Few people have claimed the prescience to predict the past year’s momentous and tragic events. What we can see now is that the pandemic has changed many things about life, and most people would acknowledge that going into 2021 it has transformed attitudes to technology in particular.
The suddenness of this transformation has led to commentators talking about “five years of transformation in five weeks”, and this is perhaps no exaggeration, not least in corporate culture and the mindsets of decision-makers. The insurance sector is no outlier, and insurtech investment is at record levels.
With so many people working from home, it is hardly surprising that the lines between work and personal lives have blurred. For example, many more older people will have embraced video-calls via tablets or laptops for communication with relatives. Cash payments are increasingly obsolete and e-commerce has become even more the norm for shoppers.
Most CEOs have likewise been compelled to rapidly overcome scepticism about remote working, and embrace the new norms of entire teams and staffs logging in remotely and using Teams and Zoom rather than traditional meetings (albeit with pros and cons). E-trading and e-placement are replacing traditional transactions in another reflection between retail customers and commercial insurance market behaviours.
It is unsurprising therefore that insurtech trends mirror what we see in daily life. Your commentator recently led the research for one major tech report for the insurance market, and it became increasingly obvious that certain technology trends were gaining greatest traction, while others previously touted as universally game-changing (blockchain, anyone?) have been put on the backburner, aside from some specific applications.
Firstly, the pandemic has profound implications for innovation in health insurance. The space race offers one of the few historical parallels with the achievement of the vaccination race. Never before has there been such collaboration between governments, technologists and the worlds of health, pharmaceuticals and medicine.
Converging advantages afforded by big data, predictive analytics, wearable technology and the internet of things could confer great innovation potential within the health insurance sector. The opportunity is there within health insurance, as the huge yet dysfunctional US market is ripe for disruption.
Artificial intelligence (AI) is the second major theme, and perhaps the biggest single trend overall. The amount of data being generated every second of every day, and stored in Clouds, is growing exponentially: ‘Big data’ is a dramatic understatement. Unlocking its value – from Instagram ads to foretelling the effects of unfolding climate change – is becoming a 21st century obsession.
The more data you feed an algorithm, the more powerful it becomes. Quantum computing and super computers will provide enormous opportunities, and it is rare to find an insurtech business that does not focus on automation and AI. The applications are endless, and it would be unwise to pigeonhole one section of the market or aspect of insurance activities as ripest for disruption: pricing and underwriting, claims management, day-to-day operations, distribution – AI promises to revolutionise them all in equal measure.
Climate change is perhaps the other great driver of technological innovation, for insurance specifically, and across the economy as a whole, and will reassume its pre-eminence once the Covid-19 pandemic has receded. Insurers and reinsurers rank alongside poor farmers and rich energy sector companies in their exposure to climate risk and its associated trends, from extreme weather catastrophe events, to the switch from fossil fuels to renewable energy.
Demand is strong among insurers for technologies that can offer smarter ways to understand climate risks and provide the data to price risks appropriately as well as incentivise good risk management. Satellite data, sensors, drones and parametric data products are all areas of insurtech innovation for which demand will only increase as the industry pivots towards a more risk-aware, tech-enabled and greener future.