Canadian insurance companies have yet to fully embrace the potential of blockchain and digital authentication. Meanwhile, other industries are pushing ahead with innovative, enterprise-scale services related to these technologies.
Chris Gory has seen big changes in the insurance industry over the course of his 23-year career. But the founder of Insurance Portfolio Financial Services (IFPS) thinks Canadian insurance companies need to do more to embrace the digital capabilities that are changing businesses across multiple industries.
“As an industry, especially on the benefits side, we really need to embrace change more. When you look at other industries, there’s change going on, and things are changing pretty quick. And we really need to keep up,” he says.
The beginnings of enterprise-scale transformation
What sort of changes are the larger insurance providers undertaking? It’s about more than just putting a shiny new face on the same services. To make real headway, companies need to adopt what EY calls ‘enterprise-scale digital services’.
According to Gory, big providers are already taking steps in the right direction, but the best is yet to come.
The transformation taking place in Canadian insurance is clear when looking at new technologies targeted to improve the customer experience.
- Manulife has developed Alexa integration, allowing customers to access account information via voice recognition.
- Sun Life’s new digital coach Ella works with Google Assistant to provide customer support in a similar fashion.
- Sun Life has also opened up the playing field for blockchain and benefits providers with the recent announcement that the the company is teaming up with SecureKey to help customers verify their credentials.
Gory notes that blockchain innovation has big potential for the insurance industry, especially for benefits — reining in the debilitating paper trail of claims.
Startups and legacy companies push ahead together
The presence of startups within the insurance market has become too large to ignore.
According to the 2017 World Insurance Report, 31.4% of customers rely on insurtech options — either on their own or paired with more established insurance provider offerings.
At IPFS, a company that specializes in providing employee benefits to startups around the world, Gory does business with a lot of the exciting, young companies that are reshaping Canada’s business landscape.
Gory says he has never seen the scale of change currently moving through the insurance space.
“This is something awesome. Before, you wouldn’t see such engagement, such traction with the tech startups, with the insurtechs. You saw some before, but definitely not on the same scale. They’re being more widely accepted than they were say in the Dot Com era. The Dot Com era was pretty limited as to what you could do. There was a certain number of vendors, but you didn’t have the number of insurtechs out there.”
Insurtechs pointing a way forward
“In the benefits space, you’re seeing a lot of companies that are trying to really gain traction in Canada,” says Gory. “They’re competitive, but they’re also pushing the insurance companies to make changes.”
Gory points to a couple of Canadian insurtechs as sources of inspiration and collaboration for larger providers.
- Insurtech platform League has partnered with business leaders like RBCI, AETNA and Humana to broaden its reach and improve its ability to offer customer solutions.
- Newcomer Honeybee — a group working under the umbrella of insurance provider Benicaid — has also garnered buzz recently for its non-traditional benefits platform. The online app allows employers to allocate benefits to employee healthcare spending accounts, allowing the employees to choose what they spend their benefits on.
These developments are helping to transform the insurance industry, adapting the wealth of technology that can upgrade outdated systems of file keeping and customer onboarding. And according to Gory, it’s this collaboration and ability to engage with enterprise-scale solutions that is beginning to transform the insurance industry in Canada.
“I think we’re starting to see that they’re realizing, they’ve got to do big picture,” says Gory. “It’s not just small-scale innovation that’s going to set them apart.”
Blockchain to boost speed, security of insurance claims
What do the decentralized, shareable ledgers that blockchain technology drives have to offer to the insurance world?
A lot, according to Insurance Portfolio Financial Services founder Chris Gory. “I’d love to see blockchain come around,” says Gory. “That’s just going to help with the payment of claims process with all the companies we work with.”
In a recent report, EY outlined how blockchain technology could “be used to address the considerable inefficiencies, gaps and errors caused by poor data quality in both front and back offices” of insurance providers.
Blockchain and Benefits
In the employee benefits space, says Gory, the time it takes to process claims and provide payment is crucial. Blockchain’s ability to provide tamper-proof, shareable records of transactions could drastically speed up the interaction between insurance providers, their customers and third parties.
