The Digital Revolution of the Insurance Industry

Benjamin Quinlan, CEO & Managing Partner, Quinlan & Associates And Yvette Kwan, COO & Partner, Quinlan & Associates

Benjamin Quinlan, CEO & Managing Partner, Quinlan & Associates


One of the key drivers of the global insurance industry in recent years has been the growth in developing markets, with strong economic growth and rapidly growing middle classes underpinning a rise in insurance premium volumes from emerging Asia to Africa. The rise in insurance penetration rates has been aided by increasing technological (and mobile) penetration in these markets.

On the other hand, a number of challenges continue to drive the ongoing digital transformation journey of global and regional insurance incumbents alike, including slowing premiums in mature economies, a lack of available talent amidst increasing regulation, and volatile markets. The need to reduce costs, enhance operational processes, and optimize revenues is becoming more important than ever.

Technology in Action

Technology is being increasingly applied by insurance companies across their entire customer value chain; from the use of data analytics and machine learning to automate the development of compliant products to A.I. algorithms and predictive analysis in order to enhance the pricing and underwriting processes. For large retail insurers with strong brands, we are also observing a continued shift in sales and distribution efforts away from large third-party sales forces to direct channels, aided by the advent of chatbots and robo-advisory solutions.

In the highly labor-intensive claims management process, the use of drones, while nascent in its application, has made a significant impact on the speed and accuracy

Yvette Kwan, COO & Partner, Quinlan & Associates

of assessments, especially in property insurance. Inaccessible places–such as roofs after hail damage or areas of large-scale disaster–can now be easily accessed, reducing the need for on-the-ground specialist assessors.

Separately, the proliferation of the internet of things (IOT) has allowed for the creation of a digital ecosystem, integrating sensors into property (from cars to buildings), as well as wearable devices, for better activity monitoring and risk assessment. Sensors in cars, for example, can determine driving behaviour, including mileage, location, and time of driving, as well as vehicle condition.

The use of blockchain’s distributed ledger technology also means that insurers and the numerous institutions they deal with–from commercial banks involved in trade finance to health providers and reinsurers–can streamline processes and reduce risks. For example, medical records can be securely shared between health providers and insurers, thereby enhancing the medical insurance ecosystem. While we are yet to see large-scale adoption of blockchain in the insurance industry, we expect smart contracts to drive efficiencies in application documentation and the monitoring of contract performance. Another important benefit would be the ability to aggregate claims across insurers, significantly strengthening fraud prevention.

Across the whole value chain, vast amounts of data are now being generated and analyzed in real-time. The adoption of cloud computing means that insurance companies are better able to manage their cost structures with the flexibility that cloud computing allows in terms of investment in storage and computing capabilities.

Competitive Landscape

Similar to other industries like transportation and lodgings, which have experienced extreme digital disruption, we see a select group of global insurance leaders who are looking to openly embrace new technologies in order to compete.

“The rise in insurance penetration rates has been aided by increasing technological (and mobile) penetration in these markets”

One of the best examples in the Asia region is China’s Ping An Insurance, which has put technology at the center of its business, spending roughly USD 1 billion per annum over the last decade on research and development. A.I. technology is applied, for example, throughout its car insurance claims settlement; from initial reporting, the submission of digital pictures, to electronic disbursement of claims via face recognition. Cognitive recognition software is utilized with over 95 percent accuracy, significantly speeding up the damage assessment process.

With one of the largest insurers in the world investing aggressively into their R&D efforts, it is little wonder that most global players are realising the need to up their game. However, many incumbents remain hamstrung by the cost and complexity of overhauling their existing businesses, including challenges associated with legacy systems. Moreover, culture remains a major hurdle for digital innovation at many large corporates, and insurance companies are no exception.

One way a number of insurance companies have sought to capitalize on the global digital revolution is to invest directly into insurance start-ups, such as Allianz’s investment into the Swedish micro insurance start up, Bima, which is active in Africa, Asia, and Latin America. Bima enables mobile application-based health insurance to be purchased via mobile phones using phone credits. Such scalable technological solutions can be easily customized and rolled out to markets at different levels of sophistication but are especially suited to micro insurance, given the much lower margins per customer.

Another strategy insurance companies have adopted is to leverage partnerships, such as mobile phone companies and e-commerce platforms, as a way to enhance their customer reach and tap into new sources of invaluable data, particularly with respect to better understanding consumer behavior. While great on paper, a considerable amount of work needs to be done to ensure these partnerships yield meaningful benefits for insurance companies, including a fundamental overhaul of internal systems, processes, and employee mindsets.

Points to Remember

It is evident that we are at the cusp of a digital revolution in the global insurance industry. Pure-play technology players, albeit with much small footprints, as well as a handful of tech-driven incumbents, have carved out meaningful digital propositions that have served them well from a branding and profitability perspective. However, many firms are stuck in the middle ground and struggling to manage the process of digital change. We believe this poses a major risk for several incumbents, who are likely to get left behind as technological laggards. And now is the time to act.

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