Technology-focused investments are pushing business model changes across industries, and insurance is not immune to these pressures, a new study by global investment management firm Conning suggested.
Released on Wednesday, the study examines the changes that are underway in personal lines and the potential impacts on the insurance business model, focusing on product development, client acquisition, risk analysis and claims. The study, titled Emerging Business Models in Personal Lines Insurance: Innovation-Based Disruption, also identifies a number of “near-term possible outcomes and business model changes for the industry,” Conning said in a statement.
“Insurtech investments are attacking different links in the personal lines insurance value chain, including product development, client acquisition, underwriting, and claims,” said Steve Webersen, head of insurance research at Conning. “Digital capabilities and the arrival of new competitors carving off pieces of the insurance value chain may well drive a significant restructuring of the industry. For personal lines insurers, the key will be trying to figure out which parts of this evolving system are areas where you provide the most value and how you are going to connect to the customer.”
Alan Dobbins, a director of insurance research at Conning, pointed out that the new innovative technologies are “rooted in mobile and digital – but include a wide range of categories, with fundamental changes in communication, data availability, and computation. Underlying these changes are several critical enabling technologies, from connectivity to analytics to artificial intelligence.”
Information from Conning noted that several trends are converging now to push fintech and insurtech investments: an explosion of available, relevant data; a push for greater efficiency (as an industry, near 40% of premium payments go to non-loss cost expenses); consumer acceptance of digital technology and the prevalence of mobile devices; a change in customer attitudes toward privacy (particularly when in exchange for a benefit); and lower technology costs – storage and processing power.
According to data aggregator CB Insights, there were 117 p&c insurtech deals in 2016, a nearly 50% increase over 2015, Conning said in the information.
Founded in 1912, Conning has offices in Boston, Cologne, Hartford, Hong Kong, London, New York and Tokyo. As of March 31, it had almost US$113 billion in global assets under management. Conning supports institutional investors, including pension plans, with investment solutions and asset management offerings, risk modelling software, and industry research.