Fintech Finance presents: The Insurtech Magazine 05

MAGAZINE

ISSUE#5

THE

INSURTECH

INNOVATE...

But how can I possibly digitise product lines and processes when I’ve all this legacy to maintain?

Rethinking the value chain TRANSFORMATION IN A TIME OF PANDEMIC

COLLABORATE...

Are you mad? That means sacrificing the customer relationship and diluting my revenue stream!

CONNECT...

An API model could cut my costs and ensure growth? Show me the way!

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INSIGHTS FROM Chubb

Sensedia ● Trulioo ● Instanda ● SulAmérica Seguros Deloitte ● AXA XL ● Uncharted ● Zurich ● Aptitude ● DBS ● L&G ● Netcall ● RSA ●

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COLLABORATION 4 Pushing the boundaries How glogal insurer Chubb stepped out of its comfort zone

8 Invisible and everywhere Exploring Chubb Studio’s ‘insurance in a box’ solution through the eyes of DBS

11 Uncharted territory Collaborating across startup Uncharted’s platform lets industry players seek out new worlds

APIs & MARKETPLACES 18 Time for a change Cloud-based, API-driven ecosystem could be a post-pandemic solution

21 A healthy outlook Telemedicine provider SulAmérica Seguros connects with startups, healthtechs and banks via APIs

28 An open invitation ‘Open insurance’, like ‘open banking’, boosts revenue and CX, says Sensedia

31 KYC-starting transformation Trulioo’s advice on where to target insurtech investment

COMMENTARY 14 The new nimble How to drive a digital agenda

32 Igniting innovation Insurers couldn’t but rise to the digital challenge posed by the pandemic. But where does the industry go from here?

CFOs 36 The great enabler

THEINSURTECHVIEW ISSUE #5

2021

The UK Supreme Court ruling in January, ordering firms to review decisions affecting hundreds of thousands of small businesses who were told they could not claim under business interruption insurance for COVID-19, was an ugly moment for the industry.

To misquote the old Commercial Union advertising slogan, it made a very public drama out of a crisis. According to the Financial Services Ombudsman, the only area of insurance to disappoint customers more was travel, where complaints to the service also rocketed in 2020. But they are both a reflection of where the industry was ‘back then’, in the pre-COVID world, which was also, for many insurers in many areas of their business, a pre-digital one.

As became very apparent editing this edition of The Insurtech Magazine, that’s changing fast. Transformation is no longer so much ‘digital theatre’; it’s a reality that’s penetrating deep into organisations – and at speed. If anything, the issue now is how to implement fast enough and, where there are still pockets of cultural resistance to change

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within organisations, how to shift them.

The personal reflections from three chiefs, in our CFOs section, give some insight into that – as do our two discussion pieces. Interestingly (and with no previous conferring!) they all identify almost identical challenges and the same approaches to tackling them. What are they? You’ll have to read on to find out… but our ‘talking cover’ might give you a clue. Sue Scott, Editor Did you recognise last issue’s ‘spine tingler’? “Vision without execution is hallucination” was by Thomas Edison, who has been described as America's greatest ever inventor!

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Technology’s great – but don’t let it take over, cautions Aptitude

38 Time to shine Zurich on allowing CFOs to play a more strategic, value-adding role

40 Future-proofing and change: A CFO perspective Digitisation at L&G is impacting every department – including Carl Moxley’s

HEALTH INSURANCE 42 Taking the pulse of health insurance Health cover will look very different, post-pandemic. Those looking to adapt will need platforms

44 India’s insurance revolution COVID-19 has encouraged Indian health insurtech to grow up, increasing reach and affordability www.fintechf.com

THEINSURTECHMAGAZINE2021 EXECUTIVE EDITOR Ali Paterson EDITOR Sue Scott ART DIRECTOR Chris Swales

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ONLINE EDITOR Eleanor Hazelton Lauren Towner

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32 ISSUE #5 All Rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying or otherwise, without prior permission of the publisher and copyright owner. While every effort has been made to ensure the accuracy of the information in this publication, the publisher accepts no responsibility for errors or omissions.

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COLLABORATION

Pushing the boundaries A plethora of new and emerging opportunities presented by digitisation means there’s never been a more exciting time for the insurance industry, argues Sean Ringsted, Chief Digital Officer at Chubb There was a time when the idea of picking a financial product off the same corporate shelf on which your cornflakes and baked beans were stacked sounded crazy. Now, supermarket banks are old hat: ride hailing firms, airlines, mobile phone operators, social media and technology companies… everyone’s getting in on the act.

Finance sector borders, once a clearly defined sector, have been permanently blurred. What does that mean for the banks and insurers whose territorial boundaries are being breached?

The smartest are busy snuggling up to strange new bedfellows and using APIs in a value exchange that’s proving deeply disruptive but mutually beneficial. Global insurer Chubb, which has long seen the value in partnering, is one of them.

In September 2020, it launched Chubb Studio, the next stage in its mission to make insurance almost invisible but virtually everywhere by enabling retailers, ecommerce providers, banks, fintechs, airlines, telcos and a host of other industries to add digital insurance options to their own product and service offerings.

Here, Chubb’s chief digital officer Sean Ringsted tells The Insurtech Magazine’s executive editor Ali Paterson why the emergence of these increasingly complex financial ecosystems means insurance has a bigger role to play than ever.

THE INSURTECH MAGAZINE: How have you seen the approach to partnerships change and evolve over the last few years?

SEAN RINGSTED: So many sector changes are taking place globally,

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whether that’s through digitisation, ecommerce… just look around at what’s happening today in terms of how business is being transacted in a number of sectors. Then you have underlying demographic changes – such as aging populations, urbanisation, changes in healthcare provision. All of these things combined are driving a whole set of new business models and new ecosystems.

Those that are successful, or will be successful, in riding the tailwind of these trends, have all expanded beyond their original core business to meet the opportunities and consumer demands.

And they’re expanding their value chains in doing so. That expansion increasingly includes partnerships with insurers such as Chubb.

Across nearly every industry, you’re seeing enterprises developing these new ecosystems or platforms – a network of overlapping services, providing consumers with one-stop shopping and a really relevant experience. Obvious examples that come to mind are Alibaba and Tencent in Asia, or Amazon and Apple in the United States.

If we just focus on banking, many banks are moving towards what I would call a convenience banking model, and they’re based on a number of non-traditional financial services around milestone moments in someone’s life – getting married, going to university, buying a new home. At each of those moments, there’s a traditional interaction with the bank, whether it’s a loan, a mortgage, wiring funds, a credit card, or just simply opening an account. Banks are starting to engage in the digital ecosystems by offering contextual services as a

complement to this traditional transaction. By doing so, they’re delivering a richer experience to their customers, and, at the same time, building greater loyalty and stickiness.

As all of these ecosystems and businesses grow, they create different risks for consumers and the companies serving them. That’s where insurance comes in. And that’s the great thing about insurance. Everybody needs it. It makes the world move, it protects you, your family and your assets.

So, if insurance can be transacted digitally, then it really helps these digital ecosystems move along.

TIM: How will the recently launched Chubb Studio help this approach to partnerships and will it change the insurance industry as a whole?

SR: I don’t know about the industry as a whole but, at Chubb, we’re very excited about it. Even before we launched Chubb Studio, we had about 150 distribution partnerships globally.

In just the last few years, we signed five major new partnerships which has given us access to more than 100 million customers in Asia and Latin America.

Those partners include major financial institutions, such as DBS, one of the largest and most respected banks in Asia.

Based on our experience of these partnerships, we’ve learned that to succeed it’s got to be about more than just impressive tech. It’s also about making the products and services contextual, relevant and very customer-focussed. This is where Chubb Studio comes in, and why our product teams are particularly excited about it. www.fintechf.com

Companies have expanded beyond their original core business to meet the opportunities and consumer demands, and they’re expanding their value chains by doing so. That expansion increasingly includes partnerships with insurers such as Chubb

A digital blur: Now that every sector is making inroads into finance, insurers need a new approach

www.fintechf.com

Issue 5 | TheInsurtechMagazine

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COLLABORATION The platform will simplify and streamline insurance product distribution for our partners around the world.

It can be a complex and lengthy process to stand up a combination of technology and an insurance product, but with Chubb Studio, we really think we’ve simplified that process. Our partners are using the new platform to add insurance options to their own suite of products and services, and they can do that in minutes by adding a widget. They can also use the Studio to stand up a whole website, which could be white labelled, co-branded, or use a Chubb branded design option; or to go for a more complex, deeper API integration.

The studio technology allows direct access and interfaces for our partners to make their own adjustments in real time, and dashboards to keep track of everything.

In a nutshell, what Studio means is that Chubb can handle the insurance side of things – quotes, underwriting, payments, billing, claims processing and so on – while our partners focus on providing the insurance solutions that are most relevant and useful to their customer base.

For example, if you’re buying one-off travel insurance, the premium on that is pretty small, and that’s not effective to do manually. If you can do it digitally, you’ve just increased the range of product that’s available to a customer, and that’s but one example. As you start to go through these ecosystems, the products may be relatively simple – and the premiums relatively s mall – but Studio allows you to create more of them and make the purchase much simpler. It really is a win-win for the customer, in terms of their access to insurance that’s relevant and affordable.

TIM: How important is the use of open API technologies, as offered by Chubb Studio?

SR: They’re crucial. They’re the oil that makes the motor go around in these ecosystems. The connectivity between companies, in large part, is very much centred on APIs and, clearly, the more data you have and the better data you have, the better you are able to understand the customer and his/her needs and the better you’re able to develop products and services for them. It almost becomes a self-fulfilling, accelerating prophecy.

I think estimates over the next four or five years are that something like a third of

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the global economy will be powered through ecosystems. And it’s not just ecommerce, but mobility, travel, banking, healthcare… All of these are centred around human and organisational needs, and all of them require insurance in order to be able to operate. So, we’re very much at the core of providing risk transfer and mitigation services as these ecosystems continue to develop.

DBS is a great example of not only the kind of collaboration that’s a hallmark of a successful partnership, but it’s an example of how insurance can be used to drive customer loyalty and brand value

TIM: DBS was the first big bank in Asia to engage with Chubb Studio.

How significant is that partnership?

SR: We officially launched a 15-year partnership with DBS in 2018 to exclusively distribute consumer and SME insurance products to DBS’ large customer base in Singapore, Hong Kong, Taiwan, Indonesia, etc, and to do that through its banking channels, including in-branch, and various direct marketing channels.

To date, we’ve co-innovated a variety of customer-focussed online and mobile digital insurance products. That has been tremendously exciting. So, for example, we launched a fully integrated solution within DBS’ e-wallet PayLah!, and we built our travel insurance platform within the PayLah! app. It pre-populates customer details and allows them to

pay in-app, so the customer journey is really quite seamless.

Our products are now fully integrated as a one-click purchase on DBS’ mobile platform, including products such as personal accident and health insurance protection. These are tailor-made for DBS, to match the bank’s customer segments, and the bank product integration points, such as bill payment, remittance, and credit card applications.

If you think about ecosystems and the need to integrate within the bank those touchpoints with the customer, these are some very real, practical examples of where and how we’ve done that.

The partnership with DBS continues to evolve. It is a great example of not only the kind of collaboration that’s a hallmark of a successful partnership, but it’s an example of how insurance can be used to drive customer loyalty and brand value.

The bank’s digital ambitions marry our own: it has a very strong focus on providing the best digital experience and that resonates with the vision we have for our clients. This partnership has been instrumental in unlocking new consumer touchpoints for us as we think about our products and services, and it has also represented an extraordinary opportunity to meaningfully improve consumers’ lives.

TIM: Do you think we will we start to see more collaboration between insurers and digital banks?

SR: The appeal to banks of offering insurance products to their customers is that it does generate greater loyalty, trust and value, especially when it’s a complement to the bank partner’s core products and services. In the past, the model may have been one where the insurer pushes the product and the bank distributes, but with digital technology, we’re moving to a model that is perhaps more collaborative.

Now, of course, with APIs, you can deliver insurance products and services right at the point where the bank needs it and wants it. So, the bank has a lot more choice and flexibility about where and how that insurance product/service gets delivered.

There’s so much energy and creativity right now, in terms of thinking about how to most effectively reach the customer, and today the digital channel is really proving to be a great touchpoint. www.fintechf.com

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COLLABORATION Under covered: Consumers in Southeast Asia are among the least likely to hold insurance

DBS was the first of Chubb’s banking partners in Southeast Asia to open Chubb Studio’s ‘insurance in a box’.

Pearlyn Phau explains why it came at just the right moment Banking now and into the future is no longer a go-it-alone venture, says Pearlyn Phau, group head of consumer banking products, marketing and ecosystem partnerships at DBS. The largest and one of the most exciting banks in Southeast Asia, with more than 11 million customers and 29,000 employees, it has recently been crowned the world’s best digital bank for the second time and the world’s best bank for the third

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time by Euromoney and Global Finance respectively. It’s earned those impressive mantles by delivering best-in-class customer experience and groundbreaking digital products, notably its mobile wallet PayLah!, which was released way ahead of its time in 2014 and now has more than 1.8 million users. You’d think that it would be big enough to stand on its own two, well-planted digital feet. But, according to Phau, if DBS and banks like it are to keep their foothold as a new type of competitor shakes the financial tree, they need allies.

Global insurance provider Chubb is one of them. The two giants entered a 15-year partnership covering Singapore, Hong Kong, China and Taiwan, in 2018, bringing together two companies who have strength in their respective areas. Chubb, being a world-leading general insurance company, was able to bring to the table a full suite of

comprehensive products, while DBS had its extensive distribution network, and the digital capabilities it has been building over the past 10 years.

“The important thing, though,” says Phau, “is having a common view towards digitisation of the insurance journey, which facilitates quicker, more contextual offerings for our joint customers.”

THE DIGITAL IMPERATIVE In the white-hot cauldron of the Asia Pacific market, constant innovation is a necessity for banks to both retain and grow customer bases. A survey in early 2020 by Finder.com revealed an estimated 980,000 Singaporeans, approximately 20 per cent of the adult population, have accounts with digital-only banks, with 488,000 more planning to open a digital account in the next five years.

