Canadian Underwriter

Discovering Digital Innovation

Can Canada's property and casualty insurance industry shift into a higher digital gear before disruption sets in? Being open to digital change - whatever the source of those ideas - and understanding what customers want is critically important for a smooth transition to a new digital model.

December 1, 2015   by Sharon Ludlow, President, Aviva Insurance Company of Canada

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Sharon Ludlow, President, Aviva Insurance Company of Canada

The property and casualty insurance industry is late to the digital game. Some may even believe that this wave of consumer-driven technological innovation will bypass the business altogether. Some argue insurance is too complex or intangible to “digitize”; others clearly contend those observers are dead wrong.

Technology is making it easier to do business and impacting a number of traditional platforms. Just take a quick look at the fate of other sectors or services that were slow to recognize the pace of digital disruption quickening on their heels.

How about music, books and videos? What about taxis, travel agents and hoteliers? Did those industries see the sharing economy rushing up in their rear view mirrors?

The key factor is that customers are all still buying most, if not all, of these products or services: it is the way they are being purchased that has changed dramatically. Customer choice is driving the need for dialogue among industry, government and regulators to work together and embrace digital technology.


Insurance is, in many ways, ripe for disruption. Will there be an algorithm that transforms the face of Canada’s p&c insurance? Can the industry become “uber-ized”?

There is a gap between what the insurance industry has offered, in terms of overly complicated products, traditional distribution channels and cumbersome buying experiences, and what modern consumers want when it comes to convenience, simplicity and price.

As everyone know, nature abhors a vacuum. The big question is, who will fill this gap? And where will the new competitors come from?

Canada is already seeing signs of disruption in the financial services industry today. Take the example of shadow banking, where virtual lenders and borrowers are matched, and money is lent simply and seamlessly.

Online lending has grown to US$12 billion in new loan originations, in a short amount of time, and is disrupting the traditional banking model.

Or how about robo-advisers? Earlier this year, Power Financial Corporation partnered with Wealthsimple Financial Inc. to plug into the world of robots.

The partnership of the robo-adviser firm and a major financial institution is the first of its kind in Canada. The aim is to reach more Millennials and other Canadians who are less likely to invest through traditional channels, and opt for low-cost robo-advisers that provide automated online portfolio management.

Closer to home, in the p&c insurance space, there is an increasing pattern of experimental start-ups and innovations from both new and established entities. In Europe, especially, there are several examples of new peer-to-peer (or P2P) insurance groups, such as Guevara Insurance and Bought By Many in the United Kingdom, and Friendsurance in Germany.

The marketing thrust of these P2P ventures can be best summarized in Guevara Insurance’s online profile, which notes: “Guevara is a digital company offering a new approach to insurance… Our customers recognize the opportunity to leave behind an industry that’s not working for them anymore and embrace something better.”

Tech leaders like Google have also dipped their toes in the insurance waters. With its Google Compare Auto Insurance Services, the search giant is now licensed to do business in 26 states south of the border.


So if, indeed, the seeds of digital disruption are springing up all around, how can Canada’s p&c industry react? A starting point is to identify what is holding the industry back.

Technology and regulation

Leadership, technology and regulatory barriers are major considerations that insurers have to think through. The limitations of existing (and past) technology are a major obstacle.

The traditional approaches to business development, change management systems and process upgrades are too slow to work in the digital age. This is holding the door wide open to faster-moving competitors.

The regulatory framework surrounding insurance is another brake on digital innovation. Rigid regulation is not innovation-friendly.

Insurers may understand what consumers want and be eager to create a product, service or feature to meet that need – yet are unable to introduce it for regulatory reasons. A uniform, one-size-fits-all approach to product oversight does not lend itself to digital change.

The Canadian p&c industry and the taxi industry are similar in that both are stifled by regulation. Are insurers going to permit the same level of disruption with an unregulated player like Uber?

When it comes to the sharing economy, it is essential that insurers engage with government, regulators and consumers so that they can embrace digital technology for the purposes of meeting customer choice.

Need for leadership

While technology and regulation are significant hurdles, it is leadership that has greatly hampered insurers’ approach to digital innovation. What is holding the industry back, plain and simple, is cultural change.

It is necessary to understand the same consumers buying insurance products are having unique experiences in other service and retail environments (online and offline). They automatically compare these to the insurance-buying process.

This synchronicity means that it will be consumers who lead the charge for change. The insurance industry will be dragged into the future.

But how the industry responds will be crucial. Instead of being dragged kicking and screaming, it is better to anticipate change, be continually curious about what is going on elsewhere, spot the opportunities and seize how these could relate to insurance, technology and customer experience.

This imperative is one reason Aviva Insurance has developed “digital garages” in London, U.K., Singapore and Toronto, which allow technical specialists, creative designers and business teams to explore, develop and test new insurance ideas and services.


Some of the aforementioned P2P insurance examples in Europe may seem far away, but they are destined to emerge in Canada, as well. Insurers here are not geographically immune to digital disruption, so they must be ready to tackle this problem.

This does not mean simply starting a digital project here or there, and tacking it onto an overall business plan. Instead, the effort must involve a comprehensive undertaking that includes strategy, customer-centricity, business process, organizational change, technology and data analytics. In other words, insurers need to transform the business itself into a digital strategy.

As an industry, there are opportunities to make smarter investments in technology. The industry can capitalize on those innovations that bring the kinds of changes consumers demand – simpler products, mobile and digital options, customizable features and a better experience.

These must go beyond the incremental improvements to technology infrastructure, such as policy administration systems. Bolder strategies are required that embrace digital technology (including cloud and mobile) either as standalone services or as effective bridges to current systems.

A simpler business environment will contribute to the success of the insurance industry in advancing digital innovation in Canada. That means more flexible, customizable product options, and greater agility for companies to design insurance solutions that meet the needs of digital clients.

Key to efforts moving forward is leadership – the ability to ask tough questions, spot emerging trends and figure out how these will impact the industry.

Companies must constantly be asking, What are competitors (old or new) doing to disrupt the p&c insurance business and its business model? How could change in other industries affect the insurance model? What can insurers do to stay ahead, knowing that digital disruption has impacted, destroyed and transformed industries?

The gradual development of innovative technologies, such as autonomous and semi-autonomous cars, the connected home, drones and Google glasses, is already being seen, and is starting to have an impact on the p&c insurance industry. In October, the Ontario government announced it will be the first province in Canada to allow road tests of automated vehicles, starting in January 2016.

While some may see these as futuristic “toys,” it is interesting to note that PayPal, Netflix, Skype and Uber were once dismissed as toys. In recent years, the number of technologies in the “toy” phase has risen sharply and is hard to ignore: 3D printers, smartwatches, Internet television, robots, wearable technology, autonomous cars, drones, expert systems, quantified self and artificial intelligence.

The p&c insurance industry has to engage with regulators, governments and other stakeholders on how to embrace these “toys” that customers are – or will be – demanding.

Change is inevitable. The problem is trying to spot where change will come from. The worry is not so much about traditional competitors or even insurance start-ups. Rather, what keeps some insurers awake at night is the person in his or her garage, thinking of different ways of offering a product or service that will completely alter the insurance experience.

For the insurance world, that could be just around the corner. The choice as an industry is to peer around that corner and anticipate this change – or sit idly and wait for it to radically transform the industry’s business models.