The smaller end of commercial insurance could become the next battleground between brokers and direct insurers, according to one industry expert.
Speaking to
Insurance Business on the launch of
Accenture’s 2016 Technology Vision for Insurance,
Ravi Malhotra,
Accenture’s insurance strategy lead for Asia Pacific, said that the smaller end of the market sees “a trend of the consumerisation of B2B.”
Malhotra said that both insurers and brokers will face challenges and opportunities as disruption continues to impact the industry, with certain trends to watch.
“The peer-to-peer insurers are the ones that have the potential to disrupt because they are basically providing a substitute to the insurance company inclusive of capital,” Malhotra said.
“Those are the ones that you look at and say ‘wow, that could really scale and then we’d have a completely new competitor.’
“Outside from that, I would say the direct distribution models in say the small end of commercial insurance, which is still highly intermediated in most places in the world… if you look at companies like InsureOn, that basically takes a broker-model and it is still a broker-model but it is done in a very different way.”
Brokers will need to stay aware of the changing nature of technology as Malhotra noted that insurtech spending is increasingly focused on distribution.
“If you look at insurtech spending most of it globally is right now going into health insurer still…but if you isolated that and looked at the rest of spend and said where is it going in the value chain, the majority of it is going into distribution,” Malhotra continued.
“Absolutely, that is an area where we see a lot of activity that would either look to challenge the role of the intermediary or displace them, again there are a lot of examples in other markets, but again what I would say is there is also quite a lot of investment going in enhance the way that they do their roles.”
The 2016 Technology Vision for Insurance, a global survey of insurance executives, showed that the pace of change is not slowing down as 90% of respondents said that the pace of change will either increase rapidly or at an unprecedented rate, Malhotra said.
“Yes, there is risk if you don’t respond but also there is opportunity,” Malhotra continued.
“This is coming in the form of new players from within the industry and outside the industry as well as current players. Almost 80% of the Australian respondents agree with the statement that organisations are being increasingly pressured to reinvent themselves and evolve their businesses before they are disrupted from the outside or by their competitors.”
The Internet of Things (IoT) could have a big impact on the insurance industry as Malhotra mentioned both that and AI as areas to watch as they good prove to be game-changing.
“The things that we talk about a lot is the value proposition of an insurance company,” Malhotra said.
“Traditionally, it has been product based and it has been risk transfer, there is disruption potential in that that can become a commodity, there are peer-to-peer models, there are lots of things that you could consider, I’m talking mainly personal lines.
“The question becomes, could they be facilitators of doing more of customers. A basic one to explain is instead of just providing risk transfer, what about providing advice on loss prevention. Don’t just compensate me when something goes wrong, help me avoid it.
“That is absolutely doable with the IoT.
“We had 80% of respondents globally saying that the IoT will cause at least significant change in the industry with 21% of them saying it will cause a complete transformation,” Malhotra continued.
Malhotra said that insurance businesses will need to watch the market as the next five years could see major changes.
“Things like smart advisers, we actually put those in a two to five year period,” Malhotra said on the pace of change.
“You contrast that with something like on premise enterprise systems and those are already matured probably moving into the aging category. As far as timelines, I’d say we are in for quite a bit in the next five years.
“This is not science-fiction stuff.”
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