The big buzzword in the insurance market is without doubt, InsurTech. It is used to describe everything from insurance technology platforms (underwriting and broking platforms) to App and web-based insurance challengers and much more besides. In many articles I have read over the past few years InsurTech is touted as the great saviour of insurance, with millennials queuing up to buy bespoke insurance products ‘just in time’ for holidays, trips and so on. It is not correct to re-label existing transactional insurance platforms InsurTech as they simply are not! They are perhaps cloud based now rather than running on banks of dedicated servers but that does not mean they qualify as Insurtech. That is not to say they don’t in themselves have a place. Insurtech is not the only tool an enterprise may arm itself with in its portfolio. But even so let’s just drop the pretence people and look at what really makes something InsurTech and it’s not just a transactional platform for multiple class business.
Whether insurance is offered via an App, web based or follows the traditional London market broker/underwriter relationship, there are fundamental principles in offering any form of insurance product. All insurance products rely on accurate data and the underwriting experience to interpret that data. This data can be collected via a proposal form, online or on paper, rekeyed, or it could have been entered in by the Insured, either in its totality or by means of augmented data (eg: postcode returning the full address, last sale price, and crime rate in the postcode etc)
We cannot get away from the need to have structured data on which to base the insurance activity. This data and experience drives the premium charged plus the overhead for actually managing the business and the use of capital to underpin the promise to pay any valid claims occurring. Without that data and knowledge, the smartest App will fall down. Actuaries will interpret the data; lawyers will identify and describe trends in settlements, but it is fundamentally the underwriter who pulls all of this together to arrive at a price for their product. The intent is then that the price quoted is enough to pay for the costs of the business and any claims that occur. The Underwriter may achieve this for some of the high volume risks through the means of a rating engine, and these may become ever more sophisticated. Think Hubs of products that machines can post and pull data to gain a rate, but the rates proposed will need to be collated and analysed with many factors including the USP.
I have no doubt that InsurTech has a bright future in insurance and will allow new and innovative products to be developed and come to market faster than ever before but please don’t let us forget the key piece of every insurance puzzle; the talent of the underwriter!