Richard Kerr, the Chief Executive Officer (CEO) of U.S. domiciled insurance exchange, MarketScout, has said that for the first time in two decades insurance distribution is to experience significant disruption, which in turn will support lower premiums, all driven by the continued rise of InsurTech.
“By utilizing new tech-enabled distribution, underwriters are ultimately going to reduce acquisition expenses, which will enable them to offer the consumer a lower premium. The end result will be a win-win: a net premium reduction for the insured and an increase in ROE for the insurance company,” said Kerr.
He explained that of all the world’s industries the property and casualty insurance sector has the highest distribution expense, at as much as 32%. And with distribution expense so high, Kerr is confident that technology focused and driven millennials will collaborate with insurance and reinsurance industry leaders to establish “a better mousetrap.”
The rise of technology has seen numerous InsurTech and Fintech start-ups emerge, each looking to increase the operational efficiency of various parts of the insurance value chain, and Kerr states there’s already plans underway to reformat distribution.
“Naturally this reformation will begin with the low hanging fruit of the industry, commoditized products. Auto insurance is a great example. Large accounts and specialty insurance will ultimately be impacted, we just don’t know when or exactly how,” continued Kerr.
MarketScout firmly believes that InsurTech will bring the first significant disruption in insurance distribution for the first time in twenty years, driven by the desire of company CEO’s to lower distribution costs, the increasing effectiveness of InsurTech solutions and systems, and that InsurTech’s number one target appears to be distribution.
Insurers and reinsurers continue to struggle in the softening landscape, and efforts to lower costs via advanced technology is seen as one way at lower expenses. With distribution expenses being so high for the industry and the fact InsurTech is very real and advancing at a fairly rapid pace, it will be interesting to see how insurance minds and technology minds collaborate in the months and years ahead.