Competition for that business has just www.fintechf.com

grown even fiercer with the Monetary Authority of Singapore (MAS) granting digital banking licences to three tech giants and a financial consortium. A tie-up between ride-hailing and internet services giant Grab and Singapore Telecommunications (Singtel) won one of the digital full bank (DFB) licences while a wholly-owned entity from Sea Ltd received another. MAS also awarded a digital wholesale banking permit to Ant Group Co, the financial powerhouse that was spun out from Jack Ma’s Alibaba, with a consortium of financial equity investment firms – Greenland Financial Holdings, Linklogis Hong Kong, and the Beijing Co-operative Equity Investment Fund Management – securing the last.

“We are seeing a lot more evolution in the ecosystem landscape,” Phau says. “Fintech companies have started to mature and have ambitions beyond their original mandate; they are coming into the banking space, they are lending money, they are taking deposits and giving out retail investments.

We are also seeing the emergence of virtual banks and digital standalone banks.

“More recently, of course, COVID-19 has accelerated digital adoption and digital disruption. We are seeing a lot of changes in the marketplace; partners’ business models altering; customers’ behaviours and expectations evolving, as well. And I think there are going to be a lot more changes in the months ahead.”

Speed in adapting to those changes is crucial, and working with a like-minded partner helps, says Phau.

“The bedrock of our partnership with Chubb, in terms of our culture, in terms of where we see our future together, is really about doing what’s right for our customers.

It’s about aligned work cultures, it’s about leveraging on technology, and also having a shared vision for innovation. Chubb’s commitment to digital innovation, its active collaboration with partners, and offering a suite of market-leading products, across different customer segments, makes it an ideal partner for us. It also helps us to deliver the digital customer experience that we are known for.

“One good example of that has been the development of a complementary COVID-19 cover, which is clearly a very relevant product in today’s world. Both organisations wanted to do right by our customers, and we were in a position to help. More than a million customers and their families signed www.fintechf.com

up for this cover in under a month, allowing the two organisations, by coming together, to offer a level of assurance in customers’ moment of need.”

While being able to offer timely, contextual insurance products, helps embed banks in customers’ lives, for Chubb it’s an opportunity to gain access to a market almost invisibly, particularly in Asia-Pacific where consumers are significantly underinsured, but at the same time have high expectations of being able to achieve any financial task through digital channels with ease.

In September 2020, Chubb announced it had developed Chubb Studio, a global platform that streamlines the distribution of the company's insurance products through its partners' digital channels, using an open API architecture. In effect, ‘insurance in a box’.

DBS was the first bank in Asia to open it.

“We believe that the sharing of data in a secure manner and, of course, with consent, as well as an open API architecture, will be a gamechanger for both companies,” says Phau.

“Both DBS and Chubb have harnessed their digital capabilities to provide a convenient, seamless, and end-to-end purchasing experience for our customers.”

Chubb Studio is enabling us to take a very agile approach to rolling out new digital products that are timely, while also allowing us to experiment and pivot In fact, DBS didn’t waste any time leveraging Chubb Studio to develop and roll out three hyper contextual and relevant products in the closing months of 2020.

Mozzie Protect offers customers health insurance against dengue fever, which has the highest mortality of any disease in Singapore, which was rolled out for under S$0.25 a day. Against the moving backdrop of COVID-19, it also launched Work Anywhere, a product that protects against health and ergonomic risks associated with telecommuting. And then there’s the Staycation Project – another product of the pandemic.

“There’s nowhere to travel, right now, so there are a lot of people going on

staycations,” explains Phau. “This product offers health protection as customers enjoy their next staycation.

“Chubb Studio is enabling us to take a very agile approach to rolling out new digital products like this that are timely, while also allowing us to experiment and pivot.

“We believe that an API open architecture is going to be the way forward. For the customer, it means the process of applying for a product, or getting onboarded – the entire customer experience, in fact – is going to be seamless and is going to be a lot faster, because there is no need for the customer to go through the hassle of having to fill out information, when a lot of this data already resides within the two organisations.”

Phau sees an even closer collaborative ecosystem developing between banks and insurance companies, two industries that she describes as having a natural alignment. At the heart of that, is the benefits that accrue from sharing and analysing data to provide enhanced, even holistic, services for customers.

“We get a lot of data from social media interactions and data interactions with our partners in the ecosystems,” Phau says.

“Data is not just coming into us; it’s also coming off us. As well as the techniques that banks have acquired in data analytics and in modelling, the use of artificial intelligence and machine learning have allowed us to make a lot more sense of the abundance of data that we have.

LIVE MORE, BANK LESS “It is important for us to go beyond just product manufacturing and distribution, but really to understand what the job is to be done,” emphasises Phau. "By that I mean, when are we able to provide customers with insights and intelligence that goes beyond the obvious? How can we help customers anticipate their needs? How can we advise them and alert them? And how can we provide all this intelligence to the customer in an automated fashion?”

Today, when customers apply for a DBS product via its digital platforms, they’ll invariable find an insurance offer embedded alongside. It will be contextual and relevant, says Phau, helping the bank live up to its slogan to ‘live more and bank less’. And, for Chubb, it’s making its insurance protection both invisible and everywhere.

Issue 5 | TheInsurtechMagazine

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COLLABORATION

D E T R A H C N Y U R O T I R R E T Mike Eksteen is Chief of Growth and Product at an insurtech that allows every actor in the value chain, whatever their stage of digital transformation, to collaborate across one platform. It’s ‘not rocket science’, but it does allow the industry to seek out brave new worlds It’s fair to say that consumers don’t view insurance firms as technological pioneers; they don’t expect them to be as intuitively helpful as Google or infinitely satisfying as Amazon.

In fact, we tend to have a grudging relationship with cover holders, which is transactional at best.

And, because of this historic interaction model, insurers have not needed to be at the cutting-edge of IT. At a time when many other businesses have migrated from legacy systems to mobile and Cloud solutions, for example, insurers remain some of the largest users of mainframe technology.

Times, however, are changing – and changing fast. The insurance industry is rapidly evolving away from being heavily reliant upon ageing technology stacks, inefficient workflows, fragmented distribution and limited access to quality data. www.fintechf.com

For Mike Eksteen, chief of growth and product at Uncharted, the Singapore-based insurance-as-a-service platform, the goal is digitisation and simplification of the insurance product process. But first, he says, insurance needs to accept that the industry is one that consumers prefer not to have to think about or deal with.

“It’s a tough thing to swallow, but people don’t want to interact with insurance companies. They just don’t, and I think the faster insurance companies understand that, the better for the end customer. Rather, the way that they would like to consume insurance is through their existing lifetime or lifecycle journeys,” he says.

As part of his job to drive a worldwide growth strategy for Uncharted, Eksteen has established a ‘product-led layer within the company’. The product in question is the Uncharted Cloud, a bunch of services that enable product development, underwriting and digital distribution across insurance transaction flows.

“From an insurance standpoint, building out the technology, the open API framework, to then make that product available and integrated into a frontend environment, like a bank, or a distribution endpoint, or a partner,

just makes absolute sense,” he says.

“It allows accessibility for the customer; you’re not asking them to drop whatever they’re doing and go to a separate insurance experience, which, no matter how good the user experience is, none of us really enjoys.

“So, these partnerships are absolutely crucial, not only to grow an ecosystem environment, but also to push insurance into the future – that combination with a bank or other distribution endpoint, which could be a Google or Amazon because they understand how to manage clients, they understand customer service, they have all the technology deployed to do that and they do all the work to acquire the customer. A secure data framework set up within that, then allows the insurer to access that customer and provide the product within a journey that is frictionless.”

There are several ways in which underwriters, who develop and risk assess a product, the carriers, who customise and price it, and product distributors can use the Uncharted Cloud, whether they’re searching for an end-to-end solution or just looking to supplement part of an existing system or process.

“It enables the carriers, on one side, to make their products available through digital distribution, and also to test and sandbox products,” says Eksteen.

“It enables them to, in some cases, innovate outside of the internal security frameworks around the product, with price testing and so forth.”

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COLLABORATION Stellar ambition: Transforming insurance could help build a better world

“On the other side, it allows brokers to access a digital insurance product from the Uncharted platform and then use that to distribute into their frontend; or the actual frontend distributor to embed that product deeply into their existing user journeys. And when I talk about the product, I’m talking about the product end-to-end, not just the policy; it’s the policy, the servicing, the claims, all of that packaged into their API frameworks.

It’s about the ability to then expose this, without needing to go through massive integrations every time. It allows the insurer to really focus on the product, the portfolio management and risk management. The things they do really well.”

Fundamentally, Uncharted is about allowing everyone in the insurance value chain, whatever stage of digital transformation they’ve reached, to communicate effectively with each other.

“If you look at insurance transactions flow, the biggest bulk still runs between the insurance carrier and the broker environment – traditional brokers and new-age brokers, like managing general agents (MGAs). For these two to come together takes massive deployment and integrations, as they are already focussed on their own transformational programmes.

“This is where Uncharted comes in,” says Eksteen. “All we are interested in doing is enabling that digital transaction flow and making it more efficient from, firstly, a cost point of view, but also from a time point of view; for these companies to speak to each other. It’s not rocket science.”

Adopting this model to reach consumers, he says, could not only free up capital to allow the insurance industry to become an even more powerful force than it already is,

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but the data it generates will also enable it to focus on designing hyper-personal, hyper-local products.

“These types of ecosystem partnerships create access to insurance products that have never been seen before, on a mass scale. They allow the insurance company to collaborate with the frontend distribution platform, like a bank, that already understands that customer, and can then start to build specific products and services around that customer, according to their needs and life stage.

“In a lot of cases, the insurance company doesn’t know where a consumer is in their life stage; it’s trying to sell them a product that doesn’t necessarily fit what they need. Where I think you’ll see success in future, is where a company starts to understand what types of products to serve and serves them to consumers at exactly the right time. The technology is an enabler for that, it’s a tool, but all the technology in the world can’t create magic for you if your product is just not relevant for the customer.”

That comes from relationships and data.

“There is enough data out there to understand customer needs, but also, I think, understand hyper-local needs,” adds Eksteen. “Every market is completely different. And, with this post-COVID environment we’re in, everything becomes very locally driven. You need to understand the geographic environment where these customers are operating, too.”

Since its launch in 2017 by co-founders Nick Macey and Joachim Baecker,

Uncharted has grown swiftly across Asia, Europe, North America and Africa, boosted by the acquisition of fellow Singaporean insurtech Swift in early 2020. That gave it a proprietary core insurance system to inform technology development for its distribution platforms. The acquisition was swiftly followed by a $5.8million Series A funding round to power global expansion.

“Insurance is pivotal to everything we do,” says Eksteen. But he believes it should be developed and sold intelligently.

“You just cannot keep on serving products for the sake of serving products.”

There is a bigger picture here, too.

“If you have a more efficient transaction flow within insurance, there is evidence that there is a good percentage point of premium being charged that is freed up.

Insurance companies are central to the capital markets and, if they are able to unlock cost efficiency, there is a case to be made for the industry to utilise some of that to, number one, pass on to the client, but also to take a much bigger stand on things like climate change. That allows us to completely relook at the insurance model – and that is definitely within our long-term vision at Uncharted.

“We are not competing here with the carrier and the broker,” stresses Eksteen.

“We are looking to partner and enable – it’s as simple as that. By doing so, hopefully, in future we can enable a new model of revenue flow, profit flow and commission flow, and, ultimately, utilise some of that to build a better world.”

These type of ecosystem partnerships create access to the insurance product that’s never been seen before on a mass scale

www.fintechf.com

Three ways to drive revenue and add customer value: Simplicity. Ease. Speed.

Chubb Studio is insurance, simplified. It lets partners digitally access our products, services and claims… integrating what we do into what you do.

At Chubb, we value our partnerships. We help banks and financial institutions deepen and expand their customer relationships by providing insurance solutions that addresses meaningful financial and life needs.

To learn more about how a partnership could benefit you, visit chubb.com.

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COMMENTARY: HOW TO DRIVE A DIGITAL AGENDA

Thenewnimble IT projects that have been overlooked for years have shot to the top of board agendas, as companies, galvanised by the pandemic, commit to new ways of working. So, just how do you get buy-in for transformational change and how do you deliver it now? We asked Richard Farrell, Chief Innovation Officer for Netcall, David Germain, Group Chief Information Officer at RSA, and Nigel Walsh, who leads on the insurance industry and insurtech at Deloitte, to discuss their experience

It’s been a monumental struggle to win hearts, minds and budgets for transformational change in insurance. So, when the pandemic hit, there was a hold-your-breath moment as boards who’d previously committed to shifting the dial, weighed up their priorities in the face of business-critical pressures.

But, according to Richard Farrell, chief innovation officer at Netcall, which offers low-code

contact centre and omnichannel messaging solutions over its Liberty platform, no one’s considering taking their foot off the gas.

“Some of our larger insurance customers, that already had long-term digital plans, told us quite early on in the pandemic that they were prioritising our projects, because they were so important to their business outcomes,” he says.

In fact, if anything, projects that had been idling at the bottom of companies’ to-do lists, suddenly found themselves greenlighted.

“Every year, they’d be the part of the budget that got cut, but now they’re in the top tier of our programme prioritisation going forward,” says David Germain from insurer RSA. He’s one chief information officer who’s been building an IT strategy fit for just such a Damascene event.

“RSA has been around since the 17th Century, so our brands are very well known. But we have technology that’s been around a hell of a long time, too (maybe not quite that long!). Trying to modernise that technology, build new products, create a bimodal architecture that can work with the old and the new, is really challenging,” he says.

“We need a strategy that ensures we’re continuously moving at pace, making the right smart investments, aligning ourselves with the right smarttech/insurtech partners – which we’ve done more of in the last year than at any point in our history. And then building

those partnerships, because we can’t do it alone – we’re not an in-house development organisation. We want to be a Cloud-first adopter; where it makes sense, we want to build a low-code environment that’s API driven; and we want our stack to be microservicesdriven. So, we’re trying to put ourselves in a position where the partnerships we have, the architectures we drive, the ecosystem we’re a part of, all work together well.”

This approach has been proven by the world coming to a standstill in 2020.

“Our thinking, right now, is that we’ll exploit any platform opportunity that allows us to accelerate an outcome for the organisation, and not become the victim of the business process because our organisation thinks it can only be done a certain way,” says Germain.

“A lot of platforms come with out-of-the-box functions that you can tweak, and that has to be the focus. Take the Guidewire claims programme we’re using. If you’re smart around how you deliver that tech, move it on, so you don’t have an issue with creating infrastructure around it, and use the Guidewire Cloud, or software as a service (SaaS) solution, you’re then into a low-code configuration environment.”

