'Can incumbents get innovation faster than startups get distribution?' - Insurance2025 speaker, Lidia Bozhevolnaya

Is the industry moving at a quick enough pace to keep up with consumer needs?

The battle between incumbents and startups is about whether incumbents can get innovation faster than startups can get distribution because for them to acquire customers is super expensive.

I think with Lemonade the awareness of the brand is disproportionate with their customer base, so I am not concerned about them taking over, disrupting us.

I am more concerned about Amazons disrupting insurance, for example. For Lemonade to grow to the size where they can actually pose a threat to some big players like AXA, Aviva and Hiscox, it will take them a lot of money and funding.

I am really more concerned about big Tech players with big customer bases because it is about customer access. So, Amazon has probably close to one billion customers, they are likely to go to their site for insurance.

We are moving fast enough… well that depends right, are we losing customers yet but we are not. We are actually gaining customers. I can’t say we are losing out because we haven’t got a digital offering. We are thinking about it, we are investing in it, trying to stay on par.

Tech giants like Amazon or Google could really disrupt the industry. Is that something you are keeping an eye on and try to stay on a par?

Amazon has just invested in Deliveroo and Wholefoods when they went to food distribution. Deliveroo is ready meals and leveraging their logistics and delivery system.

It is important for us to innovate and become more relevant and serve the customers better because customers are expecting more possibility and they are expecting an online experience. But it also helps with our cost model because online is cheaper than offline in certain cases. So, I think I can’t say this is the only thing that kept me awake at night because it is just one extra reason why we need to keep pressure on innovation and digitalisation in our business so that is in terms of retail.

In terms of wholesale, there are six scenarios for the future according to Lloyd’s. We are thinking in exactly the same way at Hiscox in terms of simple high-volume, low complexity risks, pricing for them can largely be done in an automated fashion.

 

For this portion of our risk book, we are definitely looking at those models. For some bespoke risks, you still need humans involved. What John Neal has outlined in his vision for Lloyds is very much aligned to those six scenarios we see in the future.

I still think you need insurance companies and brokers, we are still definitely not in a space where brokers are not needed. We still need the element of the advising and putting the right risks. But too many steps in the chain are not efficient. The reality is that if you are a mailbox passing from the retailer to the underwriter, you are not really adding much value, right?

So job losses are inevitable?

There will be different jobs because if you think if you assume that the state of the market is the same and some of the things can be automated.

There is still an opportunity for the market to grow, opportunity for creating products. I think you will lose some jobs, but you will create other new jobs. For example, jobs in data analytics, jobs in customer service and maybe working on customer journeys. I think it will be a shift in terms of different skills that will be needed. But I think the industry will grow overall because insurance market will grow overall.

Lloyd’s listed five new skills that they are saying will be needed in the future centred around data analytics, creativity, product innovation and communication. You can see that these are the skills that we are shifting to in normal, traditional insurance companies. We need more of these skills and less of other skills.

For people who want to do the same, you can go to any other industry, you will see the same. You can go to telecoms or energy, everything is changing. You just can’t keep doing what you are doing in the past. Everyone is evolving.

The distribution model of insurance is changing, it is evolving, and it is becoming more digital and that in turn is creating different but potentially more opportunities for people to get involved.

A lot of startups have realised that they will not become the new Munich Re or AXA. A lot of them have shifted from thinking that they will disrupt, to how they are going to work with the insurers to enable automation or better claims.

They are innovating in parts of our value chain and helping us become more efficient. We need the innovation and they need us as a customer. It is a symbiotic way of existing. Why? Because it is really hard to grow if you have several thousand customers, to go to a million, it is a lot of marketing money and most cannot afford it.

These startups are looking to partner or gain backing. How would an insurer differentiate a good startup from a bad one? What would they look for in a startup?

It is really hard and sometimes you make mistakes. You look at the product, whether it is interesting or not. Then you look at the team because for me what makes me want to work with a certain startup not another, is really the quality of the team. And for me it is about the team’s ability to understand and adapt to working for a large corporate because you know they are all very young and it is a different environment in terms of governance and structure.

We are trying to be very fast acting in Hiscox but it does not always work. You need to know how to work in the system. Some of them might not understand the industry well.

The only way to find out is by talking to the team. There are teams in which people disagree cos they are a startup. You find if the team is someone you can work with and you have to accept that it is a bit chaotic.

For me it is all about the quality of the team. And we have met some great teams that we have worked with.

Are you looking forward to speaking at the Insurance2025?

Lidia: Yes, definitely. It is a great opportunity to meeting people and to hear their opinions and debate and I look forward to what the exhibitors will come up with.