I recently attended two conferences in London, one on Insurtech and one on Blockchain. The common theme discussed by their speakers was trust, or to be more precise, the lack of it.
Globally, the phenomenon of declining trust in institutions defines the political, economic and social changes that are driving headlines around the world. The 2017 Edelman Trust Barometer survey discovered sharp declines in popular trust in business, media, government, and NGOs. The tech sector, on the other hand, enjoyed a high level of trust, 76%, but this level had stagnated and did not extend to several emerging technologies.
Insurance is hardly immune to these trends. At the Insurtech London Conference, one executive despaired that the public has less faith in the insurance industry than in bankers, who are broadly held responsible for the financial crisis. Another, based in Dubai, argued that a pervasive distrust of collaboration was perpetuating outdated processes and pushing up operating costs in the London Market.
Insurtech has been embraced as a solution to the trust deficit by an industry fearing disruption. Investment has been pouring disproportionately into business to client (B2C) focused startups, taking a cue from the recent disruption of distribution channels. The idea is that seamless and integrated technology can improve the customer journey, reducing the frustration many customers associate with making a claim. The most discussed disruptor, Lemonade, aims to build trust this way, using AI to speedily process claims with minimal handling costs. Despite reports of unflattering financial results to date, customer satisfaction appears to be high.
Meanwhile, in emerging markets, insurtech offers a method to close the global protection gap and access growing customer bases. Microinsurers have leveraged trust earned by local mobile providers by partnering to offer products that exchange mobile money and airtime, leapfrogging local financial institutions. Beyond the enthusiasm to build resilience displayed by panellists from the Insurance Development Forum, multinational insurers are also keen to import innovative business models to inform their own offerings.
In the business to business (B2B) space, blockchains are appealing because they enforce trust between potential competitors, removing barriers to collaborative information sharing. Multiple consortia and partnerships have been set up to accelerate the progress of the technology, which relies on the network effects of multiple contributors. Although the Blockchain Live conference was dominated by excitement about ways that the technology could reshape businesses’ relationships with their customers across sectors, representatives from the insurance and finance industries stressed that process efficiencies were their chief opportunity. The insurance blockchain prototypes that were presented promised to do to multinational insurance contracts what AI could do for customer experience, enforcing trust and removing up to 30% of administrative costs associated with reconciliation, compliance and paperwork.
There were notes of caution, however. A startup investor warned that the blockchain “brand” will soon be used to scam both consumers and businesses, and that those developing products need to be prepared for those abuses of trust. Others emphasised that the governance of disintermediated systems, which are operated by multiple stakeholders, remains underdeveloped. Another executive worried that the potential of established technology, especially big data analytics, was being ignored in a rush to embrace untested new technology.
Axco’s new white paper, Insurance and the Fourth Industrial Revolution: Technology Transformation and the Future of Insurance (available to download here), emphasises that emerging technology is already changing processes and business models. The challenge remains to navigate the rapid pace of change and take the opportunity to establish trust as emerging technology becomes more capable.