2018: The Year Insurtech and Data Analytics Pay Their Way

As the new year gets into its stride, I can see the insurance industry heading in some exciting directions. The starting point is how the last twelve or more months have witnessed Insurtech and Data Analytics make big inroads.  However, the year ahead will be about how those ideas and blueprints are turned into more concrete outcomes for insurers.

Data listening monetises managing 21st Century risks

Protecting people and businesses from rising cyber risks is an obvious insurance opportunity. Analysing non-traditional data, crucial to underwriting new cyber risks, has been a dark magic act. Insurers are working overtime to mine data that might deliver the required personalised insights, just like Amazon and Facebook. In 2018, the industry will demand and reach for new sets of smart AI tools that formalise data listening of external sources to evaluate and price new kinds of risks.

Insurers rely on Dynamic Data Analytics  

With a reliance on actuaries from its earliest days, insurance has long been a data analysis business. So, data analytics mattering in 2018 is not much of a forecast. But, what will become a differentiator is how insurers will rely on live analytics to support more personalised engagements, aligned to individual customer need. Typically, digital transformation has been about faster transactions. During 2018 the goal and the norm will be to make core insurance systems smarter. Smart core is all about live data analytics happening right at the centre of operations, rather than in an isolated silo.

Augmented Intelligence matters as much as AI

At the start of last year, Japanese insurer Fukoku Mutual Life Insurance made headlines when employees were made redundant by IBM’s Watson Explorer AI. As we begin 2018, the view on the impact of AI is more nuanced. AI will play a critical role, but more in terms of how AI will automate tasks and elevate insurance work, rather than automating human judgement and eliminating personnel. There will be more focus on AI freeing up staff from menial tasks, so they can become better engaged with solving their customers’ needs. As I mentioned in my Electric Sheep post, I also see a clear benefit in how AI could help insurance staff be more empathetic, by combining predictive data analytics with machine learning around behavioural analysis, resulting in some interesting new technologies. A great example of this is seen with Insurtech company, Cogito, an obvious choice for customer management.

Insurtech gets boring but more meaningful

Insurtech has had a great couple of years. Fantastic, challenging ideas have been put on the table and heavily promoted. However, now is the time for many of these propositions to prove their real worth. We have seen a shake-up already with the peer to peer insurer Guevara closing down at the end of last year. As I have mentioned before, there may be question-marks over whether those Insurtechs that seek to be alternative distribution networks for insurance can justify the huge amount of investment and media interest they have attracted. The future for Insurtech and other expressions of industry innovation will lie in how well they are plugged into the mainstream. So, making it through 2018 will require increasingly having old world insurer funding, like FRIDAY has from Baloise, or offering an Insurtech App with an open API to become part of a bigger player’s ecosystem. Octo and Pypestream do this with their telematics and chatbot/messaging platforms, respectively.  

Working in a technology firm dedicated to improving our insurer clients’ businesses through innovations in AI, predictive analytics and so much more, I cannot see nor desire the stream of great Insurtech ideas and business models dwindling. However, the degree to which Insurtech changes the industry may depend more on how much it is embraced by insurers, than how it disrupts the sector from the outside.