Cultural overhaul needed for InsurTech to take hold

Culture was in the spotlight at this year’s InsiderTech London conference. Whether it was the culture gap between incumbents and InsurTechs, the Future at Lloyd’s report or the interplay between diversity and artificial intelligence (AI), speakers agreed that new thinking was needed in the insurance market.

During the panel sessions and talks, cautious optimism was expressed that the paranoia and fear that surrounded the first wave of InsurTechs is beginning to fade.

InsurTechs are no longer seen as dragons that will destroy incumbent insurers, but rather as innovations existing players can use to exploit underserved markets, improve back- and front-end efficiency, and better serve customers.

Speaking on one of the panels, head of M&A and ventures at Hiscox, Shelley Lyddon-Mills, said: “Disruption doesn’t have to be this big bomb that comes in and kills all the incumbent insurers. I do think InsurTech is disruptive – it is asking questions of insurers that people haven’t asked for a long time.

“It’s making insurers put customers first, which we probably think we are doing but aren’t doing very well. They have instigated a change in insurance and that is disruption.”

According to the latest Willis Towers Watson InsurTech briefing there have been 1,059 InsurTech investment transactions since 2012, with Q1 2019 being the third consecutive quarter funding breached the $1bn mark.

However, many speakers expressed frustration at the cultural barriers impeding future innovation.

Robert Lumley, director and co-founder of InsurTech Gateway, said: “Start-ups are struggling with the fact that it takes time, and that is a challenge for the industry. We need to let people get on and get going – that is how to manage the relationship.”

Collaboration was the buzzword of choice, with both InsurTechs and insurers emphasising the importance of communication and partnerships.

Lyddon-Mills added: “I think it’s happening a lot more slowly than people anticipated. I think it will be like the Amazons and Ubers of the world where it’s an overnight success 10 years in the making. We are not 10 years into this journey yet, but it will happen.”

The Future at Lloyd’s

The Future at Lloyd’s report received close attention after the publication of Lloyd’s CEO John Neal’s outline modernisation programme.

According to the report Lloyd’s must “supercharge innovation”, expand the Lloyd’s Innovation Lab, create an “unrivalled” dataset and partner with service providers to cut cost and offer better customer service.

Liberty Mutual’s global risk solutions CUO, James Slaughter, said the document was “refreshing” and the “first time Lloyd’s was being really visionary”.

However, there were doubts that the ambitious vision would come to fruition, as legacy technology and thinking hold back innovation.

In his keynote speech Robin Merttens, co-founder and partner of networking organisation InsTech London, said: “The reason that none of this has happened is because of the analogue generation.

“These are a bunch of people who learnt their trade in the analogue era and, to protect their own interests, they’ve organised a rearguard action which is a very effective prevention of the digitisation of the market.

“The leadership in that period has either agreed with them or not been strong enough to head that off.”

This, along with legacy technology, has meant innovation has been stymied in the market, making it difficult for top-down – or bottom-up – modernisation to take root.

Merttens continued: “Not a single insurer or managing agent that I know of in London has a policy admin system that is fit for a digital world, and I don’t know anyone who is investing in one that is. 

“Even if Lloyd’s does pull this off, and I really hope that it does, it is digital lipstick on a legacy pig. You are only halfway through the process, you’ve only got a front end that works.”

Sharing data

Panellists argued the industry as a whole needs to review its perspective if it is to modernise effectively.

Data-sharing was the key example, with the Future at Lloyd’s report citing the importance of shared data sets, and InsurTechs throughout the day saying pooling data would irrevocably change the market for the better.

Lloyd’s head of innovation, Trevor Maynard, said: “There are some cultural issues that are getting in the way of sharing data.

“Some people have understood the value of the data and therefore they don’t want to share with other people because actually ‘that’s our edge’, but there is a power in pooling a lot of data – and the insights could outweigh the edge.”

Head of insurance at marine InsurTech Windward, Nick Maddalena, said: “It is a complete change of perspective. You are asking underwriters to abandon what they know and use a completely different set of data points and believe in them. It is a different perspective and it’s very hard to achieve.”  

This kind of cultural change is much-needed, but it comes with risks as developments such as Big Data and AI could further embed bias in the insurance industry.

Hyperion X chief data officer, Miguel Baptista, said: “There is a risk that insurance could sleepwalk into an ethical crisis, and it is a big risk.”

He added “a lot of this data will be behavioural data about people that can be breached and misused, and I think if you are not thinking of that from the beginning you incur a high risk of something like Cambridge Analytica happening.” Baptista was referring to the analytics firm accused of harvesting information from Facebook profiles without users’ permission for use in political campaigns.

Digital Fineprint CEO and founder, Erik Abrahamsson, echoed this when he spoke about AI.

“We might inadvertently build bias into our models that could discriminate against people who are different than the people who wrote the models,” Abrahamsson said. “That is why diversity and technology are so important, and why broader views should be at the table.”