Such solutions have an exponential effect on the tech transformation timeline.

What’s sometimes slow to catch up is the culture of the organisation running it.

“I’ve spent a fair few years doing large-scale, core system transformations, whether it's Guidewire, Duck Creek, Salesforce or any of the

Eye on the prize: It’s best to run the digital race in short, sharp sprints

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customers and brokers,” says Nigel Walsh, who leads on insurance and insurtech for Deloitte. “What I’ve found is that there will always be technical debt – something you put in yesterday is out of date tomorrow – so, yes, you need to make the system flexible, through Cloud, microservices or APIs. But I also see a lot of operating model debt – legacy ways of working.

“Our industry is very quick to blame technology as the prohibitor when it comes to the speed at which we can move, but technology is never normally a barrier. There might be a cost issue and you might be moving through what a friend of mine calls ‘the valley of the shadow of death’, when you have old and new technology running simultaneously and you’re trying to get stuff turned off – which we’re terrible at, in insurance. But you can hustle your way through that.

We’re all about exploiting any platform opportunity that allows us to accelerate an outcome and not become the victim of the business process David Germain, RSA

“The things that take longer to change are the mindsets and attitudes towards the new operating model. We all talk agile, but very few people can actually say ‘we’ve got our business folks working side by side, desk-to-desk with our technology folks. If they want a change done, we can use DevOps tools, and whatever else, to push stuff out to market in real time. And that’s where the insurtechs have done really well. They don’t have any technical debt and, at the same time, don’t have any operating model debt, either.”

Germain agrees: “It’s the toughest thing in the world to change your operating model. Where you have function leaders who are resistant to change and people who feel they’re becoming less empowered, and no one really understands the squad-type construct [of change management]. In that case, it’s really hard to bring a group of individuals together – with a scrum master, an architect, an infrastructure lead, and a couple of SMEs – to www.fintechf.com

run some kind of sprint, and then iterate and increment change around it. Because they’ll ask ‘where’s the management layer?’, ‘where’s the business case?’, ‘where’s the myriad of management overhead that we need to lead it?’, ‘how do we know you’re spending the money wisely?’, ‘what do you mean by a backlog… that just means you haven’t delivered the sprint, surely?’. You get into these conversations, which are really hard to get out of, because it’s an education process and, even after that education process, sometimes people still don’t get it. So, going from zero to one is really difficult, and going through the maturity curve even more so.”

As a technologist of 30 years’ experience, Netcall’s Richard Farrell has arrived at the same conclusion.

“I can talk to you about instructions per second, and David and I can have a great chat about infrastructure … but the culture, the operating models, the processes are far more important than the tech,” he says.

“In fact, at Netcall we try to keep the technology ‘til last when we’re talking to clients. First, we want to understand their ways of working and processes. We want to know what business outcome is required.

For example, we did a recent piece of work with an underwriting firm and its driver for change was twofold. It was looking at operational efficiency – saving money and getting more throughput – but its other key metric was Net Promoter Score, and making sure it was improving customer experience at the same time. The task was to look at existing complex processes and journeys, not a new service or shiny new product. It was to ask ‘what are the processes that cause us pain, and cost us a lot of money?’ and ‘what process should we get to, and then implement?’.

“We look on design thinking as a sort of philosophy,” he adds. “We’re constantly talking about stakeholder involvement and so, if an organisation comes to us, that has already set up multifunctional teams and is already clear about the business outcomes it wants to achieve, that’s great. If somebody’s just looked at a Forrester Wave report and wants to talk technology, that’s probably the wrong audience at the wrong time.”

David Germain’s advice to anyone trying to minimise the shock of the new and gain buy-in from the top is to ‘start with something small’.

“That’s what I did – you have to prove you can get stakeholders to believe in it,” he

says. “When you start with something small and the outcome is fantastic for the sponsor – it’s grown his or her op plan, their revenue line, etc – they start to believe in it, and then you can increment. But you can’t take an organisation through a huge transformation and expect to move from basic waterfall processes to something so profoundly different in one leap. I’ve done it in big banks, and it’s imploded on me.

“So, in this organisation, we’ve done it in small steps and we’re still doing it – we’re not there yet. In time, it changes the culture. Also, think about the people you hire – people who are more progressive in their mindset. That really does help the business embrace change.”

The culture, the operating models, the processes are far more important than the tech Richard Farrell, Netcall

“ We use a slogan here quite a lot, which is ‘think big, start small, act quickly’,” adds Walsh. “It’s just a polite way of saying ‘we’re not trying to tell you don’t have a great vision around horizon two or horizon three thinking. But there’s no point spending all our time talking about horizon two and horizon three, and not actually executing something’.

“I remember my first large-scale claims programme, which was a five-year programme, and I think I was one of the last people standing from the original team, because people churn so often on those projects, which makes them really hard to do. By contrast, those I’ve been involved in over the last couple of years have been around 12 weeks to minimum viable product: iterate, next iteration, release one, release two. They’re short, sharp bursts.

And that echoes David’s point. You need that to build belief and earn the respect and trust of others across the organisation.

Then you can go ‘hey, we did this! This is what we said you were going to get, and we’ve delivered it. Let’s do the next batch right now, or work through the backlog’.

“Also, this isn’t just about the management and IT departments, it’s about getting everyone on board.

It’s also not about having your own legal or procurement people involved.

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COLLABORATION: HOW TO DRIVE A DIGITAL AGENDA There’s no point dropping back into a standard procurement process, that’s going to take 12 weeks, for example, if you’re trying to accomplish a six-week project.”

Since the events of last year, there is evidence to suggest that visionary chief technology officers and others within an organisation with responsibility for digital transformation, won’t have quite such a hard time justifying a new approach.

“We do some work with the London Market at Lloyd’s, and that’s had 300 years of face-to-face engagement and using paper.

And all of a sudden, on one day, that changes, and it breaks,” say Farrell. “I think we’ve seen two things as a result of that. One is that there’s been a desire to adopt different processes as a reaction to the reality of different ways of working. The other is that larger customers told us they were prioritising our projects. So, we saw a reaction, but also a reaffirmation that this is the right long-term strategy: that there needs to be more digital, and there needs to be more engagement.”

Netcall, which works across sectors, including government and health, was at the sharp end in experiencing demand for agile solutions in an environment where speed couldn’t have mattered more.

“We have seen some real, cutting-edge, vaccine and testing use cases for technology solutions. We’ve had entire applications that have been delivered in five days from scratch. These proof points are something we will bring back into other sectors, for more evidence of how these technologies can really radically alter a process and be implemented quickly,” says Farrell.

David Germain recalls how, back in April 2020: “Our challenge wasn’t digital solutions delivered into brokers, or digital solutions for consumers. Our challenge was getting our business to work remotely.

“We did not have an appropriate remote setup for our organisation. We had to deliver thousands of laptops – we had to buy thousands of laptops before we could deliver them! – to get our back-office staff and contact centres to be able to work from home. We had to deliver more capacity on our network, because we didn’t have enough to support the business under this new, homeworking model. And we didn’t have the right collaboration tools. In other words, we didn’t have a digital workplace strategy.

Ensuring business continuity became my primary activity. But that was a really positive moment for our organisation, because a

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number of things that we always said would never work if we had a geographicallydispersed, remote-working organisation, so we wouldn’t do it – well, we were doing it or we wouldn’t have a business.

“So, having busted that myth, let’s look at doing payroll runs, let’s look at doing end of months, let’s look at how we do video livestreaming chats with claims customers.

We’ve had to do a number of things to demonstrate digital processes can work remotely. That’s learning number one. Just the fact we’ve managed to myth-bust, over the past several months, has been really important. That’s given our execs confidence that, actually, we can do more with this now.

“The second is to do with partnerships: they’ve allowed us to build programmes more efficiently, they’ve allowed us to accelerate projects which were never in

We use the slogan ‘think big, start small, act quickly’… to build belief and earn respect and trust across the organisation. Then we can say ‘hey, we did this! This is what we said you were going to get and we delivered it’ Nigel Walsh, Deloitte

the top 10, 20 or 30 on our list before. Every year, they’d be the part of the budget that got cut, but now it’s in the top tier of our programme prioritisation going forward.”

Nigel Walsh agrees that the pandemic has been ‘a massive accelerant for things that we already knew about’.

“My biggest fear is that we haven’t rethought the process, or actually applied too much ingenuity or thought around why we are doing it in the first place. I get it: when you’re told to move a whole organisation, globally, to homeworking overnight, you don’t get a choice; you do what you know. But I do think, as this starts to settle down now, we should start questioning the steps that we’ve digitised, to make them more optimal, or just get rid of them entirely.”

Key to that judgment call, in many instances, might well be how the

industry improves its data gathering and data handling.

“With insurance, the main issue around selecting the right data, and the right integrations, has been speed – speed of case handling,” says Farrell. “Data enables you to improve processes, and then allows for continuous improvement.”

Walsh is cautious of the ‘more data the better’ argument, though.

“In fact, I’m always quoted as saying that data lakes are where people are going to drown and we want to try to avoid that. In financial services, we make – physically – nothing. Just data. And we keep adding more, thinking it’s going to solve problems.

“I would caution against us getting too excited about what we can do with all the variants of data that are out there, because, of course, you can rate things to your heart’s content, and know so much – but, often, by looking so far ahead, we miss the basics. There is so much out there and I think insurers will be playing catchup to work out how they leverage it into their propositions, to go from reactive to proactive, which, ultimately, reduces claims.

Artificial intelligence and machine learning will help with that.”

David Germain agrees that it has to start with the basics.

“It has to start with good relationship management, building up the right 360-degree view of your clients or your customers; understanding how you’re going to better market and sell those products; build the data stack up appropriately, so that you get information you can use, and work with your data scientists on getting insights into that data. But it has to start with the lineage of the data. And most organisations really struggle with that, because they honestly believe you can do a mashup and pull it in, and you’ll get some insights, and you can’t really.”

All agree that the industry has taken a decisive step forward over the past year.

“If there’s anything good that’s happened with this pandemic – and it’s been hell for all of us – it’s the green shoots of positivity that it’s brought to business, organisations, operating models and ways of working,” says Germain. “And I don’t think the world will go back. None of us are going to regress our businesses. We can only go forward from here.”

“Insurance can’t go back," says Walsh.

“It would be a travesty of our industry.” www.fintechf.com

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APIs & MARKETPLACES The pandemic has demonstrated that a Cloud-based, API-driven insurance ecosystem delivers cost-effective change fast, as Instanda’s Head of Solutions, Gari Gono, explains If the insurance industry needed a compelling reason to finally deal with digitisation, COVID-19 was it.

The pandemic has changed the question on its leaders’ lips from ‘if’ to ‘how’ they should modernise. And Cloud-based, software-as-a-service (SaaS), ‘plug-in’ API ecosystem solutions are among the fastest, least-disruptive options they can choose.

They only have to look across at the banking sector to see how that approach has played out. The ‘out-of-the-box’ model has take hold there in recent years with transformational results. Incumbents are gradually letting go of their historic predilection for owning their own, on-premise IT infrastructures in favour of platform systems that delight their customers with the kind of seamless

services the big tech players have led them to expect. Cloud-based systems have delivered flexibility to scale (up or down), test and trial, introduce, improve or replace products at the touch of a button. Software-as-a-service is significantly reducing the cost of ownership and freeing up staff to concentrate on adding real value to the organisation. And an API-enabled network is facilitating rich data sharing and a marketplace approach.

Like banking, insurance has been hampered by time-consuming manual processes and documentation, compliance and hard-to-update legacy systems, which have held their gaze on technical delivery rather than focus on meeting customers’ needs. But whereas banks wrestle with the dilemma of how to expose their systems in an ‘open’ environment without sacrificing direct customer relationships, the insurance value chain is used to disintermediation.

Insurance carriers have been working through agents in various forms for years – intermediaries like brokers and, more recently, managing general agents (MGAs) and price comparison websites. It’s already a complex web

of partnerships. Its immediate challenge is how to balance some of the biggest potential payouts ever demanded of it while experiencing historically low returns from investments. And who’s going to sign off a hugely expensive digital transformation budget against that background?

As Instanda’s chief of staff, Steven Haasz, recently said, the requirement for insurers to digitally accelerate couldn’t have come at a worse – or a better – time.

“Many insurers have used this [COVID-19] as an opportunity to look again at their strategy, tools, technologies, and how their consumers want to procure their services. They’ve decided they want to become more digital, nimbler, so they can improve their business.

But at a time of immense cost pressure, they want to do so without the huge timescales and large sums traditionally associated with transformation.

“Partnerships are a solution to that problem. Insurers can partner with organisations like Instanda, where the start-up cost for the platform is considerably smaller than other

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technologies. This way, transformation can be made at record speed – we’re talking weeks here, not months.”

According to PWC research, roughly 70 percent of insurers’ IT budgets were still being spent on maintaining legacy technology, pre-pandemic. Despite numerous declarations by institutions that they’d embraced change, clearly real transformation was a long way from happening. Providers like Instanda, which offers a no-code, end-to-end digital solution for insurance carriers, distributors and re-insurers, are poised to help insurers turn the ‘digital theatre’ they’ve been engaged in for years, into reality. And Instanda is offering every pathway it can to get them there.

It was the first insurtech covering all insurance lines to offer a code-free product design platform using an API framework to integrate with insurers’ legacy systems, reducing product configuration from months to days. It chalked up another first when it integrated with the Microsoft Azure Marketplace.

In November, Instanda launched its own Integration Marketplace for back office solutions. This offers insurers connectivity to more than 200 pre-integrated business solutions, giving insurers a cost-effective way to shortcut a complex legacy system upgrade. Among those already onboarded to the marketplace are Salesforce, DocuSign and Xero.

“The Integration Marketplace is where Instanda is pre-integrated with technologies that insurance companies might want to use, including various CRM platforms, general ledger technology and others,” explains Instanda’s head of solutions, Gari Gono.

“We’re not trying to build all the functionality within Instanda. We appreciate there are many other things that insurers need to do. But the focus has been on trying to tackle problems for insurers, to reduce the friction that they have when interacting with all these other platforms, and reducing project time, so that we can increase time-to-value for them.”

The marketplace will expand in 2021, giving clients access to an even wider range of leading business solutions in one place.

“What makes digital transformations involving legacy products difficult, is

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you’ve got one product where absolutely everything is baked in. So, the moment you say, ‘I’m going to do a digital transformation’, you suddenly have to replace absolutely everything,” says Gono.

