The Perfect Storm in Insurance (Part 1)
“The future is already here”. That is the key message of Insurtech 2030: il futuro e gia qui, the exciting new book written by Italian insurtech thought leaders Massimo Michaud and Edoardo Monaco. Virtually everyone we speak to agrees we should leave the crisis behind and start looking further ahead. The title of the book is a perfect promise in that regard. And more than that; a positive promise as well.
Our colleague Roger Peverelli had the honour to be invited to write the introduction chapter to the book: The perfect storm in insurance. He recently shared his view at the Insurtech Symposium in Cologne and at Italian Insurtech Summit in Milan. A perfect occasion to ask Roger to also share what he actually means by ‘the perfect storm’ with the broader DIA Community.
Roger, let’s first start with Insurtech 2030: il futuro e gia qui; the future is already here. What got you so excited?
“The book title summarizes exactly what I experience in daily conversations with insurtech leaders and insurance executives across the globe. Much of what new advanced technologies make possible is already applied in practice somewhere in the world, in a proof of concept or at scale, mostly in a productive collaboration between an insurtech and an incumbent. Of course, that does not mean that we are there yet. Much remains to be done to further shape the much-needed digital transformation and innovation of the insurance sector. But I believe the momentum is now. Insurtech 2030: il futuro e gia qui could not have been more timely.”
Roger, now about ‘the perfect storm in insurance’ …
“Yes. Sounds scary, doesn’t it? Let me explain. Obviously quite a lot has happened and is still happening. But this also brought something unexpected: We entered a new era. The pandemic created important permanent changes in customer perceptions and behaviour. We all notice a dramatic increase in sense of urgency among insurers for everything digital and, looking at demand and funding, insurtech is at the turn of a next chapter. With all these three taking place simultaneously and enhancing each other, we’re about to experience the ‘Perfect Storm’. And therefore, it would make a lot of sense to give much more attention to the post-pandemic future.”
You mention three different perspectives; consumers, insurers and insurtechs. Can you elaborate a bit on that?
“Sure! Let’s start with consumers. What we all recognise is that covid has put an already ongoing shift to digital on fast-forward. Our knowledge partner McKinsey said we actually made a five-year leap into the digital age in only eight months. Of course, several shifts in customer behaviour are temporary, purely related to coping with the situation, but other, more fundamental shifts, are here to stay. And these determine the priorities of customers in the next years.”
What specific consumer trends are you thinking of?
“Let me highlight two. The first is that putting your ‘Health First’ is the single most important priority. The second is that trends towards ‘Connected Living’ shifted into a higher gear.”
Can you elaborate a bit on these two consumer trends?
“Let’s first take ‘Health First’. The past year and a half made clear that, at the end of the day, for most people, there is nothing more important than your life and health. Virtually everyone has been prepared to make huge sacrifices, to drastically change the way we live. We even to put our entire economy in jeopardy. As a result, consumers are more aware of the importance of adequate life and health insurance plans. Therefore, the volumes in health and life insurance will grow in the next few years. Many life and health insurers experience that already today. But looking ahead, it is not about just your regular life and health plans. People want to be assisted in improving their lifestyle. Everywhere across the globe, more and more people are exercising more and eating healthier. They are interested to know more and have control over things. All sorts of health and lifestyle apps experience a growing popularity. And there is much more willingness to share that data.”
How about the second consumer trend you mentioned, ‘Connected Living’?
“I think we all see a fundamental shift in how people live and work. Connected living is the new norm. Think of the boost of ecommerce; that is not going to bounce back completely. The same goes for working from home. We shouldn’t expect everyone at every company to return to the office five days a week from 9 to 5. Many companies are anticipating this situation. Nationwide, for instance, one of the largest insurers in the USA, permanently closed 5 of their 9 office campuses because employees will continue to work remotely. I heard rumours of similar moves of insurers here in Europe as well.
We also see that many people have invested quite some money in their homes in the past year. Among others to make them more connected and smarter. Going through these few trends make it obvious we need to reimagine insurance to stay relevant.”
