Willis Towers Watson has released its second quarterly InsurTech Briefing, revealing a stark increase of 248%, or nearly $1 billion in InsurTech investment from the first quarter and pointing to insurance claims management streamlining as the biggest opportunity for reinsurers.
The 2017 second quarter (Q2) was characterised by a record number of transactions including several large-scale InsurTech investments amounting to a total spending of $985 million, Willis said.
Andrew Newman, President and Global Head of Casualty at Willis Re, said the $985 million invested in InsurTech in Q2 is another sign of the rapid change ahead of the industry; “whether disruption beckons or opportunity unfolds is primarily a matter of perception relative to each company’s position in the insurance value chain.
“It is not the technology that is disruptive, but the degree to which a competitor can successfully wield that technology compared to another.”
With 64 transactions, the second quarter saw nearly double the 38 transactions of the first quarter, showing re/insurers are stepping up the pace of investment in technology.
In this environment of rapid investment and innovation, the million dollar question is which area of the industry might provide the most value over time when enhanced by InSurTech; increasing re/insurers reach and generating higher revenue streams.
The Willis report suggests that the answer is in claims management, calling it one of the industry’s most “underestimated modules,” adding that the $170 billion global industry is “currently controlled approximately 90% by incumbents that’s booming with innovation.
“One of the most disruptive scenarios that could result from the InsurTech revolution would be a change in underlying function of the insurance value chain, from volatility management (paying claims) to risk mitigation (making losses smaller).”
InsurTech could catalyse a transition from a re/insurance claims model based around payments and cost control to one that prioritises claims mitigation and risk management – disrupting traditional insurance functions and their place on the value chain.
With claims management being the biggest area of interaction with customers, positive change to its processes could bring far-reaching results for improving customer satisfaction and retention.
According to the InsurTech report, a customer who experiences a personal auto claim could be up to 40% less likely to renew their policy, regardless of the claims outcome.
This figure demonstrates the extent of the potential of a positive transformation of claims processes to make re/insurer’s better able to compete and market products with a happier consumer base.
Rafal Walkiewicz, CEO of Willis Towers Watson Securities said; “The claims management conversation with a client provides the greatest insight and opportunity to improve risk mitigation, making it increasingly core to the evolving, consumer focused, insurance value chain.
“We believe claims management could assume additional prominence at the expense of other functions including distribution, underwriting and capital management.”
How effective market players are in harnessing the segment through technology, Walkiewicz said, “will be a key source of differentiation for incumbents going forward.”