Are we creating an insurance desert for society’s have-nots? C
ould someone you know be uninsurable by 2025 because they’ve no desire, access nor confidence to use technology?
We no longer blink at the thought of autonomous cars, connected homes or personal assistants like Amazon Alexa. The problem is, not everyone can use these devices or has the disposable income to afford them. This trend could ultimately drive a wedge between the tech ‘haves’ and ‘have-nots’. When combined with the industry’s unceasing appetite for data to accurately price risk, we’re creating the perfect conditions for disenfranchising a significant segment of our customers.
Challenging the point of pooling risk
Thanks to our love of data, every risk is highly individualised, and the best risk customers (the haves) get the lowest prices. Without intending to, this cherry-picking is making the riskiest customers (the have-nots) uninsurable. This is unravelling the original point of insurance: to pool risks, so the misfortunes of the few are shared among the many. As more services move to the Internet of Things, where everything from mobile phones to washing machines connect to the Net, there could be even less available for the ‘have-nots’. Without a connected home device or car technology to improve their risk rating, they’ll pay more for their insurance. So how far should we take personalisation or pricing risks? If the ‘have-nots’ slide towards marginalisation, one consequence is the regulator stepping in to ensure, somehow, the disenfranchised are not excluded from buying insurance. The challenges posed by this rapidly changing environment should be spurring our industry into action.
Coping with shifting sands
Another trend affecting us and our customers is automation through chatbots, robotics, artificial intelligence or non-human interaction. There’s a real possibility that every link between the insurer or reinsurer and the customer could be replaced by a slicker process for them and more efficiencies for the risk carrier. How will the industry deal with a future that’s more volatile than ever before? A good starting point is to understand the shape of things to come. The more we know about technology like AI, the more we can visualise what the future landscape looks like. The good news is we have time to rehearse strategic responses to scenarios like these and to communicate openly about what we see and how these could change over time. Because looking out for tsunamis is the best place to start planning for them.
Spirit of co-operation Where are there currently opportunities for collaboration in the claims sector, and can this be achieved? nyone in business knows that effective collaboration is essential to performance. Working together to achieve shared goals is valuable and important. The question is whether we can do that in the claims sector? Can we generally agree on a set of shared goals? I think so. We can all agree about combatting fraud and making the process of making claims as efficient as possible for genuine customers. Agreement on ensuring the process should be fair, balanced and independent would probably be more challenging. A joint effort to put the customer first.
We know that collaboration is generally difficult. Collaboration requires commitment, particularly at a senior level. It should be in the interests of everyone to reach an agreement on many thorny issues so that the commitment to find common ground might be found. Collaboration requires good communication. The debate on the proposed whiplash reforms has certainly been heated at times, but for the most part, the individuals and organisations that matter have been combative but remained professional without getting personal. Lines of communication between individuals and organisations have always remained open. The ability to reach agreement is directly impacted by the quality of the relationships. As previously negotiated agreements in the sector have shown, it does take time to build trust, openness and mutual respect for differing opinions. Although the pace of the reforms has slowed and implementation looks increasingly distant, the clock is ticking on the time available to genuinely develop a spirit of co-operation and shape these reforms positively. The more people or organisations involved, the harder it is to achieve collaboration. This is certainly true across the sector, with differing views and priorities on both ‘sides’. So, what could we agree on? Fraud and ID checks and verifying legitimate claims. The development and integration of Claims Portal and MedCo as part of the new claims environment. Working to ensure that high quality medical reports are available in a timely and efficient manner. Agreement on better sharing of intelligence, information and data. Also, working together to change the culture around illegitimate claims, whilst agreeing that most claims are legitimate. Much could be done and I am convinced that collaboration is possible, although it will require time, patience and a commitment to find some solutions. The proposed reforms currently have too many loopholes and the consequences are too serious. Some genuine and practical solutions could be agreed, but it is not a genuine collaboration when a gun is being held to the head of one side. The Ministry of Justice should think on that. I live in hope. Donna Scully, Managing Director, Carpenters.
Ken Marke, Head of Strategic Futures, Ageas.
Modern Insurance 31
Published on Nov 10, 2017