Okay, important consumer trends set the stage. So much for the first perspective. The second perspective you mentioned is ‘insurers’. What do you see there?
“The outbreak revealed how slow the digital transformation of insurance has been to date. Insurers have to deal with even more demanding customers who are increasingly reaching out to their providers digitally. Again, this development had already started – and is not new. It just accelerated.
Quite a few insurers found out the hard way. Distribution models, which were not sufficiently supported digitally, turned out to be less competitive, less sustainable, and not agile enough to respond fast to changing conditions and a less physical world. At the same time, digital models, also those with strong digital support for brokers and agents, proved to be resilient, successful, and more future proof.
Never before have these differences become so clear. And it certainly pushed executives to change their mindset.”
Okay, so the mindset changed. But can we already see proof of that?
“Good question. True, not all carriers have been able to manage this change quickly. Yes, there is a different mindset in board rooms. But there are other hurdles that need to be removed as well. And not just technical barriers, such as old legacy systems. Looking at the use of insurtech solutions for instance, in many organisations ‘the not invented here syndrome’ or ‘the corporate immune system’ still rules. As a result, the scale on which these new solutions are being used is still limited. And so is the impact of insurtech on the top line and the bottom line.”
So, what should insurance executives do?
“There is quite some room to become a bit more ambitious. Despite all the investments in digital, insurance has not fundamentally transformed by it. Not yet.”
Can you give an example?
“Let’s take a very simple, obvious example. We still see incumbents replacing ‘wet’ signatures by ‘digital’ signatures. Transforming is taking a different perspective. Not thinking about getting a signature digitally – but taking a higher level of abstraction. In this case how to establish identities; in a more efficient, effective and customer friendly way; digitally. It’s an example of digitising the current process, rather than using digital and new data to transform the process. We are still only scratching the surface. The new customer expectations make it necessary to think in new ways. There is a big opportunity to look at digital transformation and innovation more fundamentally, leveraging all the new technologies, data streams and solutions that are becoming available. And that is where insurtech comes in …”
That’s a cue to move to the third perspective you mentioned at the beginning of this interview; insurtech …
“Yes. We did a study together with McKinsey, called ‘The Pulse of Insurtech’, for which we spoke to more than 100 leading insurtechs and investors around the globe. One of the conclusions: Insurtechs hardly suffered from the pandemic. On the contrary, it definitely triggered more demand for online, digital and remote services. Incumbents are retooling themselves.”
Do you think this demand will continue; even after the crisis is over?
“Definitely, but in our view, this is not enough. It is all just ‘deferred maintenance’. All these investments are about catching up, repairing the past. But not about taking a leap forward, creating a new future. Consumers and businesses are looking for a new generation of products and services. Incumbents need to increase their relevancy. This will also lead to a quicker adoption of new technologies. Which is good news for insurtechs which really accelerate digital transformation and innovation. Especially because the time frames to achieve this have been compressed.”
Stay tuned for the release of the second part of this interview, in which Roger explains what incumbents and insurtechs should focus on in the next decade.
About Insurtech 2030: il futuro e gia qui
The structure of Insurtech 2030: il futuro e gia qui, around a large number of real use cases, offers perfect proof points that the future is indeed already here. Massimo Michaud and Edoardo Monaco invited 18 agents of change from various blood types – executives, insurtech leaders, consultants – to highlight specific perspectives. The mix between insurtechs and incumbents provides a pleasant balance between what is possible and what incumbents priorities are in the short and long term.
Chapter authors and co-authors include among others Simone Ranucci, founder and president of insurtech Yolo Group; highly acclaimed telematics expert Matteo Carbone; bancassurance thought leader Andrea Battista; Stefano Bison, the group head of business development and innovation at Generali, and of course Massimo and Edoardo themselves.
Massimo Michaud is an advisor for many insurers in Italy and abroad, former CEO of AXA and Allianz in Italy among others, and co-founder of the Swiss Insurtech Hub. Edoardo Monaco has a vast track record in investment banking and insurance; he is the creative and entrepreneurial mind behind Axieme, the first social insurer in Italy.
Interested in the book? Check it out on amazon!