“Our Integration Marketplace makes this easier by enabling companies to break their problem down into smaller chunks.

“If they just want to replace their policy administration platform because they’ve got Salesforce for HR or CRM, Sage for accounting and other platforms doing various things, they can just replace that one thing and integrate the rest.

“Something already on the marketplace could be up and running within a couple of hours of testing; if it’s something we don’t have yet, it’s a few days for us to add a platform, assuming it has integration capability. It’s about figuring out which platforms do specific functionality best,” he adds. “Then, looking at which works best in an ecosystem."

Transformation should be about gradual replacement, he continues.

Our goal is to ensure technology becomes a commodity, so insurers can focus on product innovation, customer-centricity and delivering what people need “There’s enough evidence in the market of big bangs not working and wasting money. So, bringing legacy technology into the new world should be gradual, and Cloud-first.”

It would be wrong to think that Instanda’s solution is all about legacy, though. An API-first approach to building an ecosystem is as helpful to new entrants.

“We make it really easy for newbies to enter the marketplace and start their own MGA or brokerage, for example,” says Gono.

“They can have a sandbox, do tests, get a test licence, then quickly start to build their insurance product and ecosystem.

Although this capability is relatively new, we have clients that, starting as MGAs, used Instanda as their core platform and

developed their ecosystem around it. We’ve got MGAs running their entire businesses on Instanda, one of which grew from a £2million book of business to a £40million book.”

Instanda was developed by professional insurers for professional insurers, to take products from concept through to the customer interface, connecting all touchpoints across its platform.

“Insurers should be able to just take the technologies out there that perform different functions well, to help them run their businesses,” says Gono. “Insurers should be focussed on meeting regulatory requirements, serving their customers and protecting people’s risks, not worrying about technology. It’s there to support the insurance industry and ensure that it’s covering risks correctly – and profitably.”

BUILT-IN COVER – THE FUTURE? A key characteristic of the Instanda approach is that it’s completely agnostic about which distribution channels an insurer might choose to use.

“It will depend on individual strategies,” says Gono. “For example, credit card insurance might be part of a distribution model where the customer doesn’t need to know who the insurer is.”

On the whole, he tends to subscribe to the view that insurance brand should come second to the product and the customer’s experience of it.

“The reality is that, while insurers might want to remain at the forefront so that we know their names, customers don’t really want to think about insurance unless things go wrong,” he says. “I’d be quite happy if I bought my PlayStation 5 (PS5) and the retailer just told me ‘by the way, it’s sorted – if it ever breaks, you don’t have to worry about it’. I don’t want to think actively about how my PS5 might break, and what I would then do!” he says.

Not only does this integrated approach to distribution result in a much better service to the customer, but it also opens up endless possibilities for insurers to expand their business through partnerships.

“Technology needs to enable insurers to distribute in whichever way they want," says Gono. “Our end goal is to ensure technology becomes a commodity so insurers can focus on product innovation, customer-centricity and delivering what people need.”

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APIs & MARKETPLACES

Ahealthyoutlook

SulAmérica Seguros used API technology to connect with startups, healthtechs, fintechs and banks as it set about expanding its telemedicine and other digital channels during the pandemic. And now that it’s begun the API journey, there’s no stopping it, says Enterprise Architect Manager, Cristiano Bezerra Brazil’s publicly-funded healthcare system SUS (Sistema Único de Saúde) has been under pressure since its ambitious and well-intentioned roll-out in 1990 – principally due to fiscal austerity measures that eventually led to the government freezing health service expenses for a period of 20 years.

Unsurprisingly, buying private health insurance became a life goal for most Brazilians – behind getting a good education and having your own home.

Indeed, in March 2019, there were approximately 47 million private health plan (PHP) beneficiaries in the country, roughly a fifth of the population, according to the National Regulatory Agency for Private Health Insurance and Plans. Corporate health insurance plans, managed by an operator or insurer and offered to individual employees, accounted for the bulk (approximately 70 per cent) of those PHP beneficiaries.

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As the dynamics of the public-v-private healthcare market evolved, SulAmérica Seguros, Brazil’s largest non-bank owned insurer - with more than seven million customers – developed its own, holistic approach to health cover. It entered a joint venture with leading US healthcare provider, Healthways, in 2015 to promote wellbeing, established wellness coaching programmes and monitoring programmes for patients with chronic diseases and complex conditions. In 2018, it launched a telemedicine service, although regulation at the time prevented it from including video consultations. And, in 2019, it rolled out SulAmérica Direto, a new line of regional health plans, giving brokers an opportunity to sell a low-cost product to companies in areas of the country where coverage was poor.

But 2020, saw SulAmérica Seguros push health to the top of its agenda. It divested itself of its auto and P&C (property and casualty) business lines and purchased Paraná Clínicas, a well-established specialist in corporate healthcare plans, adding more than 90,000 to its membership base in the south of Brazil.

Announcing the company’s most recent Q3 results, SulAmérica Seguros CEO, Gabriel Portella, described health management and the company’s Coordinated Care programme as being the two strategic pillars of its operations, noting the importance of tracking beneficiaries’ journeys ever more closely; primarily through advanced technology.

The pandemic gave the insurer fresh impetus to adopt and upgrade digital health tools for beneficiaries, as well as physicians and therapists. Its app allows policyholders to schedule virtual appointments with general practitioners as well as specialists, including psychologists, nutritionists and other therapists. It also enables drug prescriptions and examination requests to be implemented, all in a safely remote way via mobile phone, computer or tablet. Having its telemedicine platform in place before the pandemic meant that when government was forced to relax rules around video consultations, it was primed and ready to go with its in-app Physician on Screen feature, rolling it out over new channels, including WhatsApp, with remarkable results.

Virtual consultations jumped from 500 in February to 15,000 in April, reaching a peak of 60,000 in June. By May, its then- recently launched online screening feature for COVID-19 had clocked more than 280,000 access requests.

With almost 400,000 digital appointments made between March and November, SulAmérica Seguros and its partners were not only able to offer swifter assistance around COVID-19, but also for elective and non-COVID emergency appointments, as well as enabling ongoing treatments – something other countries found hard to maintain. For SulAmérica Seguros, the digital direction of travel was clear.

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APIs & MARKETPLACES It’s now planning a similar ‘financial doctor’ virtual service for its life and pension divisions.

“We need to open our markets and I believe APIs, as well as microservices, will be key for that,” says its enterprise architect manager, Cristiano Bezerra.

“We started our journey with APIs a few years ago and even though we didn’t have the vision we have today, we knew that technology would play an important role.

Today, the adoption of APIs is not a differentiator, as it may have been a while ago, but a vital lever to remain competitive in an ever-changing digital world.”

He argues that APIs are the gateway to the value chain, allowing business intelligence to be opened up ‘for consumption and interaction via new channels and interfaces that will impact the customer experience’.

The ecosystems they’re designed to function in are no less fundamental for the future of insurance, including that of SulAmérica Seguros.

“We have seen the digital journeys of insurers involving an increasing interconnection with a large community, not only of brokers but also banks and regulators. In our case, we have also connected with startups, healthtechs and fintechs, to accelerate the exposure of an improved offer, too,” adds Bezerra.

Companies would be foolish, then, not to repurpose and remodel their businesses for API exposure, he says, even in cases where there is lack of demand at present. “Because this is an accelerator for what will come, be it a connection with a telemedicine healthtech – as in our case – or when it comes to entering the ecosystems of others to offer, for example, some of our intelligence as a service.”

Particularly in health – where exposing data siloed among doctors, healthcare record companies, healthcare providers and insurers has been a barrier to improved services – liberating APIs allow for personalised suggestions to improve customer wellbeing. APIs also allow for the adoption of automated services, such as chatbots and IVRs (interactive voice response systems), that can greatly improve customer experience. They also make customer requests much faster and less costly to process, says Bezerra. APIs can be

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used to establish rules and routines for automatic approval, as well as to spot and notify insurers of attempted fraud.

“For each of these scenarios, there will be an API capable of ensuring your company delivers a rich experience to your customer,” says Bezerra. That said, there is still a question over how standardised APIs can best be developed for sharing information with partners, while also maintaining customer security, all the while having to meet regulatory/data privacy requirements across the globe.

“Inevitably, more disruptive digital experiences demand more data, so in this case transparency is key,” says Bezerra.

“It is necessary to explain to customers what data is demanded and, at each stage, ask for their permission to use it.”

SulAmérica Seguros recently launched a web application that allows policyholders to not only see how their data is being used and where, but facilitates them asking for it to be deleted.

“Portals like this that use APIs, as well as the business’ own APIs, must have additional layers of obfuscation, encryption, unifying databases and so on, that allow companies to simplify the governance of this data,” says Bezerra.

“We need to continue to surprise and add value for customers. To achieve this, digital interactions must be smarter.

We can enrich the processes with artificial intelligence and machine learning, creating new ways to interact with wearables and home assistance devices. That’s a great opportunity for the financial services industry, not just insurance.

"Connecting these IoT devices requires mature models of technology that not only support traffic, but also maintain data privacy. Once again, APIs will be crucial.”

For now, though, Bezerra’s priority is making sure existing systems are fit for purpose both now and when it comes to handling more distributed and granularised data in the future.

“We need to ensure the experiences we want to deliver with APIs, web applications, mobile apps etc, are as good as possible. Because if our clients run our app, click a button, and it takes more seconds than it should, we are going to be (seen as) untrustworthy,” he says.

There’s no room for complacency, especially when the competition is not necessarily another insurer, but a tech company whose DNA is data-based customer service that doesn’t miss a beat.

In the UK, GlobalData noted in a 2018 report that more than 30 per cent of UK consumers would consider switching their insurance to a Google, Amazon, Facebook or Apple (GAFA) product. Some of those have already expanded into pharmacies, diagnostics, wearables and insurance.

Meanwhile, venture capital is pouring into digital health startups – a record $8.4billion in the third quarter of 2020, according to CB Insights.

“Big techs expect to enter our market, and it will be an interesting challenge for us. But we don’t have to be afraid of it; we need to learn from them,” says Bezerra. “We use their services, like Cloud and APIs, to build the ecosystem, so I believe we can bring these forces together with our experience as a 100-year-old insurer to create something new that ensures our longevity.”

The adoption of APIs is not a differentiator, as it may have been a while ago, but a vital lever to remain competitive in an ever-changing digital world

AN IoT OPPORTUNITY Over the course of 2021, SulAmérica Seguros will be leaning even further into the tech by leveraging the Internet of Things (IoT). The potential is already clear.

“We already have transactional data and talk with our customers through our Coordinated Care programme, but if we can observe the client, we can further help influence their behaviour to improve their health and wellbeing,” he says.

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G+D Mobile Security is a part of the G+D Group with more than 11,000 employees worldwide. Our 5,300 experts in over 40 sales and partner offices all over the world are glad to advise and support you with years of experience and comprehensive solutions that let you meet the challenges of a connected financial industry and capitalize on its opportunities.

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7

Reasons to ditch link ratios

Link ratios cannot measure calendar year social inflation The assumptions are rarely met by the data No insight into trends in the business Too slow to review No connection to the risk characteristics of the data No early warning system No way to determine whether an answer is good, bad, or ugly

The Mack method is a regression formulation of volume weighted averagelink ratios (chain ladder). The regression formulation means the method can be tested statistically.

Other method variants can be included such asdifferent weights, an intercept (Murphy) and an accident year trend for each development year. All these methods are included in the Extended Link Ratio Family (ELRF) modeling framework.

In the Probabilistic Trend Family (PTF) modeling framework, we identify a parsimonious model describing the trends in the three directions (development, accident, and calendar), along with the volatility about the trend structure.

MaCk!

Mack!

Mack!

Mack!

What quackery is this?

Link ratio methods residuals trend down: Projections too high Consider anonymized Paid Loss data for an Auto Insurance provider (segment: Bodily Injury). The data can be downloaded from: icrfs.me/7reasons The display on the right shows a strong downward trend in the residuals (trend in data minus trend in method) versus calendar year.

This means a link ratio method will grossly overstate the reserve estimates. The Mack method (volume weighted average) gives a total reserve of 902M. The arithmetic average link ratios gives a total reserve of 1.16B.

Above is the forecast table (incremental version) for the Mack method.

The company just paid 202M GBP in 2017 (blue numbers are observed) but the fitted mean value (black numbers) is much higher at 289M. Further, the method is projecting the company will pay 284M GBP in the next calendar year!

The method clearly provides false indications.

The optimal model identified in the Extended Link Ratio Family (ELRF) modeling framework applied to the last five calendar years has trends, intercepts, and very few ratios (because they have no predictive power). The residuals are much improved (left). The trends in the data are more in line with the trends in the method.

The total reserve mean projected from this identified model is 504M – around half the original Mack method projected mean reserve! This is a much better estimate of the reserve mean, but how do we know it’s the best?

Let’s see what is really going on The identified model in the PTF modeling framework has calendar year trends as seen on the right. The calendar year trends are much lower more recently. Trends in other loss types (for instance: Case Reserve Estimates or Number of Claims Closed) can be related to the trends in the paid losses.

The actuary now has a narrative about the data.

Projections from the PTF model are much more realistic. The forecast scenario in PTF, using the 8.7%+_ calendar year trend,projects a mean payment of 223M GBP next year – much more in line with the recent history.

The total mean reserve is 598M. The actuary has control over all future trend assumptions in the PTF modeling framework. These can be related directly to the trends (or volatility) observed in the past – including CREs or NCC. To get in the ballpark of the original forecasts of the Mack method, the future calendar year trend has to increase from the most recent 8.7%+_ calendar year trend to more than 25%+_ for the entire run-off period!

Link Ratio Methods residuals around zero: Projections too low Maybe you think using Incurred Losses gives better estimates than Paid Losses?

Consider the Incurred Loss data from Best’s Schedule P (2011) for Tower Group.

The data can be downloaded from: icrfs.me/7reasons On the left are residuals from the Mack method applied to the Incurred Losses. The zig-zag conflates what is going on.

The total mean reserve projected by the Mack method is: 1.059B. The held reserves by the company as of 2011 were 921.9M. By calculating chain ladder ratios excluding the ‘high’ calendar years of 2009 and 2011, the forecasted total reserve drops to 950M. The held reserves were supported by link ratio methods.

In the PTF modeling framework, Paid Losses and Case Reserves are modeled separately. Note the calendar year trends are not the same in the Paid Losses (left) and Case Reserves (right).

