The need for insurtech will be driven by market pressures

Insurtech, a hardening market and some further consolidation will be the main trends of 2020 for the risk transfer industry, according to a comprehensive poll of Intelligent Insurer’s online readers and other key executives from the industry.

These things were interlinked for many respondents, as one explained: “We have already seen the hardening market and the impact that has had into 2019.

“Expense ratios need to be reduced significantly and this will lead, I believe, to more investment in technology to replace repetitive human tasks and to increasingly automate and shorten the transaction chain, plus enable far better access and use of data.

“Innovative insurtech products will continue to come to market, especially where these are easily commoditised. It is definitely a route to enable effective access to new markets at low acquisition cost.”

Albert van Haastrecht, corporate insurance manager, Ballast Nedam said: “Several respondents commented around the need for efficiency in the industry. The insurance process can/must operate more efficiently and effectively by adopting innovative solutions.”

Other commentators pointed to some of the pressures facing the market in terms of new or unforeseen losses.

“I expect a surprise catastrophe due to a large scale cyber attack. I expect performance to stay fairly weak and less capital to be available due to uncertainties and recent performance of the market.

“Insurers will keep investing in tech and insurtech—you can’t not,” said Jarno Seegers, associate at Xceedance.

Others commented on what elements of insurtech would come to the fore. Craig Foster, chief executive officer of escape of water claims mitigation system LeakBot, said that, alongside increased insurtech investment, the industry will also continue to see increased disruption from new entrants in the market.

“The challenge for insurtech providers will be to shift the industry narrative from disruption to collaboration by highlighting reciprocal benefits of adopting insurtech,” he said.
He predicted: “2020 will be the year of the internet of things (IoT), as IoT-based insurtech solutions finally start to ‘cross the chasm’ from proof-of-concept test phases to scaled-up, full-stack rollouts.

“Meanwhile AI and big data will see increasing adoption as the industry starts to transform the way it measures, prices and mitigates risk,” he said.

After a lull in activity in 2019, some respondents said they expect further consolidation to continue to shape the industry in 2020. “The weak will be merged away,” said one respondent.

Some respondents highlighted wider societal trends. Will Thew, head of underwriting audit at tifgroup, said: “In 2020, we expect there to be a change in purchasing behaviour in travel insurance among the Millennial generation.

“We recently undertook an analysis of more than two million policies which showed 35 percent of Millennials buy policies the day before or just before flying overseas. Research also suggests that 40 percent of young travellers leave with no insurance at all.

“In 2019 the industry saw a huge awareness of climate change. The growing number of natural disasters is starting to affect the risks when travelling to exotic or more adventurous locations which are a big draw for Millennials.

“It’s obvious to us that the industry needs to change its approach to reaching them. I think 2020 will be the year we successfully get through to the younger generation by making products easier to understand and more relevant to the type of trips they take.”
Sarah Page, brand manager for Insurancewith, added: “Going into 2020, we expect mental health still to be very much a hot topic. However, going through a medical declaration for a mental health condition isn’t at the forefront of people’s minds when getting travel insurance.

“We have noticed in particular that younger people are less likely to declare a mental health condition. There’s a perception that questions can be invasive, and consumers are worried that their premium will increase as soon as they mention this.”

Others pointed to wider issues. Jonathan Moss, international insurance sector lead at DWF, said: “Regulation and digitisation will dominate the international insurance market in 2020. A key challenge for global insurance providers in 2020 will continue to be evolving and ever-more demanding regulatory requirements, including increasing volume, speed and granularity of reporting.

“Compliance will be particularly challenging in this context due to the lack of regulatory homogeneity across jurisdictions, and an associated lack of certainty—for example, post-Brexit.”