Insurtech impacting commercial and speciality insurance

Insurtech is now having an impact in commercial and speciality insurance, according to a new report led by Lloyd’s Market’s Association (LMA) for Oxbow Partners.

The report “Insurtech-led change in The Lloyd’s Market: a primer and strategic guiderails for managing agents” was announced at Marketminds’ Insurance 3.0 conference in Shoreditch Town Hall on Friday.

The study praised the work of Lloyd’s managing agents in developing new propositions and embracing technology and was supported by InsTech London, an innovation community which supports the industry.

It highlighted how insurtech is already impacting the industry, key drivers, insurtech trends that may affect insurers and how management teams should respond.

But it noted that “insurtech-led change is not a tide that lifts all ships equally.”

Caution

It outlined two ”points of caution” for managing agents when defining their approach. It said that embedding data may depend on class of business and if “next generation” pricing expertise is provided to a sample of supplier insurtechs it could lead to a “systemic groupthink” and the domination of some vendors.

Moreover, it warned that greatest risk for managing agents is “inaction” urging them to change the culture of underwriting, partner strategically and create multidisciplinary teams where those is the value chain can work together.

It said that whilst it does not consider InsurTech as a “distinct trend” from others in the industry, instead it prefers to see it as “one of several facilitators of technology-led change.”

Tom Payne, director of market operations, LMA said that over the last eighteen months insurtech has moved beyond being seen as a “hostile entrant” into a general insurance landscape.

He said that insurtech which emerged as a term around 2016 has become “synonymous with innovation activity throughout the industry” highlighting the overall impact now being experience by customers and at the core of the business.

And he said new roles were being created in the blockchain and artificial intelligence (AI) space.

Payne added: “We believe that this activity is the evidence that innovation through new technology and data is becoming the norm.”

Specialty market

But he said that little has been written about the impact specifically on the specialty market, explaining that this is why LMA asked Oxbow Partners to explain why and how insurtech is now relevant for insurers and reinsurers whilst providing some strategic guiderail to aid managing agents develop responses.

The report revealed that it defines insurtech as both “new generation startups” and defining “higher velocity of technology-led innovation and change.”

But it splits insurtech into two categories: “distribution”-those that are trying to acquire customers through this and proposition innovation, with the need for reinsurers as capacity providers.

And “suppliers” - those that are developing technology which could help insurers, reinsurers or brokers do business more effectively - these are vendors and require incumbents as customers.

It noted several drivers of change, such as customers becoming more “digital” and the introduction of AI and natural language processing (NLP) as well as advanced analytics changing products.

It said that the challenge for managing agents is to build solid hypotheses about how these drivers of technology-led change will play out.

It stated that managing agents need to make “digital and data a board-level agenda” to take full advantage whilst having a clear vision and implementation plan.

Case studies

And it profiled 15 insurtechs including Concirrus, Cytora and FloodFlash as case studies to illustrate its points. 

The report goes on to highlight five trends within corporate and specialty insurtech that it believes will “create material opportunities or risks for managing agents” by looking at real case studies.

1. Next generation industry databases: US based Pharm3r-a healthcare analytics company uses its flagship product-a dashboard with risk insights on drug and medical device manufacturers to help underwriters assess risk from the two portfolios, a move away from using metrics and judgement as a primary source rating.

2. Creating insight from unstructured data: Cytora uses a product called “Risk Engine” which extracts datapoints about a market which is currently SME property with the insight being delivered to insurers informing the pricing process.

3. Move to behavioural data: Pharm3r and Cytora focus on providing insurers with better insight on static assets: Concirrus is focusing on risks that move. Concirrus is a big data and analytics platform currently focused on the marine and motor insurance markets with its platform, Quest enabling access and the interpretation of large sets from historic to real-time.

4. Improving quality of data: Insurdata helps reinsurers and insurers improve this feeding into the underwriting process

5. What does this mean for incumbents: Oxbow Partners sees an investment in data as both a “source of competitive advantage and protection against a strategic risk.”

Oxbow Partners is a management consultancy serving the insurance industry.insurtech is now having an impact in commercial and speciality insurance.