The insurance industry will likely face what could be its biggest shift ever over the next decade and successful navigation will demand greater collaboration with a wider group of organizations, Mike Key, SAP’s vice president of business development, Global Core Insurance, suggested in a presentation Tuesday.
“We really believe there’s going to be more change in the next 10 years than there have been in the last 30 years or even in the last 300 years,” said Key, speaking at Insurance-Canada.ca’s Executive Forum in downtown Toronto.
An industry that was centered on compensating someone for financial loss is dramatically changing, he suggested to forum attendees.
“We see the fundamental change in insurance moving from compensation for a final loss to having the information and the technology to be able to reduce the severity of that loss or to be able to prevent the loss itself,” Key reported.
Three reasons driving the change are that more information is available than ever before, more technology is available and “there are competitors that have greater access to that information than sometimes insurance companies.”
That being the case, insurance companies would do well to recognize the importance of collaboration, sometimes with completely new partners.
Mike Key, SAP’s vice president of business development, Global Core Insurance
Key relayed information presented about life insurance during a conference in Tokyo. The man reported a new policy could be underwritten with four pieces of information off of the Internet, very little health information from the insured and no lab work or physician visit.
“His data scientists can gather all that information from third-party and research and information that’s available in social media,” Key said. Although the man noted lab information was still being requested, “that’s purely to triangulate data back to what the data scientists are coming up with,” he told forum attendees.
“I think that really changes the way we think about insurance,” Key pointed out.
“If we don’t have that information and we don’t have that technology, other folks in the industry… are going to be able to shape that a little differently,” he suggested, adding that “we see the change going through all of the business models, all of the business processes of the insurance company.”
Historically, insurance companies have been siloed, with strong brick walls between “the life or the health or the property and casualty or the commercial institutions,” Key noted.
In the future, however, “we’re talking about slivers, we’re talking about services and product capabilities in a very agile fashion,” he said. “We’re talking about partnerships with multiple channels that have information about our insureds.”
Key pointed out “we have car companies that have more information about our insureds, we have commercial entities that have more information about our commercial coverages than we do, we have health care companies that have more information about our insureds than some of our health insurers.”
In addition, insurance companies themselves, “because of social third-party and available Internet of Things information, have that information about those insureds as well, to be able to drive our particular operations,” he said.
“Collaboration, cross-industry collaboration, we think is absolutely key,” he emphasized to attendees. “We see having information, working with the car companies, working with the commercial entities, working with the health side of the business in order to be able to get that information is very, very key and vital to that digital environment of the future,” Key suggested.
“What customers can have today and what you can have today as an insurance industry is that customer-centric environment,” he pointed out. “We think the customer is the centre of all future interactions, not the product. We think that services should be made available for the product capabilities,” he added.
“When you’ve got the information and technology to be able to shape that, to be able to underwrite it, to be able to find products, to be able to rate the risk associated with that loss in real time or that insurable entity in real time, that dramatically changes things,” Key suggested.
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