3 key messages, 7 wicked problems, 14 critical dates and 6 digital transformations

There are three key messages, seven wicked problems, 14 critical dates and six digital transformations changing the face of Australian insurance.

Explored in detail at the first Insurtech Australia in-person event for 2021, the insurance landscape was summed up by one participant simply as “ripe for disruption”.

2021 is shaping up to be an acceleration point in this disruption with investors seeing the value in the insurtech sector, insurtechs subsequently breaking IPO records and insurers making #insurtech their number one strategic investment.

Simon O’Dell proposed that insurtech has a bigger role to play than one may think.

There are 5 collectively exhaustive macro areas of risk.

At the moment, we’re enduring; a macro downturn, a global pandemic, the threat of cyber and AI, climate change which will lead to large scale people displacement, increased frequency and severity of natural catastrophes.

These are all real threats that pose varying degrees of risk across all areas of life.

We’re canvassing the globes tier 1 geniuses to solve for these problems which includes not just entrepreneurs looking for a unicorn exit, but the world’s best science labs.

Simon proposed “for what greater causes would one be wanting to invest their capital right now? Insurtech is about innovative ways of managing risk, and risk is synonymous with the problem. Start-ups solve problems”.

So what are the problems?

One of Insurtech’s thought leaders, Ron Arnold described the “seven wicked problems” facing the insurance industry in his presentation as being;

  • Affordability & Availability vs Profitability
  • “Black Box” Pricing vs Transparency
  • Open Data vs Closed Data
  • Customisation vs Fragmentation
  • Risk & Compliance vs Innovation
  • Frictionless Insurance vs Traditional Distribution
  • Innovation Effort v Innovation Impact

Our view;

Insurtechs that create a frictionless customer experience, use open data, transparent pricing, balancing affordability, availability and profitability; will become some of the most valuable companies of our generation.

Insurtech has applications in creating new products to service new & emerging risks, providing accurate risk modelling for both old and new risks, better utilising these data insights, and dynamic data-driven insights to identify & service lower-risk customers.

Insurtech can also bring uninsurable assets online with new risk transfer paradigms, including parametric utilising objective triggers.

These solutions can impact and influence how we interact with our environments, economies and society and we’re actively canvassing founders from around the world to solve problems in each of these areas.

But first they have to also find a way to negotiate the new level of complexity in Australian insurance regulation.

Regulation and compliance in 2021

Risk and Compliance Specialist Paul Muir outlined the 14 key dates for compliance changes in the industry and said at the heart of the changes was the customer and the concept of “fairness”

He said in order to see opportunity in regulation, insurers and insurtechs must;

  1. Foster genuine partnerships
  2. See the value in compliance data
  3. Approach compliance with a customer centric approach
  4. Tackle the issue of conflicted remuneration head-on and reduce the friction (middleman taking his “clip”) from the supply chain
  5. Make fairness the new benchmark for service

A heated debate

The issue of compliance and regulation always sparks a heated debate. The question was asked, why are European markets leaps ahead with AI integrations and frictionless insurance?

The answer some say is in the evolving regulatory framework in the Australian market. In the EU today, customers can buy a product with built-in insurance, enter their number plate and get an automatic quote for insurance – the insurtech systems being built are intuitive, fast and shift the responsibility for providing risk profile from the consumer to big data sources.

It’s more accurate and seamless but some would argue less transparent and reduces the control of the consumer. At the moment, in Australia, our governments are taking a conservative approach to consumer consent but at the same time shifting the responsibility of risk profiling away from the customer and towards the insurer.

How and why are we doing this?

Alison Kelly, Swiss Re’s Senior Solutions Manager for Australia and New Zealand offered her insights into this trend.

She said Digital Transformation was accelerating across Asia and impacting the insurance industry in two overlapping waves driven by behaviour and technology.

But ultimately Customers were driving the change with;

  • 54% of consumers are now more likely to buy insurance online
  • 60% of consumers value the ability to process policy online
  • 76% of consumers prefer digital channels such as e-wallets, bank/insurance websites, e-commerce platforms
  • 40% of consumers are willing to share in-app usage history in exchange for premium discounts

Source: Covid-19 APAC consumer survey 2020

Source: Digital Insurance Solutions Consumer Survey 2020

“Insurtechs and insurers are now under pressure to fill the data gap and solve more than one problem.”

So the opportunity is ripe for investors and insurers alike. As event participant, entrepreneur and investor, Scott Mendelsohn said “this event demonstrated for me that insurance is a huge beast, slow to change & ripe for disruption.”

Insurtech Gateway UK and Australia is at the centre of  insurtech investment, building a $300m portfolio, who have raise more than $90m in capital from 25 venture capitalist firms, while creating strategic value for 24 underwriting partners.

Gateway is part of the solution eroding the barriers for change in insurance and turning long standing problems into new opportunities for insurtech, investors and insurers alike.

If you’re are an insurance incumbent or an investor looking for de-risked investment opportunities, we encourage you to get in touch with our Managing Director simon@insurtechgateway.com.au