The COVID-19 pandemic is set to accelerate a “silent metamorphosis” that the re/insurance industry has been undergoing in recent years regarding its use of technology.
This is according to Paul Donnelly, Executive Vice President for EMEA at Munich Re Automation Solutions, the specialist insurtech subsidiary of the global reinsurer.
Speaking in an interview with Reinsurance News, Donnelly acknowledged that the re/insurance industry has garnered a reputation for being slow to innovate and adopt new technologies.
This is possibly due to its very traditional culture and reliance on personal contacts, stemming from the early coffee house culture of the Lloyd’s of London market.
But over the last few years, Donnelly has observed a shift in the way re/insurers approach new technologies.
In the life insurance space in particular, he said industry players have been re-tooling for the future “at a pace never seen before” to replace slow manual processes with automated and paperless systems.
“Enabling the move to digital and direct is certainly a priority,” he told Reinsurance News. “While we’re heading in the right direction, we should always take steps further towards improving the user experience.”
“Currently life insurance remains a complex process to many – a process that we should continually simplify. While insurers have a well-established reputation for being dependable and understanding the consumers’ product requirements, customers demand speed and ease,” Donnelly went on.
“Therefore, we need to make the purchase of a complex insurance product, as easy as an Amazon transaction, reducing unnecessary friction.”
To achieve this, the Munich Re exec suggested that insurers must continue using data to streamline the interview process, while implementing and improving machine learning and AI techniques to optimize the user journey.
Regarding global recent developments, Donnelly believes that the COVID-19 pandemic will neither dampen nor change the course of tech-focused trends in the re/insurance industry.
Instead, he argued that the crisis is likely to accelerate the adoption and implementation of new technologies, as the industry approaches a sharp inflection point.
“Now, many insurers will move swiftly to become more direct and digital, at the same time simplifying the online customer journey and speeding up underwriting. Consequently, those who began this journey in 2017 or 2018 will profit from their experience to date and emerge in front,” Donnelly stated.
“We’re about to witness a sea change in our industry, and the pace of change will go a long way to changing the perception of Insurance as slow to adopt new technologies.”
After a very strong 2019, insurtech investment dropped significantly during the first half of 2020 as pandemic-induced volatility hit the investment markets and caused venture funds to act more cautiously.
But despite this initial lapse, Donnelly believes that the COVID-19 crisis will ultimately be positive for insurtech investment.
“The first response to the COVID-19 pandemic was to push the entire venture landscape into a sort of holding pattern,” he noted. “This was followed by a differentiation between the fortunes of Medtech or Healthtech and other sectors. Essentially, where investors could believe in a path forward for a sector with greater certainty, then the investment followed.”
“Within insurance, it is widely accepted that digital will become essential as new business models emerge,” Donnelly continued. “Insurtechs that digitise key value chain operations (such as underwriting and claims) will be essential to improving operational efficiency and I expect shrewd insurers to look to B2B insurtech more in order to improve their digital capabilities.”
“This is especially true against the backdrop that distribution will continue to trend towards direct and digital. So, despite the initial lapse, accelerated underwriting and smooth customer journeys that enable online purchasing will be more important for consumers.”