SPEAKER PREVIEW: Insurtech can boost cyber risk, says Generali

The increasing use of insurtech and data in the insurance industry is promoting the need for cyber protection, in products as well as with insurance providers.

Most advanced in the implementation of insurtech is arguably car insurance. Telematics-based motor insurance has become popular particularly among young drivers as it allows them to have reduced rates.

Personal data collected through technological gadgets and other sources is also expected to change health insurance, with products offering lower rates to customers while promoting a healthier lifestyle.

Home insurance may be behind the curve due to the level of technology required to have a truly connected home which could, if implemented, have a significant effect in terms of fire or flood risk mitigation.

The growing amount of data available to insurers may help reduce the risk of claims, but it is also expected to require more cyber protection.

“In underwriting, more data allows for a better risk selection,” said Steve Hales, global head of connected insurance for the Generali group. “At the same time, the more we use technology and data, we are able to bring in other risks such as cyber which we need to be managing,” he (pictured left) noted.

In order to prepare for the changing operating environment, Generali is investing in developing its cyber risk capabilities in terms of products but also for its internal processes.

“We operate with a healthy level of paranoia when it comes to cyber risk,” Hales said.

Cyber risk also needs to be taken into account when insurers partner with insurtech startups, which may happen more  frequently in the next few years.

Some insurtech startups are focusing on specific issues in the insurance value chain, which may be difficult for an  incumbent to focus on, Hales noted. Some others, which may include Trōv and Lemonade, are moving a bit more broadly  across the value chain, he added.

“It’s pointless to deny that the industry is going to be changing very fast over the next few years because of technology,”  Hales said.

However, the emergence of new companies providing services in the insurance sphere based on technology does not necessarily represent a threat to the incumbents’ business models.

“If we do nothing, it’s very clearly a threat,” Hales said, “but if we work out an intelligent way to bring in and work with some of those startup companies, it offers some big opportunities.

“The insurtech’s and the startups’ approaches provide us with very interesting opportunities to integrate them into the way we run our business,” Hales said.

Italy-based Generali is addressing potential opportunities on a case-by-case basis, looking at issues that need solutions, and then deciding whether it makes sense to partner, to develop solutions in-house or to acquire a company, he explained.

In 2015, Generali acquired full control of MyDrive Solutions, a company founded in 2010 focused on developing data analytics tools to profile driving styles to produce tailor-made products for customers with favourable tariffs for low risk drivers.

“Startups can have agility and speed in terms of the way they can act. A startup can offer a fresh perspective from someone outside the industry,” Hales said.

“Large insurers such as Generali also have a lot to offer these startups in terms of how to run a sustainable business, although Generali does favour in-house solutions.”

So far, most of the focus on insurtech has been on the retail rather than the commercial side of the insurance business. Generali is primarily a retail player but has a fairly strong commercial base in small and medium-sized enterprises and it also operates a global commercial operation.

“In 2017 Generali plans to drive attention to the opportunities insurtech offers on the commercial side of the business, which will require more bespoke products than on the retail side, taking into account size, industry and location,” Hales said.

Generali has, for example, obtained a licence to use drones for large property inspections in the Czech Republic and uses them for claims management in agriculture. The drones help Generali obtain detailed documentation and cut time and costs. Generali sees a much bigger development potential for the project due to its replicability and the opportunity to merge it with new technologies such as thermo and multispectral cameras.

Other opportunities to extend the use of data and technology in the commercial insurance business could be partnerships with fleet management services companies to apply telematics on commercial fleets. Potential may also lie in insuring large factories and premises, which already have significant levels of security technology in use.

“Generali is debating options to use the data to develop innovative insurance solutions,” Hales concluded.

Steve Hales is one of the speakers at the Intelligent InsurTech Europe event at the Grange Tower Bridge Hotel on Wednesday, November 16. For more details, click  here.