January 22, 2018
2017 marked a year of change for the insurance industry
With the digital tides shifting, unprecedented levels of investment are driving innovation initiatives into the mainstream. From standing-up corporate venture capital funds and incubators, to building data-science and innovation organizations, and restructuring organizations around newly-appointed Digital and Innovation leaders, carriers are focused on innovation.
Technologies ranging from blockchain to virtual reality took the main stage in 2017, sending the insurance industry into a frenzy of promise. With the buzz and excitement of these bright innovations also came a lot of noise – perhaps what the folks at Gartner would call, “the peak of inflated expectations” that comes right before the “trough of disillusionment.”
For those insurtechs among us who partner with carriers, the industry’s sharp pivot toward innovation in 2017 was energizing, if not a little frenetic. Will this excitement continue in 2018? Though the business of prognostication is filled with folly, I would like to share Life.io’s 2018 predictions for insurtech.
SEPARATING SIGNAL FROM NOISE
2018 will be a year of focus for the industry. Carriers, punch drunk from the 2017 innovation party, will hone-in on the two to three innovations that really matter, and concentrate their energy around fully realizing the potential of these new technologies. After all, to achieve the desired impact and realize the business case, these innovations must be implemented at scale.
FROM DATA-DRIVEN UNDERWRITING TO DYNAMIC UNDERWRITING
The market has made a decided shift to data-driven underwriting, and for good reason. Medical underwriting has been and remains impractical for the masses, and is costly for the carrier. Carriers in 2017, compelled by competitive pressure but still
weary of such a fundamental change to their business, carefully began wading into new waters, testing data-driven underwriting. Over the next 24 months, carriers will not only embrace data-driven underwriting, but will go a step further, introducing a wave of insurance products offering dynamic pricing and underwriting for the consumer. More convenient and accessible, these new products will reduce potential exposure to carriers through pricing models that adjust alongside changes in consumer risk, while ultimately aligning the interests of the two parties for a healthier, more secure life. Simply said, these products will be transformational for consumers and carriers alike.
THE YEAR OF THE CUSTOMER
The disruption of 2017 challenged the status quo in the industry, and one thing became abundantly clear – carriers have a serious problem. What is the problem? Despite significant marketing spend, life insurance carriers have devastatingly low brand awareness and affinity. In fact, according to LIMRA, many consumers cannot name a single life insurance carrier, and over 60% cannot name their employer-sponsored life carrier. Given this, it is no surprise 19 out of 20 people who own life insurance have not purchased an additional product from the same carrier. Needless to say, insurers who solve the ‘relationship gap’ stand to be rewarded handsomely, and those who are complacent will be handing their business to their forward thinking competitors. Carriers still need to meet the needs of brokers and agents for years to come, but they must also
implement significant and meaningful capabilities to build direct relationships with policyholders and prospects. So, while distribution will remain central to the industry, it cannot be at the expense of customer needs.
THE BUZZ AROUND BLOCKCHAIN WILL ABATE
As carriers (and the rest of the world) sift through the hype of blockchain and its impact on their business, they will come to recognize blockchain for what it is – an innovation to improve security and transparency; and what it is not – a profound transformation to the insurance industry. Over time, markets, including insurance, will adopt blockchain to further enhance security and transparency, but blockchain alone will not profoundly change the insurance value proposition or reshape the competitive market landscape.
From politics to the financial markets to even the weather, 2018 is off to another wild ride. Whatever the future holds, for over a hundred years, consumers have relied on the life and annuity industry for security in the midst of uncertain times. While consumer preferences have evolved and created challenges for carriers over the past decade, the technology for carriers to meet consumers where they are is readily available. As the saying goes – “with great change comes great opportunity”, and we expect 2018, for those carriers who take action, to be a year of both change and opportunity for the industry.