”I’ve had a number of clients reach out and say ‘Hey, can you move us away from Company A, Company B, Company C’ because claims payment is taking so long. With blockchain you can get that done a lot faster.
“You can integrate third parties and actually have better coordination of benefits. If someone’s using a third party for say a health care spending account, you could have more integration between the benefits plan and the spending account. There’s so many different possibilities with blockchain I could see playing out within the next 24 to 36 months.”
The use of smart contracts that speed up the validation of client documents could lead to big reductions in administration costs for benefits providers, as well as higher customer retention.
Where are insurance companies currently with blockchain?
As in other industries, it’s early days yet for blockchain and insurance.
Most insurance groups are still in the testing stages, according to a recent report from KPMG.
But investment into the new technology is high among industry leaders: AXA Strategic Ventures, and other partners, invested around $55 million in a blockchain startup; and USAA contributed $75 million into a blockchain-driven digital currency in 2016.
A recent job posting by John Hancock also shows where the industry is headed.
The posting indicated the Manulife offshoot is seeking a developer to “come explore blockchain with us.” While the company’s efforts appear to be in the proof of concept stage, developments could be ported over quickly to the company’s larger insurance infrastructure.
SMEs want to buy insurance online
Growing numbers of SMEs are turning to online insurance to protect their business.
According to a new report from PwC, 36 percent of small business owners will interact with their insurers online in the near term. By 2022, it will be 48 percent of all SMEs.
SMEs want to buy insurance online
PwC’s new Digital SME Insurance Survey of 2,100 small businesses from 14 countries indicates that SMEs are interested in purchasing online-based insurance solutions as the sector begins to digitally transform.
Recently founded companies are the most eager to interact with their insurers digitally with 48 percent of companies under a year old saying they want to purchase their insurance products online. For companies over ten years old, it’s 37 percent.
The findings show that insurers who are already digitally transforming have a significant advantage when seeking new customers.
As more new SMEs are formed, they’re increasingly likely to choose an insurer with an online customer-centric service. This gives insurers a chance to overhaul their business and emerge as a leader in the digital sector.
Tailoring insurance products
PwC said the opportunities for insurers present an “open door” to new products.
However, the company’s Global Insurance Leader, Steve O’Hearn, noted digital insurance initiatives face several potential roadblocks before they achieve success.
One of the biggest challenges will be in replacing current operating models with more agile digital-focused alternatives.
“Insurers must have the capabilities to understand their customers and have technical solutions allowing them to rapidly evolve and adapt solutions as the market changes,” said O’Hearn. “They also should look at an emerging generation of startups not just as customers but as potential partners in providing new technology solutions and value-added services, creating more responsive, and targeted solutions.”
Cybersecurity Insurance Lags
The study also found uptake of cybersecurity insurance is very low, with just 16 percent of firms having active cover. Over 46 percent of the respondents said cybersecurity insurance could be applicable to their business.
U.K. insurtech jobs booming
Jobs in insurtech are increasing 22 times faster than the rest of the U.K. market, according to a report from Accenture. And Brexit isn’t going to slow things down.
The sector saw significant investment levels, says the report, hitting US$250 million in just the first six months of 2017. This was twice the level of investment in insurtech in the rest of the European Union.
Accenture predicts this level of growth is unlikely to be stalled by Brexit. The number of insurtech jobs grew by 22 percent per month over the course of 2017. This is way above the employment growth rate of just one percent for the whole U.K. economy, as reported by the analytics company Joblift.
Most In Demand Insurtech Roles
Accenture says the most in-demand roles in insurtech in the U.K. market are:
- web developers
- data analysts
Interestingly, vacancies in traditional insurance have seen a decline, despite that seven out of every 10 insurance jobs is within the ‘traditional’ sector. Frankfurt, Europe’s other main insurance (and insurtech) hub, has seen similar patterns, according to Insurance Business magazine.
These patterns are a clear sign of how the insurance sector is changing as a result of insurtech startup disruption.
Nshish Nangla, senior director of insurtech and digital transformation at Synechron, says: “The latest technology trends will definitely change how the market works and how people interact with each other, as well as how things are presented in the market. There’s going to be a lot of change around customer engagement and how insurers communicate with their customers, and that might lead to disintermediation.”
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