Hayden Robinson appluads the insurtechs that have evolved from a tale of disruptively replacing cautious and inadaptive incumbent insurers to one many call Insurtech 3.0 and others Insurtech 2.0. A wave defined by companies that make the existing system work better by enabling rather than disrupting.

In fact, incumbent insurers increasingly work with this new wave to deliver better products and services to customers. Insurtech is imprecise in one aspect- it covers both new insurers offering niche products and technology providers delivering the means to innovate and transform. 

Flock in the UK is an example of the former concentrating on commercial insurance- fleet managers and owners. Genasys the the latter- a core system provider enabling insurers both incumbent and new to innovate and deploy new products faster. 

Robinson says “We are taught that insurance is a business of inches where a 1 percent improvement in the expense ratio is a massive win. Insurtech 3.0 lives in these details: combined ratios, loss adjustment expense, and distribution efficiency. Their success depends on whether they can make underwriters and actuaries more effective, not on whether they can convince the industry it needs a whole new brand.”

Elsewhere he describes the Insurtech 3.0 model as boring rather than delivering roller coaster excitement like Nemesis Inferno. If you look at the current deployment of Generative AI it is for boring tasks: -

  • High Volume
  • Highly predictable
  • Well understood
  • Low value-add admin tasks

Replacing the need for underwriters to spend over half their working hours juggling spreadsheets, or claims handlers using multiple sceens to  check if claims are covered by the policy document. 

Maarten Ectors has for long been at the forefront of both gradual and disruptive transformation including leading Legal and General's innovation in both General and Life Insurance. Whilst he warns of the disruptive waves that will reach the shores of insurance he also states that current AI deployments are for these boring tasks as enterprises learn how to embrace AI and adapt culture, resourcing and change management to be able to scale and operationalise AI projects. He is busy bringing digital workers into augment homo sapiens. Vital when you think that the vast majority of claims professionals are mature and reaching retirement age. 

As insurers and their insurtech enablers experiment and learn more about the potential and pitfalls of Generative AI and Digital Workers aka Agentic AI, the number of viable use cases will expand. But in a highly regulated and compliant industry like insurer taking a risk too far can end up with expensive legal cases as a few carriers found out.

I discussed the partnership of Allianz and Anthropic this week stimulated by an article by Patrice Bernard who authors a report with resarch.astoria.io which invests in and researches the European Insurtech market including AI innovators (see further reading) . 

Bernard comments: "“This selection is easy to understand, as it aligns neatly with the industry’s ingrained culture of caution. In particular, the chosen implementation conditions lend themselves to continuous oversight, limiting as much as possible the potential missteps of machines. Unfortunately, they barely scratch the surface of the opportunities that AI typically opens up in the insurance sector.”

That is the dilemna for incumbent carriers- dealing with short-term need of quarterly reporting and at the same time the micro-, macro-, and mega-trends that are and will impact the industry. Not just this year, but next five years and next decade. 

Those boring but constant improvements that Robinson describes add up to considerable change and improvement in both customer satisfaction and insurer's financials. That is not to say that disruptive changes will not impact markets and insurers. Disruption occurs more when incumbents ignore trends with the famous examples of Blockbuster, Nokia and Kodak. The latter had the digital technology to ransform the market but were so afraid of loosing the substantial revenues of selling films and processing that they did not launch it. In Memoriam Kodak. 

Incumbent insurers can embrace technology and launch new products; legacy systems are a hurdle whilst deploying newer MACH architected platforms like Genasys, ICE or EIS for new products are a way to start the process of replacing legacy core systems with new adaptable ones. 

Boring may not be exciting, may involve hard yards of work, but the end results can be immense, exciting and ensure incumbents achieve top-quartile, even top-decile rankings. 

Futher Reading

Insurtech 3.0: Rise of the Enablers Wisconsin School of Business

Allianz and AI: ambitions kept in check Research Asorya.io 

Beyond AI: Preparing For Artificial Superintelligence Forbes Magazine

The Adaptability Newsletter Rory Yates on Macro Trends for insurers

An AI revolution that is proving valuable and viable Insurtech World

An AI revolution in drug making is under way  The Economist