracing mega trends, insurers can service their existing customers or reach new audiences with new propositions and new business models, to grow. Or leverage new opportunities to reduce claims- and expense ratios and improve operational effectiveness and resilience.” 

And what do you see in practice? 

“To reduce insurance production costs, optimization of the value chain is required which means partners in the chain may be disintermediated unless they deliver unique value. Also, as digitalization accelerates, customers are looking for convenience and access to digital channels. Direct insurance offerings are on the rise and on-demand, targeted insurance will be growing. 

Some examples: 

• At Liverpool Victory, around 40% of claims are straightforward no-fault claims that are simple to process and resolve. Another 40% are at-fault claims where liability is clear. The remaining 20% occupy a grey area where liability is unclear or disputed and the process of resolving the case can take up to twelve months. By using Microsoft Azure Machine Learning they have been able to reduce this number to only 3,9%.  
• Munich Re can now predict how single locations from real estate to the supply chain will fare in coming years if nothing is done to mitigate those risks based on different climate change scenarios which can be combined with decades of data from Natural Hazards.  
• Zurich Insurance Germany built an AI platform for multiple (future) use cases. One of them is leveraging cognitive services to check car paper authenticity and reduce typing errors while registering new customers.  
• AXA is building a Digital Health Platform to facilitate multiple use cases while partnering with health payers, health providers and other 3^rd parties in a compliant way. 

All these insurance carriers started with specific business goals as their guiding principles. Each of these started with data as their fuel, turning data into insights, and insights into impact. They focus on the transformation of the experience that customers and employees will have with insurance carriers to a positive one.” 

Vision 

“Insurance carriers have traditionally operated in a somewhat insular fashion. The future of insurance will see the creation of data ecosystems and business partnerships that span across industries. These ecosystems will include healthcare, automotive, manufacturing, and many other sectors of the economy.  

Technologies like quantum computing, will enable greater data sets to be analysed and prediction to be conducted within seconds with an even greater accuracy. Insurance will be seamlessly embedded into customer journeys. New trends like autonomous cars, human digital twins, virtual worlds, cyber-security, and a focus on sustainability will create new opportunities for insurance products and services. New market entrants will challenge traditional businesses, leveraging their customer data and relationships. At the same time, changing regulatory compliance requirements will continue to require investments.” 

What does this mean for insurers and insurtechs? 

“A successful insurance industry will shift even further from paying claims to actively helping customers prevent losses. Merging their own data with new sources of data to better price products, efficiently underwrite policies, and pay claims fast. All while taking a holistic customer view of the business. 

Going back to megatrends, ecosystems will continue to form, bringing together all types of stakeholders. Insurance may take a leading role in some ecosystems and a participatory role in others. The focus on ESG will drive government, academia, and participants from many industries to work more closely together to address these global challenges.  

Carriers need to create agile business models and technology platforms, in which the role of insurtechs cannot be underestimated. Traditional insurance carriers are very good at underwriting risks using traditional time-tested methodologies, but they may not always be as agile as they could be in providing improved customer experiences, introducing innovative products, and establishing efficiencies into the value chain.  This is where insurtechs can shine. It is clear, that with open innovation, combining traditional carriers with insurtechs, will drive the industry forward.”