At the 2017 World Economic Forum in Davos the technological revolution and strategies for how to remain on the cutting-edge of the innovation race have been a focal point for industry experts across finance, insurance and reinsurance industries.
John Cryan, Deutsche Bank CEO, named effectively using technology as the key to surviving the next five years in a market where traditional institutions have to contend with competition from technological innovation both within their ranks and from fintech and insurtech start-ups that are revolutionising customer experience.
The key to survival in insurance and reinsurance is also in embracing technology, partnering with InsurTech start-ups, and effectively making use of better tech, experiences and business strategies, in order to make capacity deployed as efficient and profitable as possible.
David Rubinstein, Carlyle Group Co-CEO and Co-founder, spoke of the competition in both lines of the industry; “I don’t know today if the existing organisations will prevail or if these new organisations, we haven’t even heard of, will prevail 5-10 years from now.”
“You have the existing services companies we’re all familiar with, they are innovating and a lot of the Fintech revolution is making it possible for them to provide their services more efficiently and more cheaply; then you have another Fintech revolution which is trying to completely disrupt the banks and the insurance companies – and say we have a whole new way of doing things.
“Will the banks be revolutionised and changed but still be banks and insurance companies that people will be familiar with but just be much more user friendly and cheaper, or will new organisations like Alipay – which is an organisation in China which provides enormous opportunities for people to pay their bills through that system – prevail over the existing institutions, we don’t know, but both are moving forward at exponential rates of change because there’s a lot demand by customers, young people particularly.”
Marco Greco, Zurich Insurance Group CEO, said the insurer was responding to the innovation race with a twofold strategy of investing in technologies and outsourcing to new partners who work with the company on different schemes.
Greco said innovation meant using greater customer connectivity to transform the relationship between consumers and insurances companies; “because through technology, through innovation, we can get in touch with the customer every moment.”
“This is a great revolution, and it changes completely the products that we can offer to customers…it allows us to redefine the products and the services we offer to customers.”
The same could be said for reinsurance companies, who have a need to keep up to pace as insurance products change and become increasingly technology driven, reinsurance products must too in order to offer value to newly digitalised insurance firms.
Greco added that Zurich Insurance is currently testing new systems to handle claims processes and services to customers and warned that companies which do not invest in the technological revolution would be out of the market; “I think much more pervasive than what we heard so far, technology is changing the way we work, changing the services we give to customers and companies who don’t adapt to changes will be out.”
Major players of the reinsurance industry have been staying on top of the innovation game by bypassing traditional insurers and increasingly investing in insurtech start-ups – a partnership which enables them to leverage improved customer services, while insurtech start-ups gain access to the necessary balance-sheet.
As a major driving force of the reinsurance innovation revolution, insurtech’s are becoming increasingly like MGA’s or agents, providing a route to consumers for risk capital, be that insurance, reinsurance or even capital market investor backed capacity.
With innovative services that underwrite each individual in real-time and give them access to tailor-made insurance products, many insurtech start-ups promise to save their customers time and money.
But reinsurers and insurers eager to partake in the opportunities the technological revolution brings have been advised to be wary of the greater risks that are also lurking on the horizon.
Rubinstein warned the industry to invest in cybercrime prevention; “I would encourage everybody who has some kind of financial tech device to make sure that they are protected and make sure that they have taken the steps to protect themselves against money being stolen or identity being stolen because this is increasingly going to be a big problem with the whole Fintech revolution.”
Greco pointed to national regulators and low interest rates as hurdles to the market and the speed of innovation; “they’re moving more and more towards customer protection, which is fair and its right, but the issue is that consumers and companies are becoming more and more multinational and consumers also move around the world.
“The regulators tend to look at borders and regulate on a national basis, and this inconsistency is slowing down…the pace of innovation through the world.”
And even as Switzerland’s biggest insurer highlights the importance of investing in technological innovation, the company has announced having to cut back on spending on large technology projects after record-low interest rates left the firm looking at budget cuts of $1.5 billion, demonstrating the challenges re/insurers are facing in making the technological shift an in increasingly competitive market environment.