In order to reach the reserves held, the calendar year trend for the future has to change from +11%+_ to -16.85%+_ – a total difference in trend of nearly 28%!!

This is impossible!

Without access to the PTF modeling framework, how would you know whether your projections are meaningful?

• Since 2006 the paid losses have been increasing 11%+_ faster than Earned Premium.

This leads to an 11% increase in loss ratios (not reflected in the company’s held ultimates).

• Since 2007 the Case Reserve Estimates have been fluctuating (thus the masking of trends in the Incurred Losses).

The forecast table on the left assumes the 11%+_ trend continues. The projections are increasing down the accident periods (eg: dev 4) just like the observed paid losses (blue numbers) in dev 0.

On the right is the forecast where the assumed future trend is set to -16.85%. Projected payments are decreasing down the accident periods (dev 4) despite the significant increases in observed paid losses and Earned Premium.

(Tower Group went into administration in the fourth quarter 2013).

Link Ratio Methods residuals trend up: Projections too low Consider anonymized Paid Loss data for a large Worker’s Comp provider. The data can be downloaded from: icrfs.me/7reasons The display on the right shows a strong upward trend in the residuals (trend in data minus trend in method) versus calendar year.

Any link ratio method will grossly understate the reserves – the trend in the method is less than the trend in the data. Using the Mack method (volume weighted average), the total reserve is 839M.

The company just paid 188M USD in 2016 (blue numbers are observed) and the method is projecting the company will pay 152M USD in the next calendar year (black numbers are fitted means).

The method clearly provides false indications.

If every successive year you take weighted average link ratios of the last four years,each year the estimates of the prior year ultimates will increase, and projections of the paid losses for the next year will be too low.

To illustrate this, estimate the four year weighted average each valuation period from 2011 through to 2016 and plot the prior year ultimates.

Assuming the same link ratio method is applied in each of the four years, the company is in catch up mode.

For this particular portfolio, the social inflation is very high.

The optimal PTF model, whose calendar year trends are displayed on the right, projects a total mean reserve of 1.309B if the trend of 21.46%+_ continues for several years.

Link ratio type methods cannot measure social inflation.

The PTF modeling framework enables you to mitigate model specification risk and extract maximum information from the data.

Enough with this quackery.

Get your team using PTF and put the odds back in your favour!

APIs & MARKETPLACE

Anopeninvitation Stephen Walsh, EMEA Director of Sales at API specialist Sensedia, believes ‘open insurance’, like ‘open banking’, has the potential to increase revenue-generating opportunities and improve customer journeys

A car crashes through a wall and the vehicle’s airbags are deployed.

While the driver sits dazed, the airbags have triggered a call to the emergency services via the car’s embedded SIM, and a GPS location is sent.

Such ‘SOS assistance’ features already exist on higher-end vehicles. But technology could go further – much further. The car’s vehicle management system could send damage assessment data and a GPS location to the manufacturer so that its recovery service could be sent with the parts to make a repair – or have them ready and waiting at a garage. And a snapshot of weather conditions and dashcam footage could be automatically sent to the driver’s insurer to assist a subsequent claim. Once the car is repaired, the insurer’s repair garage could send a report to the manufacturer of work done so it can assess both crash performance and repair costs.

This scenario is just one example of how a connected future could shape the insurance industry – speeding up

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processes, improving claim accuracy and, ultimately, helping to limit cost for everyone involved.

Automation also means the shaken driver has one less thing to worry about, says Stephen Walsh, EMEA director of sales at API specialist Sensedia – an element of customer service that reflects well on the insurer.

“If my car has been given permission to link with my insurance company to provide the initial details of the accident, that reduces my emotional engagement and speeds up the process,” he says.

In fact, he sees the potential for insurance companies to sit at the centre of a web of information, collecting and coordinating data, enabling them to

make faster decisions – and thereby generating more revenue.

Sensedia sees the development of insurer ecosystems linked by APIs as central to this new ‘open insurance’ world that offers major benefits to both customers and businesses. But, unlike the banking sector, there is no legislative driver for that – no PSD2 (revised Payment Services Directive) to lay the framework and propel change. So, some insurers have been slow to identify the potential structural shift, and continue to follow decades-old business models.

Sensedia works with businesses to help them align strategy with new technology and develop a network linked by APIs. Then, once those APIs are launched, the São Paulo-based integration

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specialist provides a set of solutions to manage them for its clients. Standing still isn’t an option in the face of disruptive startups and the world’s tech giants moving in on insurance markets, says Walsh. And customers are changing, too – churn is seen as a virtue and people will potentially switch providers for the sake of saving a few pounds or pesos.

“The consumer is no longer the person like my father-in-law who’s happy to get something through the post to say ‘your insurance has renewed’,” he says.

“People look to save money when they renew, and they want to know exactly what they’re getting for their money. From the insurance company’s perspective, firms need to ask how to attract this new breed of customer who is more flexible and less loyal. And they must also understand that churn is a risk if they fail to interact with that customer and offer new products and services.”

As with open banking, APIs allow insurers to broaden their offer by selling white-label products from partner providers. But, perhaps more importantly, APIs also increase the potential to leverage data, whether it is held by the insurer itself or comes from an external source: weather reports, car telematics boxes, data from wearable tech. And the impact of that granular information on underwriting could be huge.

Walsh says: “If you operate a partner ecosystem model, APIs can release the power behind those partnerships, enabling bespoke products and services to be offered to different customer profiles. What used to be really expensive to implement is now low cost and easily accessible – as long, of course, as you’ve embraced that new way of working.

“The key focus for insurers at the outset is to identify what integration is required, then establish the business partnerships that facilitate growth. This comes before the technology, since in the current environment there has to be a real return on spend, whether it’s to improve efficiency, reduce customer churn or raise profitability per customer. Then they must work out what access each partner needs and the technology plan is developed.”

INFINITE FLEXIBILITY Sensedia’s customers include institutional players with legacy IT systems who tend www.fintechf.com

to follow an established ‘way of doing things’. One was Brazilian insurer SulAmérica Seguros, which focusses on health, life and pension cover.

Sensedia’s input changed SulAmérica’s business from ‘one where the insurance man comes round to the house with a book, to thinking about things which no one else is even trying’, according to SulAmérica’s chief technology officer Cristiano Barbieri. He summed up the agility that APIs brought to the business when he revealed that directors now recognised the IT department was a bigger driver of change than the board.

He says: “We had business areas that two years ago massacred us, everything was slow and expensive. Nowadays, in board meetings, directors recognise that IT can deliver things in projects far faster than anything else. Those who lead the technology have a responsibility to transform the business.”

Examining APIs from the consumer’s point of view, Walsh says increased automation is attractive when onboarding, claiming and renewing.

What used to be really expensive to implement is now low cost and easily accessible – as long, of course, as you’ve embraced that new way of working “Starting with the purchase, customers need to know a product meets their need; it needs to have that value proposition, and they’ll want to edit and add bits and bobs to a policy until they’re happy,” he says. “When it comes to making a claim, when someone’s suffered an accident, a loss, some damage, their emotions will be running high. They don’t want to be judged – they maybe don’t even want to speak to someone on the phone. They just want to give their details quickly and easily. And when the claim is being processed, the customer wants to know how far it’s got; they don’t want to wait for a call to be answered or to hear someone read text off a screen when they can read that text themselves.

“An insurer with efficient digital channels will really reap the rewards,” says Walsh. “But that’s not to say there aren’t points in that journey where interactive voice systems, and indeed in-person systems, are absolutely going to add richness to the customer experience.

But it’s about understanding where they fit, and how you can pick up different bits of technology to make the customer’s journey better and easier. Handled well, the customer is more likely to renew due to their positive experience. From an insurer’s perspective, managing that customer journey needs to be as inexpensive as possible, while providing the level of service the customer requires.”

Another aspect of increased data use that benefits both customer and insurer is the ability to increasingly customise a quote for digitally-mature customers who want products on demand.

When estimation is reduced, the insurer is less likely to price its cover incorrectly, which cuts the risk of suffering a loss. And it opens up the potential for real-time risk protection products that can be bought on a pay-as-you-go basis.

“With modern, 5G-connected cars, we have the potential to insure on a per-journey rather than an annual basis,” says Walsh. “A 500-mile journey on motorways has a different risk to popping to the shops. By using data that’s harnessed via APIs, insurers can use information from a range of sources to give a quote. Tiny facets of information, such as who is in the car, the route and weather conditions, can build an accurate picture to calculate risk.”

Of course, data use raises privacy questions, but this can be ‘designed in’ when technology systems are built, he says: “An API is a secure information traffic tool, and it can also enable additional layers of security on top to address data leakage.

“With increased data protection regulation, it’s becoming increasingly complicated to manage and, in an insurance context, there is masses of personally identifiable data. But if you’re building your ecosystem around data privacy, using APIs to unify databases automatically, building in layers of security, obfuscation and encryption, you can simplify your governance while, at the same time, identify any vulnerabilities inherent in those systems.”

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APIs & MARKETPLACES

KYC-starting transformation Deciding where to target insurtech investment is a difficult task. Identity verification provider Trulioo suggests starting with the fundamentals Insurance is a giant among industries; in the US alone, insurance premiums totalled $1.2trillion in 2017 and the industry had more than $5.7trillion in assets.

The quest for technology to deliver up innovative solutions and lower costs is attracting new entrants and forcing incumbents to adapt.

As insurance is so reliant on data, technology can assist almost every aspect of the industry and, specifically, any that helps with risk mitigation or risk transfer can have a significant impact. Consider the internet of things (IoT), where sensors and connectivity are integrated into every imaginable object. Just as fire alarms reduce the damage from fires, embedded sensors in a bridge can warn of imminent failure, reducing the risk and associated cost of payouts. Car-tracking sensors can monitor use and adjust rates based on driving habits. Weather sensors can alert users to high-risk situations to avoid, thus minimising liability.

Data provides insight to improve risk mitigation strategies, and when artificial intelligence (AI) systems are applied to better analyse it, and advanced modelling techniques are employed to manipulate scenarios, it can help with setting more appropriate rates, spot fraudulent claims and point to new cross-selling or gap

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coverage opportunities. This rich information provides a path towards more customised insurance, where actuary data becomes ever-more refined and customers benefit from personalised packages. As a result, previously hard-to-insure markets, such as self-employed or marketplace workers, can now get appropriate coverage, tailored to their specific needs; insurance can be offered for a day or a week, and coverage can be extended to specific equipment or obscure situations.

KNOW YOUR CLIENT But, as insurance covers a gamut of sectors, it’s important to note that the impact of insurtech varies between market segments. The low-hanging fruit are areas that directly touch the consumer – improving onboarding, for example, is a quick win. Filling in mounds of paperwork has never been an enjoyable customer experience and, now that online and mobile alternatives are commonplace, it’s becoming increasingly important to offer those channels to maintain users.

Understanding who an insurance client is and what risk they may pose is fundamental to the nature of insurance.

Therefore, proper identity verification measures during onboarding are

Scan this to access io Trul o’s Buyer’s Guide to ID verification software

necessary. With mobile and online channels becoming increasingly popular, electronic identity verification (eIDV) enables an applicant to quickly sign up online while still providing the necessary evidence to fulfil regulatory requirements, as well as supporting fraud prevention measures.

Other identity techniques, such as document verification and biometrics, provide additional layers of checking, delivering more security and better risk mitigation.

Identity verification can also assist in a payout scenario. After all, insurers should be extra diligent when paying out funds, so verifying a claimant’s identity can speed up the process as well as flagging potential fraudulent activities.

Properly done, identity verification offers privacy protections to cover different markets’ regulatory requirements.

Insurance documents contain an abundance of confidential information and processes should ensure that information is protected and sharing of the information is strictly limited.

Understanding who an insurance client is and what risk they may pose is fundamental The potential of insurtech to decrease risk, provide better coverage, save money, improve both back-end processes and the customer experience (CX) is significant.

Of course, with all the opportunities out there, it can be difficult to know where to begin. So why not at the beginning?

Providing mobile and online channels to quickly onboard and renew customers is fairly straightforward and promises quick return on investment. With effective eIDV processes in place, risks are mitigated and the CX is positive from the start.

A first step: Effective eIDV can mitigate risk and simultaneously improve CX

surtechMagazine

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COMMENTARY: LEGACY TO PROPHECY As a critical part of the financial system, insurers couldn’t but rise to the digital challenge posed by the pandemic. The crisis busted myths around ways of working, but where does the industry go from here? We put that question to three experts in the field: Hélène Stanway, Global Head of Technology Innovation at AXA XL, Deloitte partner Nigel Walsh, who leads on insurtech, and Tim Hardcastle, Co-founder and CEO of insurance SaaS provider Instanda

Many would argue that the insurance industry has been fashionably late making its entrance to the innovation party – daunted by legacy systems and, until recently, content to fulfil its role as a ‘necessary evil’ with a captive audience it only really needs to engage with at onboarding and in the event of a claim.

However, that’s rapidly changing, with COVID-19 forcing a re-evaluation of the possible, and the realisation that a more customer-centric approach will be essential to maintaining margins and market share in this industry, as in others.

A year of historic turmoil has, perhaps surprisingly, also been a transformational one for insurtech, with startup launches, game-changing innovation and impressive fundraisings that signal a seismic shift in the way insurance is done.

Key to this turnaround is automation, with McKinsey predicting that, by 2025, 25 per cent of the industry will be using automation to overcome the bottlenecks and manual processes around claims processing, underwriting, policy administration and customer service that have weighed it down for decades. Tools such as artificial intelligence (AI) and automatic data extraction to validate claims and identify fraud are emerging at pace.

More omnichannel services are also helping to improve customer experience through self-service portals where insurers and customers alike can find answers, execute transactions or make their claims. Smart contracts, powered by blockchain data sharing, are enabling quicker, more accurate risk decisions, and fairer pricing. And risk prediction and mitigation is an increasing focus, using Internet of Things (IoT) devices and apps to monitor, among other things, personal behaviour with an inventive combination of data gathering and gamification to reward healthy living, which has the meritorious effect of offsetting life and health insurance payouts.

When it comes to specific innovations over the past tumultuous year Ki is notable for being the first fully-digital, algorithmically-driven, follow-only Lloyds of London syndicate, developed by UK insurer Brit in collaboration with Google Cloud innovations, to enable brokers to place their follow capacity more quickly.

The global Chubb Studio platform, launched last autumn, is another. It gives

the Swiss insurer’s partners digital access to its consumer finance products, streamlining how it distributes them worldwide while enabling its retail, ecommerce, airline, telecommunications, banking and fintech partners to tag its insurances onto their own products and services.

Among the top five global insurers, AXA used 2020 to bring its new Construction Ecosystem (CE) to market. It aims to simplify risk management in a highly complex industry, where projects can be affected by anything from the weather to supply chain and site safety issues.

Taking its lead from mapping apps showing satellite views, traffic volumes and nearby businesses, CE aims to offer a ‘digital ecosystem’ to deliver risk insights in real time, using data from its own collaborators, as well as developing technologies for monitoring site conditions, worker behaviour and other factors.

AXA’s Digital Risk Engineer (DRE), another debut last year, enables companies to monitor the health of their buildings and assets using IoT devices to capture information from connected systems such as energy, water (including sprinklers), heating, ventilation and air conditioning (HVAC), detecting anomalies in real time in order to intervene early and avoid or limit the severity of incidents and thereby claims, too.

Meanwhile, startups like American renter and homeowner insurance company, Lemonade, notched up phenomenal growth in 2020 – it hit the one-million-customer milestone after just four years in business. Meanwhile, US small business commercial insurance provider and unicorn Next, and homeowner insurance vendor Hippo, raised hundreds of millions of dollars to be valued at between $1.5billion and

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$2billion. And this investor confidence is reflected even in the beleaguered travel sector, with tech-driven specialist travel insurance provider, Battleface, raising $12million in Series A funding from US venture capital firm Drive Capital, and French flight disruption travel insurance startup Koala raising $1.6million in seed funding led by Gateway.

Amidst all this excitement, we brought Hélène Stanway, global head of technology innovation at AXA XL, Deloitte partner Nigel Walsh, who leads on insurtech and disruptive technology within insurance for the firm, and Tim Hardcastle, co-founder and CEO of insurance software-as-a-service (SaaS) provider Instanda, together to talk about the key influences on the industry, and what the future might hold.

Stanway’s job is to focus on IoT, ecosystems and AI, ‘making sure these

COVID has made people realise that the barriers they thought were there are not Hélène Stanway, AXA XL

technologies solve problems and are closely connected to business strategy’.

Nigel Walsh describes his focus as helping clients ‘work out how they get the most from new technologies in traditionally legacy estates, to drive good things’. And Tim Hardcastle’s insurtech has been purpose-built to help organisations across 13 countries, including AXA, accelerate their digitisation plans.

All three agreed that COVID-19 has rocket-propelled transformation.

“The last five years have been pivotal in terms of the appetite, readiness and

preparedness of companies to embrace and work with new technologies,” says Hardcastle. “We’ve seen an increasing trend towards AI, chatbots, robotics and analytics, and delivering value to insurance customers. When you slot COVID into that picture, there’s been a dramatic acceleration in the last six months around just the simple use of technology. Every chief executive of every insurance company around the world has had to get used to leading her or his teams virtually and this has been a real wake-up call.”

Stanway adds: “COVID has made people realise that the barriers they thought were there are not, it’s just about adaptation. At AXA, we haven’t missed a beat in terms of innovating and launching, and we’ve had some really proud moments, launching CE and DRE.” But is this entrenched industry capable of delivering meaningful digital change?

“You’ve got to put it into context,” says Walsh. “We’re not talking about a transaction system that people engage with daily, like Spotify, Amazon or retail outlets. [Insurance is] something they engage with on acquisition, and hopefully never to claim. So, innovating a process that people don’t necessarily want to engage with on an ongoing basis isn’t normally front of mind to get spot on at the outset. That said, [the pandemic] has been a good accelerant. We didn’t have a choice, we had to get here for the wheels to keep turning because we are an inherent part of society.

“I guess my challenge to the industry would be, how could we have done better?

And, importantly, how do we not go backwards from this point? How do we now leapfrog forward and say ‘what can we do to reimagine what we had in the first

place, as opposed to just digitising it?’.

That’s always been one of my worries: how do we not just take the old process, make it a bit quicker, faster, smarter, and that be seen as good enough? Which we see a lot in financial services.”

One of my worries is how do we not just take the old process, make it a bit quicker, faster, smarter, and that be seen as good enough?

Nigel Walsh, Deloitte

novation www.fintechf.com

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COMMENTARY: LEGACY TO PROPHECY But there is a problem implementing that, says Hardcastle.

“Technology capabilities today are in excess of what the industry has capacity and capability to handle. The human element, the business change, the organisational change, the cultural change, the behavioural change, that’s needed to grab and take full advantage of what’s available, is the challenge the industry is grappling with,” he observes.

“The available technology is so ubiquitous, so cost-effective, and everything on the planet is going subscription-based so that we pay for what we consume. It’s a myriad of opportunity, but the issue is pointing it, directing it, organising it, getting the coalescence of the teams in working with it in the right way to create value for the customer.”

Walsh agrees: “There’s going to be a moment where the model of insurance switches to a subscription or recurring revenue-style bundle, that brings everything together and embeds it into the asset we’re protecting, whether it’s a journey, a physical property, a warehouse, a ship, or whatever. And that changes the narrative. Technology is there by default.”

The emphasis then will shift to ‘predict and prevent’, says Stanway, reducing the number of claims but making insurance even more valuable as ‘product sitting alongside service’. Culturally, though, that still requires a change in mindset to one where tech becomes an enabler of customer outcomes with every area of a business working with it as one team.

“It’s great to hear what AXA is doing because there’s a fundamental issue in many corporate IT functions, which is that they are partly about keeping the lights on, running all the big systems and infrastructure. And it’s tremendously difficult for any leader who’s responsible for keeping the lights on to fully engage in innovation, and bringing new technologies to bear for the organisation,” says Hardcastle.

Walsh believes ‘there’s a fundamental difference between those that see IT as a service provider and those that see technology as a business partner for getting to customer outcomes’.

“But where you have those two side-by-side, in the same tribe, or squad, or team, you get a much better outcome.

“We’ve seen an inordinate number of people just say ‘we can’t transform 300

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years of legacy, at this speed, at the right price point’. This is where we see new platforms, like Instanda, coming together to reorchestrate and solve those problems, creating new opportunities from scratch, as opposed to saying ‘let’s spend lots of money transforming your legacy estate’.

“You can migrate later, if you want to. In fact, one of the beauties of the subscription market in particular is that you can migrate on a monthly or annual basis, and be off the old platform, at least in the general

It’s tremendously difficult for any leader who’s responsible for keeping the lights on to fully engage in innovation, and bring new technologies to bear for the organisation Tim Hardcastle, Instanda

insurance space, in no time at all, which gives you a really unique opportunity to refresh the estate when you need to.”

Customer experience must be the driver, though, cautions Stanway.

“It starts with the data, rather than documents, and added service. We, as an industry, should be telling clients stuff about their risk that they don’t themselves know. The big tech wind of change that’s coming through is bringing personalisation. If we can find ways to create little moments that light someone up through telling them something they don’t know, that will generate loyalty and drive better, long-term margins.

“And when claims do happen, if you service them in an amazing way, you create

loyalty for a long time. This is simple stuff that I don’t think the industry necessarily gets, because a lot of senior leaders have a more technical, underwriting mindset, but customer experience is a big opportunity.”

Collaboration will be the enabler for this. “[The industry] will become more ecosystem-based, bringing together multiple solutions to solve one or more problems,” continues Stanway. “Because, while we’ve got price comparisons and people want to shop around, they also want to go to one place with a holistic view of their risk and say ‘I want my property here, my cargo here, to buy this sensor device and access this data about what’s around me in terms of theft’.

“Organisations that make meaningful sense of the different data, will win because the client then gives complete transparency of their risk, and the insurer can make product and premium decisions accordingly.”

Hardcastle has seen that begin to play out already. “A South African bank we’re working with has built an ecosystem of services around owning a pet. That immersion, putting arms around the customer’s world – understanding the asset at risk, that people care about, and how to help them ensure they’re not ultimately suffering a loss – will lead to the industry needing enhanced capabilities, like real-time risk pricing. Given the data we’ve got at our disposal, that’s not an impossible task in the near-term.”

And there are other lessons to be learned from around the world, according to Walsh.

“If you look to Asia, or even India, where people were never insured or you didn’t have the same level of developed product that we see here in the West, they’ve quite quickly leapfrogged all the legacy we’ve got and gone straight to more modern products like microinsurance, with the likes of BIMA. They’re not adopting faster, they’ve just not taken the same path.

They’ve seen what’s worked for us and what hasn’t, then developed products that are more fit for a modern age.”

He uses the example of microinsurance in agriculture to illustrate how the industry could migrate away from tradition.

“It allows you, for example, to plant a seed and, should there be no rain, automatically provides a claim through a parametric trigger.

“That sort of stuff is really exciting.” www.fintechf.com

CFOs: IN THE DRIVING SEAT

The

Greatenabler Great enabler Jeremy Marchant of finance management software provider Aptitude cautions insurers not to ‘let technology take over’. Rather, it should be seen as part of a broader transformation journey – one that’s increasingly driven by the finance team When it comes to innovation in the insurance sector, vision is everything. Technology will obviously help solve some of the biggest issues, but insurers need to be clear what the problems are that need fixing in the first place.

“Of all the industries in the world, insurance is the one where CFOs are most looking at technology-enabled innovation,” says Jeremy Marchant, head of international pre-sales at financial services software provider Aptitude Software.

Insurance CFOs are taking more ownership of the innovation agenda and data across their organisations than in any other sector, he adds. “That includes banking – a lot of experts think banking is at the cutting edge.

Well, it turns out it’s not. It’s insurance.”

Insurers were particularly hit by the COVID-19 pandemic, which severely disrupted operations and put pressure on profits. However, this only exacerbated problems already facing the sector, most notably those relating to technology and productivity.

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McKinsey’s Insurance Productivity 2030: Reimagining The Insurer For The Future report estimates that insurance carriers will have the chance to boost productivity and cut operational expenses by up to 40 per cent over the next decade, while also improving customer experience. But this transformation from traditional insurance models will likely require major technology investments, with clear implications for many CFOs. Radical improvements in productivity across the entire value chain – rather than piecemeal changes – will be needed for insurers to thrive in the post-pandemic world, the report observes.

McKinsey concludes that, by 2030, the most productive insurers will provide no more than five to 10 products – a stark contrast to the 50 to 100 products that many property and casualty (P&C) insurers currently offer, but many of which do not generate meaningful revenues or profitability, McKinsey said.

In fact, it estimates that it’s only the top 10 to 15 current products that generate more than 95 per cent of the total gross written premium (GWP). Marchant agrees, citing McKinsey analysis himself which says technology can have a disproportionate impact by focussing on a few processes,.

“What they mean by that is probably up to 40-45 per cent of an insurer’s cost base is determined by about 20 of their end-to-end processes. So, looking at a small number of processes and really prioritising where they’re applying the technology can have a disproportionate effect on the underlying cost base.”

Like many industries, insurers have been

guilty of applying sticking-plaster fixes to regulatory requirements as leadership teams seek to strike a delicate balance between compliance and implementing changes in an efficient way.

This is understandable and there are times when such fixes are appropriate, says Marchant. “People don’t want to spend too much, they want to wait until the requirements are fully finalised. In particular, people wanted to wait until they could see what IFRS 17 looked like and the overlap or alignment with Solvency II,” he adds, referencing two of the biggest regulatory changes of recent years to fundamentally affect insurers across the EU. “But that has led to big, negative impacts on the finance functions,” he says. “Where you’ve got fragmented architecture, you’ve got lots of expensive people and processes to paper over the cracks.”

The problem with the sticking-plaster approach is that it creates a lack of agility and makes reacting to the market a problem, adds Marchant. Transparency is also an issue as the finance team spends so much time keeping the function together that they’re unable to provide valuable insights to the CFO and the rest of the C-suite.

“So, that means things like suboptimal pricing and new products take longer to come to market. Overall, it comes back to an organisation that is less reactive, less adaptable to the market and the competition it faces, and less competitive because companies have a high cost-to-income ratio.”

Marchant believes that enterprise-wide transformation needs a different approach.

While achieving compliance in an efficient www.fintechf.com

Wheels of change: Starting with smaller wins can help build buy-in for transformation

and cost-effective manner is undeniably important – as is a robust business case – it is not the most effective way for CFOs to inspire organisations to go on the journey.

“What we find works in helping the leadership to step out of their mindset is to use an approach that we call ‘I would like…’’,” he explains. “We ask ‘what would you like to do that you can’t do now?’, and that’s what gets people inspired about the change journey.”

“So, instead of telling them ‘you can reduce your manual journals by, say, 50 per cent’, we encourage them to talk about the vision: ‘I would like to decommission all of my claims systems that my team have been complaining about for 10 years’.

Another example would be ‘I’d like my incredibly highly-qualified and expensive team to spend their time helping me with analysis, rather than doing complex manual processes’,” says Marchant.

“It’s more inspirational. Yes, you need those metrics, and a really robust business case, but that’s not going to take people on the journey. But focussing on what they would like is going to get the leadership team interested in change, those things they want to be able to do, but can’t do now.”

Marchant outlines a series of key trends of digital transformation in insurance, including a move towards digital analytics and decisionmaking, having a proper digital strategy, and the importance of customer-centricity in the digitising of business processes.

But he also emphasises the importance of a corporate culture change.

“Five or 10 years ago, insurers were not www.fintechf.com

set up for this wave of digitisation and they have to now organise for digital, so that they have the right people to be able to adapt to the change,” Marchant explains.

The role technology plays in the transformation has also altered. Historically, the technology wave was primarily at the frontend – focussed on customer experience and the client journey, as well as the analytics around that – but now it’s extending to the back office and the enterprise-wide transformation.

“The C-suite and CFOs are looking at change much more positively and much more flexibly,” observes Marchant.

By looking at a small number of processes and really prioritising where you’re applying technology, it has a disproportionate effect on the underlying cost base Aptitude itself has identified 10 drivers for change across the industry. The top five include antiquated legacy systems, the high cost base such systems create and the proven value of digital disruption.

Increased regulatory burden is also a key driver for transformation right across the sector, Marchant adds, while the fifth is improved market competitiveness.

“There is huge competition in the industry. There are organisations that are acquirers, of either companies or books of

business, that can generate more profit than legacy organisations.”

As for where to start any transformation, Marchant again stresses the importance of having a vision to work towards.

“If you try to be so tactical that something’s just not exciting, you won’t get people to buy into it,” he says. “On the other hand, that vision needs to be achievable and deliver the value you said it would, quickly. One thing I’ve learned from leading multi-year transformation programmes is that if you stop delivering, or lose momentum, the money starts to go away.”

He suggest transformation leaders should focus early project phases on initiatives that deliver the biggest bang for the buck. For example, automating manual allocation routines or other repeatable finance processes that deliver benefits very quickly.

“Things like capital allocations, apportioning of costs across business units or contracts – done manually in Excel or, at best, an Access database. Automate something like that and you have a return on investment (ROI) that pays back over four or five months. Then you’re off the blocks, building momentum. You’ve proven that what you said would work, has, and can start adding things with a longer ROI.” His final piece of advice may surprise some: “Don’t let the technology take over.

It is the enabler, not the whole project or the whole purpose of the transformation.”

That said, if there’s one thing 2020 taught insurers, it’s that the time to act is now.

Plan a vision for the future and, as Marchant says: “Don’t be afraid to go on the journey.”

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CFOs: MANAGING CHANGE Zurich Insurance Group is reskilling thousands of staff as digitisation moves from the front to the back office. One impact will be to allow CFOs to play the more strategic, value-adding role they’re increasingly needed for, says John Keppel, Chief Operating Officer in the UK When Mario Greco, the big boss of Swiss-based Zurich Insurance Group, declared at the end of 2020 that the old insurance business model was ‘dead, or at the very least dying’, it surely sent shockwaves through the industry.

But his reasoning was sound. New customer needs due to lifestyle changes and advancing technology have caused huge drop offs in traditional revenue streams. And historically-low interest rates, which many analysts forecast will remain for the foreseeable future, have seen insurers’ investment income plummet.

Greco was speaking from a position of strength; Zurich had repositioned its strategy some five years ago to be more service-minded so that it now derives more than half of its income from recurring fees – and although, of course, even global entities like Zurich can do little about interest rates, they can do something about technology to mitigate the impact of that decline.

John Keppel, Zurich’s chief operating officer in the UK, admits that the insurance industry – and Zurich itself – might have been slow to see the value of digitisation, but the company now considers itself a pace setter. And it’s determined that this won’t come with an associated human cost in what has been an intensely-manual industry.

For example, Zurich has started a company-wide upskilling programme for its staff as it introduces disruptive technologies. The company will spend £1million over the next five years in the UK alone, retraining, upskilling and augmenting 3,000 roles – about

two-thirds of its UK workforce – and not just because it foresees an industry-wide shortage of robotics, data science and cybersecurity skills.

“There are many preconceived ideas about implementing automated processes into a business and how these roles must be carried out by tech specialists,” says Keppel. “In reality, the best people to do this effectively are those who have worked within the function you’re looking to automate. They are the ones who really understand the process.”

Zurich has also made a strategic decision not to outsource any of that digitisation work to third parties on the grounds of costs alone. Instead, it has set up an Automation Academy that has already helped to create a 40-strong artificial intelligence (AI) team comprising of staff from across the business.

One external investment it has made is in insurtech Instanda’s low-code, Cloud-based insurance platform, precisely because it gives inhouse teams the autonomy to build, test and distribute products. But such transformation is not just about frontend products. It extends deep into Zurich, notably affecting the finance team.

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“For modern finance functions it’s about embracing some of these technologies, and making sure that people have the capabilities to exploit them,” Keppel says. “The breadth of skills that now need to be inherent in a modern finance function and other functional teams across the business is something we’re addressing, so they contain people with skills in automation and product ownership.

Citing an example of how individual talents are being matched to specific roles, he says: “There are some new skills that are a little bit different and we’re working on programmes now to both build those skills and help people transfer from historical functions to new ones."

Ultimately, that will future-proof the finance department.

“As other parts of the business have digitised and automated practices, we’ve benefitted by picking up people who know our business really well and moving them into an automation function, reskilling them, giving them modern technology capabilities. Then we will push them back out into the business, back into finance and other functions.

“This will be particularly important for finance as data is key. Finance people are, to some extent, data and, quite logically, number-obsessed. So data skills, data manipulation skills and data analytics skills, over and above what I think finance functions have historically had, will be needed, and embracing the technologies that support that kind of mass data management is something that finance functions now need to think about.

“It’s less about spreadsheet upon spreadsheet, reconciliation upon reconciliation, and more true data science that is needed in some of those areas.”

SLOWLY DOES IT Zurich has made a conscious decision to steer away from what Keppel calls large, multi-year programmes of change, to an environment where he says it ‘does small and does more’.

“Smaller projects with faster, iterative execution, is something that is starting to work for us. Insurance has been slow to that,” he admits. “You’ve seen other industries embrace it much more rapidly.

But I think it’s now certainly part of the fabric of our organisation. We’re starting to see that, not just within the project www.fintechf.com

delivery functions, but also within finance and some other areas of the business, people are starting to embrace this ‘small is wonderful’ concept.”

With every part of the finance department’s role ‘critical to someone’, Keppel knows that while substantial programmes of change are what most CFOs would aspire to achieve, they nevertheless need to be accomplished with ‘a degree of caution and prudence’.

“It’s a matter of making sure that you’re moving at a pace that’s controllable, that the change is manageable, because of the importance of the activities that the finance function performs,” he says.

“You don’t want to do anything to destabilise it, and there’s no reason why you should, in a well-run programme.

I think that comes back to the earlier point about looking for small, incremental changes that you can build on, rather than necessarily having busloads of people turn up and putting huge, significant programmes in place.

“I think, in many cases, tools like robotic process automation (RPA) are perfect for the finance environment. Multiple,

You’re going to start to see CFOs spend far more of their time and energy engaging with the business than on what the business might consider to be backend activities consistent reconciliation activities can be automated really quite easily. It doesn’t get rid of the problem – it’s transformation with somewhat of a small ‘t’ – but it releases capacity to help teams think about and focus on more material changes, perhaps. “’Just get going’ would be the best motto, I think, in finance functions, for those sorts of moves,” he adds. “Elsewhere in the business you see, perhaps, more material transformations with digital; changing channels and accessing markets in various ways, or interacting with customers in different ways through digital channels.

“I don’t think any of this is without opportunity for finance functions, for sure, and particularly in the areas of mass data

management and data science, finance functions have a huge leap they can take, if they can get on board with that agenda.”

EXPANDING ROLES And how is the role of the insurance CFO going to be shaped by increasing digitisation within the industry?

Research by Argyle Advisory and Research Services and FTI Consulting has found that by playing a leading strategic role in helping their organisations to overcome the COVID challenges, CFOs across industry are now well-positioned to lead the way as ‘value creators’ in their organisations.

Meanwhile, a separate study by the CFO Network into the abruptly changing landscape of 2020, has identified CFO priorities for 2021 as being: digital transformation; rebuilding organisational culture; creating a ‘new normal’ business model; empowering workforces through diversity, equity and inclusiveness, and growth.

Keppel fully agrees that CFOs will play an increasingly influential role as digitisation largely frees them of their traditional back-office responsibilities.

“You’re going to start to see finance functions, and therefore CFOs, spend far more of their time and energy engaging with the business rather than on what the business might consider to be back-end activities,” he says.

“Back-end activities, such as invoicing and debt collection, are not unimportant to any business but I think they can, in a big organisation in particular, become 85 to 90 per cent of what finance is doing, rather than the department supporting the business with planning, strategy development, market assessment and growth. So, digitisation will free up finance functions to add more value to the businesses they support and, to be perfectly honest, I think that’s what they’ve always aspired to do.

“Many high-energy people in finance functions who come through to take broader leadership positions within organisations are involved in the planning side, rather than the statutory accounting side of finance. With increasing digitisation of the department we’ll see more time for finance functions to deliver those sorts of things as we simplify the back-end activities for them. For me, that can only be a good thing.”

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CFOs: STRATEGY

Future-proofing and change: A CFO perspective Digitisation at L&G is impacting every department, but in finance it coincides with changes wrought by regulatory reform that demand a fundamental rethink of critical processes. Carl Moxley, Chief Financial Officer for L&G’s Retirement Institutional division, shares his experience Touching any part of a legacy system has its risks, and nowhere is an organisation rightly more nervous of those than in the finance department.

No one wants a gung-ho CFO, but neither can an organisation’s most critical functions be protected from fundamental reform forever. That’s where insurance as an industry finds itself.

In 2018, the then head of platform and change at one of its biggest operators, Legal & General, admitted the company had been working with the same internal system since 1991 and would be ‘changing every tool’, as it executed its transformation strategy.

That means Carl Moxley, in his role as CFO for L&G’s Retirement Institutional division, has become increasingly involved with how digital processes are implemented, and the impact those changes in his department will have on the wider organisation.

Moxley’s journey at L&G may be a specific one, but it will undoubtedly speak to a number of CFOs who are also looking at the risks and benefits of change.

Like many working at insurers operating in the EU, much of Moxley’s time has and is being spent overseeing the company’s response to a raft of regulations with potentially huge operational impact on

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his department, including Solvency II and IFRS 17 reform. But while the consequence of embedding these new requirements has been to tie CFOs to their desks for months, even years, on end, Moxley believes the technology solutions they finally settle on to implement them could release chiefs and their teams to grow into a more strategic asset for the firm.

NECESSITY FORCING CHANGE Solvency II and IFRS 17 require a deep level of calculation and analysis, ‘that’s making us really think about our end-to-end processes and how we can make them better’, says Moxley.

“With IFRS set to be implemented in 2023, that is another change in the amount of information, detail and data that’s required, in terms of our accounting.

There’s an increasing focus [by regulators] on operational resilience, as well. While, in the past, the banking and insurance industries in particular have seen a lot of focus on their balance sheet resilience, capital and liquidity, that’s now moving to the operational side.

“We’ve a kind of shortening window of time to be able to do our reporting, that’s something the whole industry faces, and when we have growing business, increasing

the need for data manipulation, it becomes really important to think about how we view automation, digital capability and predictive analytics. There are clearly legacy systems that were fit for purpose in the past, that now need to be rethought.”

Previous piecemeal approaches to reform were understandable, but have not done the industry any favours, admits Moxley.

“When you need to get something in place, in the short term, you tend to do stopgap-type analysis, and layer on additional levels of complexity, because the business case for wholesale changes isn’t necessarily needed – it’s just a small iterative process,” he says.

“But the more you layer onto the systems, the more difficult it is to then fundamentally change, especially while you still need to keep the wheels running.

All these aspects have been barriers [to transformation]. That’s certainly what I’ve found. It’s the large-scale thinking around these new regimes that make you start to consider your whole process. The journey we’re on in my function is to get to the end state of a more automated, digital process.”

Will that significantly change how the CFO perceives his role, and how others in the boardroom see it?

“The CFO is responsible for the balance

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sheet, expenses, the management of the financials of the company. I think that is probably always going to be the case,” says Moxley. “But you get a whole range of different types of CFO roles; I’m quite lucky in that mine is fairly broad, it’s not just the balance sheet. I also look at longevity and credit risks, and have responsibility for those, as well as financial controls and all manner of other things.”

But, in the current period of change, he’s also been able to experience a new level of collaboration with other departments.

“It’s working with the transformation team, the chief operating officers of the company, and the IT directors, to think about what a future finance function should look and feel like, so that you are able to scale efficiently,” says Moxley. “What has always been true, but even more so for me now, is asking how the finance function adds value to the business, because the real value is predicting and looking at the future. This transformation journey gives the space and time for my finance function to be able to do that.

“It all starts with the data,” he adds, “on both the asset and liability side.

We then set assumptions that get modelled and projected, and then a whole lot of analysis follows. I was finding that the initial process – the data modelling before the analysis – was taking far too long, and my actuaries and accountants weren’t spending as much time on the value add, which is the analysis and understanding. So we’ve gone into that first stage of the process and looked to see where and how we could speed up or automate it.”

Cloud technology has allowed this smooth automation and is re-addressing older means of recording data.

“In some areas where we’ve used

historical spreadsheet macros to calculate quite important and detailed calculations, we’ve been able to shorten the time that incurs by using vaster computing power in the Cloud,” says Moxley. That level of speed and efficiency is what has made it easier for him to get more people across the business onboard with the transformative capabilities of digitisation for finance.

“Being able to show time saved in that one process, and that there’s less operational risk, is something that seems to have won the hearts and minds of both my team and the sponsors of this. It’s working well and it hasn’t taken fundamental focus away from our business-as-usual work, which can’t stop.”

That has been part of the challenge when it comes to digitisation and transformation: how do you convince those you work with that it isn’t going to affect the momentum of the business?

“I have found the most powerful teams are those where you’re able to get the actuaries and the accountants to articulate what they need and want to see in the process, and to get the people who really understand the latest technology involved to help them,” says Moxley.

That doesn’t mean there isn’t jeopardy involved in that.

“When you’re starting to move things off the mainframe and onto the Cloud, you’re introducing cyber-type risks, different IT mainframe risks, especially if you’re reliant on someone else’s recovery plan. If you start to move into artificial intelligence (AI) or machine learning (ML), you need to be cognisant of who’s programming that, and if they are programming it with their own bias, which you might not be able to see in the results.

“But I absolutely do think this is a great moment for insurers to really think about their future finance processes. It makes things faster, it makes things more controlled. Using new tools, new ways of coding and new ways of data mining, and I’m sure AI and ML, too… all of these things, in my mind, enable the finance department to be future-proofed.”

And that reassurance should bring CFOs nervous about change right back into their comfort zone.

I absolutely do think this moment is a great opportunity for insurers to really think about future finance processes

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Happy place: Change can be unsettling but automation of finance processes is ultimately good for CFO teams

Issue 5 | TheInsurtechMagazine

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HEALTH INSURANCE

Taking the pulse of health insurance Trevor Davis, MD, Life and Health, at insurance SaaS provider Instanda, believes the landscape for health cover will look very different, post-pandemic – and platforms will help insurers looking to move fast to adapt to it The ongoing COVID-19 pandemic has created an almost unbearable tension between the need to ensure the physical safety of millions of people, and the impact on our individual livelihoods arising from lockdowns.

On a macro level, this unique set of circumstances throws into question the viability of some of the hardest-hit sectors of the UK economy – and the consequential impact on jobs and, by extension, health protection, when the coronavirus storm has passed. That’s because only 13 per cent of adults in the UK have private healthcare and 75 per cent of these enjoy medical insurance as a perk of the job: they are enrolled in a company-paid scheme. But what happens when there is a severe predicted downturn in employment as a result of the pandemic?

A recent speech by the Governor of the Bank of England, Andrew Bailey, suggests that unemployment rose to 6.5 per cent in the UK, equating to around 2.2 million people, during 2020 with government statistics confirming that there was a record number of redundancies between August and November. The Institute for Employment Studies forecasts that employers in Britain are planning more than twice as many redundancies than they did at the height of the last recession.

Fewer people in full-time work and reduced income likely means fewer health policies and less coverage – all in an

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environment when the NHS is at capacity, general surgery is being delayed and therefore a private healthcare option would be welcomed by all concerned.

It begs the questions: are major health insurers equipped to deal with this rapidly altering landscape? Are they agile enough to cope with a changing demand, in terms of numbers and accessibility?

Trevor Davis, MD, life and health, at Instanda, a platform provider for insurance carriers, distributors and re-insurers, says the answer to that is ‘no’. Or, at least, not yet.

“As reduced income for many people becomes a problem, they may lose access to private healthcare. This potentially impacts carriers as companies/SMEs may cancel their cover,” he says.

“The challenge is to offer health insurance more flexibly in the midst of a century-defining health crisis. Particularly as existing health insurance is not as cheap and flexible as it should be.”

Technology as catalyst It is in this space that Instanda is operating, providing a platform that increases flexibility and reduces costs.

Health insurers are traditionally big beasts, slow to innovate and still, all too often, chanting a one-size-fits-all mantra. But many are now taking on the challenge, engaging the services of Instanda and others to make themselves more relevant in this evolving new business environment.

“Legacy systems are holding back insurance productivity but we are seeing more and more insurers taking on flexible solutions,” says Davis. “No-code software providers, such as ourselves, create the opportunity to innovate at scale and rapidly change the way the insurance value chain delivers products to customers.

Business teams no longer have to lean on skilled IT developers to help build a product. They simply ‘drag and drop’ the components they need from a library in our no-code platform.

“And it’s an alignment of what customers actually need, as opposed to what insurers want to provide. Somebody under 28 needs simple insurance for travel protection and targeted health cover. Whereas somebody over 55, wants to protect themselves from becoming seriously ill and manage the cost of this insurance cover. These are very different motivators for buying insurance.

“The issue for insurers is how they provide the right solution, in the right way, at the right time, to everyone, whether they’re direct customers or through employers’ schemes. And certainly, employees have found health insurance provided by employers to have limited flexibility to meet their own or their family’s needs. In an age of open banking, customer segmentation and artificial intelligence capability, we can no longer expect consumers to accept such broad brush policies.”

An opportunity to reform the design www.fintechf.com

Shot in the arm: Ironically, the pandemic could be the shakeup health and life insurance need

and pricing of policies, of course, doesn’t just affect employees but also those often forgotten or overlooked when it comes to health or life insurance.

A new approach, such as that facilitated

by Instanda, means lower-paid freelancers and contractors know where their needs can be met more efficiently and cost effectively. In these times, where fragmentation of work life seems more and more likely, providers will find having an agile approach to these individuals is key, says Davis.

“We’re looking at a whole generation of gig economy people, individuals who work part-time, on contract, who might be employed for months at a time and then take several months off. Try explaining to somebody who is under 35 and can barely pay their rent, that they have to sign a 12-month health contract or a 10-year contract for life products. It just isn’t a good fit.

“With the new platforms, insurers can now provide products that are geared towards work patterns and lifestyles, a dial-up/dial-down subscription, tailored to changing needs.

“COVID has just emphasised the need to provide different things for different requirements and do it quickly, seamlessly and affordably.”

Finding the right fit It’s important to put the flexibility of these platforms into context, depending on whether you’re looking at life cover or health policies. The former are naturally longer term, written often decades ago, and data and functionality rich. These are naturally harder to migrate onto new platforms. Whereas shorter-term products, such as health and critical illness, can be repositioned more easily.

Davis explains: “From an insurer’s perspective, there are three key challenges to be met. One: rating and pricing the platform. Two: migrating existing policies. Three: managing the underlying risk and claims. A platform like Instanda provides options for insurers to manage all three of them.

“For example, the use of ecosystems and data can easily be integrated to enrich the underwriting rating and pricing that insurers naturally require. Secondly, it’s no longer necessary to undertake large/complex migrations as Instanda enables phased migration at renewal, including policies, documentss and claims history. Finally, it provides a modern, digital platform that understands and can leverage both external and insurers’ platforms and rating engines to deal with complex medical insurance pricing.

COVID has emphasised the need to provide different things for different requirements and do it quickly, seamlessly and affordably

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“The key is getting people in insurance comfortable with the idea that a platform like Instanda’s has fantastic flexibility but can also cope with all the complex underwriting that sits behind it.”

Increased flexibility and use of multiple data sources raises important question around data protection.

“For me, this is about the concept of data control and that the individual ultimately controls his/her own private data,” says Davis. “Although it’s not really to do with the technology but more about how institutions manage and protect that data. For me, it has to be about the concept of data and digital wallets that the individual ultimately owns and controls.”

Since the pandemic started, interest in life and health products has understandably increased in countries that don’t have the benefit of a universal health system free at the point of delivery.

“But in three years’ time, we will have a very different-looking workplace,” says Davis. “And, like it or not, COVID in the UK has thrown up the whole ‘can the NHS cover me?’ question. With this in mind, we all have to look at the best way to service employees and those in the gig economy. Technology is one of the drivers for this.”

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HEALTH INSURANCE: INDIA

Jay Bakshi runs his own digital marketing communications agency, Digiqom Solutions, from Gurugram in northern India. The organisation employs around 15 people, who were already functioning remotely when COVID-19 struck and the country went into lockdown.

During March and April 2020, Bakshi worried about how he could protect his staff and maintain his business. Around that time, one of his advisors suggested buying affordable COVID-specific health insurance.

“Traditionally, health insurances were long-term and expensive. But the group insurance I got for my team was not only affordable, the process of getting it was also quick and easy. Amidst all the uncertainty the pandemic threw at us, it ensured some cover in terms of treatment and medical costs,” explains Bakshi.

He was among the first employers in the country to secure COVID insurance protection for employees and the product design was an important selling point.

“The price of an individual policy might have deterred members of my staff from

COVID-19 has encouraged the Indian health insurtech segment to grow up. Product innovation and an emabling push from government is increasing reach and affordability, reports Swati Sanyal Tarafdar

getting one for themselves. But, as a corporate group, I could access a better package and I was willing to make that investment,” he explains.

Among the few positive changes the pandemic forced on India’s population, embracing the utility of health insurances – in fact, insurance in general – has emerged as one.

Back in 2013 a study showed that awareness, let alone uptake, of health insurance was very poor – only around one in six families had even heard of it.

And yet, with only one per cent of India’s gross domestic product (GDP) being spent on financing public healthcare at the time, treatments were expensive and put further stress on the vast majority of Indians’ household income. The same study showed that, in 40 per cent of cases, hospitalisation forced people to borrow heavily or sell assets to cover expenses.

More recent research published in the International Journal of Community Medicine and Public Health (IJCMPH) in 2019, revealed that, among a sample of 550 people in two south Indian districts of Karnataka, 16 per cent were still completely ignorant of health insurance.

Meanwhile, 21 per cent were aware but did not have cover. Of those who had health insurance, only 25.57 per cent utilised it, the rest saying the process was too complicated (42%), or they were offered only partial coverage (24%), but most cited the non-availability of empanelled hospitals, diseases not being covered, or simply not knowing how to go about accessing insurance or claiming against it. There were also large differences in health insurance coverage between Indian states.

Realising the importance of providing adequate coverage, the Insurance Regulatory and Development Authority of India (IRDAI) promoted several low-cost or free insurance schemes for those at the bottom of the pyramid. In 2018, the Indian Government started the Ayushman Bharat scheme to provide free access to secondary and tertiary healthcare for those needing specialised treatment and hospitalisation. Jointly funded by the federal and state governments, this scheme was targeted to cover 40 per cent of the Indian population; but this still left a massive section excluded. The IRDAI chairman admitted: “Out-of-pocket expenditure on health in India is as high as 64 per cent... while health

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insurance is as low as 0.29 per cent of GDP. Ayushman Bharat has provided health insurance to the households below the poverty line. But, the middle class remains largely uncovered.”

Now demand is skyrocketing. So what’s changed? In a word: COVID. “Most people didn’t think about insurance. They didn’t want to spend money on that. Also, per capita income is low, so most people didn’t have the liquidity. What COVID-19 did was change this behaviour and mindset,” says Rohan Kumar, co-founder and CEO of Toffee Insurance, an insurtech startup in India that designs and offers microinsurance packages.

“For most consumers, it’s still a push product,” Kumar adds, “but with a heightened sense of mortality, increased chances for hospitalisation and associated costs, and the lack of COVID infrastructure, the need for having some sort of protection has been amplified.”

Toffee’s focus audience is customers below 35 years of age with a family income of more than INR 50-60,000 per month – so, predominantly, the Indian middle class that hadn’t bothered about healthcare insurance products in the past. Through its innovative, customer-centric, contextual microinsurance products, Toffee had successfully sold bite-sized insurance policies to more than 1,15,000 Indians, over 80 per cent of whom were first-time buyers, even before the pandemic hit.

IT’S THE PRODUCT, STUPID! Startups like Toffee Insurance are taking a fresh look at India’s insurance scene and disrupting it through sharper product designs, relevant pricing, and a stronger focus on customer necessity.

Says Kumar: “Everyone was trying to solve the distribution aspect rather than solve the product problem. So, your offline audience, which is probably a 90 per cent chunk of the population, continued to be left out.”

Toffee identified three fundamental issues with the Indian insurance sector.

Firstly, the distribution problem is

Most people didn’t think about insurance. Per capita income is low, so most people didn’t have the liquidity. What COVID-19 did was change the behaviour and mindset Rohan Kumar, Co-founder & CEO of Toffee Insurance

actually a product problem because there was no innovation and the old-school products were extremely difficult to understand. Secondly, these legacy products were all-encompassing and had unnecessary features, which meant they were covering a large variety of risk profiles and were therefore expensive. And, finally, there was limited access to distribution channels.

So, Toffee worked with insurers to create products that covered single events that occur with the highest frequency, and sharpened their distribution.

“We focussed on typical conditions for which most people get hospitalised, including diseases like dengue fever, malaria and chikungunya.

“We developed a product for those who ride a bicycle to work. We offer coverage for people who are on the road most of the time – like Uber drivers and food delivery staff. The products became very easy to understand, product prices reduced drastically, people were able to relate to it, and it all became very easy,” Kumar explains.

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HEALTH INSURANCE: INDIA In August 2020, it rolled out The Toffee Plan, a bundled monthly subscription policy covering health, life and household, which also included hospitalisation expenses arising from pandemics, as well as their consequential impact, such as being unable to work because of quarantine.

INTEGRATIVE TECHNOLOGY Direct-to-consumer innovation is one response to the problem of underinsurance.

But there’s a parallel technology trend emerging, too: the tech layers provided by another set of insurtechs that help incumbents to adapt and quicken their pace.

MetaMorphoSys Technologies helps traditional insurance providers with product configuration so that they can launch innovative products fast, and perform quick underwriting, customer acquisition and claim resolution.

Amit Naik, CEO and co-founder, says MetaMorphoSys sees itself as a legacy transformation company.

“The incumbents are invested in monolithic, old legacy platforms. They have invested so much money in these and it’s a nightmare to change them,” he says.

MetaMorphoSys allows them to continue to power the business, but to all intents and purposes what’s clients, customers and employees interact with is his platform.

“We'll show them the butterfly – my platform,” says Naik, “which sits on top of this legacy so that they can launch innovative products, innovate in underwriting, do quick claims processing. Whether it’s a group claim, individual claim, life claim, health claim, the claim adjudicator sees the entire data on one page, it can be auto approved, it comes with a decision, and all the adjudicator has to do is to check the data and OK it because there’s so much intelligence built into this system. What took a week now happens in 30 to 35 minutes.”

This laying of old and new enable fast processing of data and integration of systems, as well as validations that enable identification of fraudulent claims.

Naik agrees that COVID-19 has accelerated digital transformation among insurance companies. The biggest change, he thinks, has been the shift from on-premise to an on-demand software-as-a-service (SaaS) model.

“Insurance companies were so scared, initially, about the regulator, about data privacy and data security issues; they were

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scared about how they’d manage, whether they’d lose control. But, pushed

by COVID-19, now they are willing to put everything in the Cloud. And it is giving them a cost leverage and a speed benefit. And the end customer gains out of this whole situation.”

Naik, however, emphasises that what actually made a difference for MetaMorphoSys was its approach, using component-based platforms and ready-to-go intellectual property.

“We gave a set of 150 claim rules and the anomalies to a Hong Kong-based insurance company we are working with. The code alone is of no use but with this intellectual

months, and for some of them it’s as high as 70 per cent. That’s a big jump and I think it’s going to stay this way all the time customers perceive an uncertainty in the health and medical environment and this heightened sense of mortality.”

For years, for those with steady, well-paid jobs, the end of a financial year meant taking out insurance policies because it helped to offset some of the tax burden.

For the rest of the year, there would be little understanding or interaction with the policies. The new-age insurtech startups are changing this behaviour through post-sale customer engagement and social media, as competition increases.

Cost benefit: Micro-insurance products and platform technology is widening access to health services

property – the rules, data and insights – insurance companies should be able to leverage the best practices. That’s what makes the difference,” he explains.

LOOKING TO THE FUTURE In the fiscal year ending March 2020, India’s life insurance companies recorded 11.36 per cent growth in their collective premium income. Since then, catalysed by the pandemic, the insurance industry, especially the healthcare segment, has seen a further boost. The IRDAI is yet to publish its data, but industry experts think there are reasons to rejoice.

Kumar says: “Across all our health insurance partners, demand has gone up by around 30 per cent in the past eight

Naik, however, suggests that the industry will see a lot of consolidation in the coming years, as startups continue to mushroom.

He says: “There’s greater awareness and penetration has increased. But, I think, over a period of time, you will see that very few companies will be able to sustain themselves.

A lot of consolidation will happen.”

For the time being, however, the new insurtechs are defining new products, new systems. And they are also showing the way to go in terms of customer engagement and relevance.

This, in turn, is enabling individuals and entrepreneurs like Bakshi to afford a health insurance cover not only for himself but for his extended families, too. www.fintechf.com

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