In the insurtech industry there is often conjecture about why big innovation seems slower than other industries and why incumbents are seemingly slow to adapt new technologies.
David Krawitz, former COO of Allianz recently joined our Gateway team as a mentor and advisor so we asked him for his insider view on the barriers to insurtech from inside a one of the big four.
Do you believe innovation in insurance is hampered and why?
I have been working in or with the Australian insurance industry for over 20 years and I am more convinced than ever that this is an industry that is ripe for change. There are endless examples of what could be better, be it better products, better service to customers, better systems for insurers own staff, and better ways of working.
But even with improvements in areas like the consumer purchase path, the reality is that much remains unchanged, for example:
- Policies and cover are still opaque, and people struggle to understand what cover they really need
- The types of cover on offer are virtually unchanged over decades
- Service is still variable at best, especially in claims
- And insurers still cost far too much to run…
So, with all this potential, why are things not moving more quickly?
From where I sit there are a few key drivers:
- The status quo can actually be beneficial to insurers, as a slow pace gives insurers the time they need to modernise their ageing infrastructure
- In addition, the heightened regulatory environment means insurers tread extremely carefully when making technology changes, which further slows the rate of change
- Finally, it is important to realise just how much change insurers are dealing with; be it technology, customer, regulatory, environmental, it is an unprecedent level of change for the industry and capacity to move more quickly is a genuine issue.
Can you tell us more about the challenges our big insurers are facing?
Insurers are still knee deep in efforts to uplift their ageing infrastructure and technology, and this can mean unwinding heaps of complexity that has evolved over decades, often with outdated technology at the core.
Insurers are also facing unprecedented pressure on the regulatory and compliance front. By my count there are at least 12 new regulatory requirements or major changes in the past year, and the penalties (reputationally and otherwise) for non-compliance have never been higher. There is a climate that even minor mistakes are viewed as unacceptable, and this goes right up to Board level.
So in this environment there is a natural reluctance to make big changes quicky for fear of getting it wrong. And when change is implemented, the benefits can often be masked by compliance; just take a look at the recent changes some insurers have made to their purchase paths which now require multi-page disclaimers and sign-offs by customers just to get a quote. It is hard to see this as a true step forward for customers when elsewhere they are getting far more streamlined experiences.
So what can we do and where are the opportunities?
One suggestion would be for an insurtech to rethink who their target market might be…it does not need to always be the end-customer, and there is big potential in helping insurers solve some of their problems, for example;
- How could you help insurers meet ever increasing customer demands?
- How could you make it easier for insurers to meet the ever-changing regularity landscape?
- How can you help insurers get better use of their existing assets?
But if going down the path of working with incumbents, I suggest you need to invest as much in understanding their issues as you do on your technology. Otherwise you may find you get little or no interest, regardless of how good your offer is.
This means for example that you need an entry point that is simple and easy for insurers to both understand, implement and execute, as I don’t believe any insurer right now has the appetite or capacity for big integration efforts. You also need to think through any regulatory and compliance issues so you can ensure you are not adding risk; better yet, bring them solutions that reduce such risks!
It is also a good idea to continue to push for the changes that will make insurance a more open market. Consumer data rights are a good place to start, but much could also be done to remove the onerous entry barriers with a true “sandbox” environment for new players like we have seen in other markets.
I still firmly believe big change is on the horizon and that the pace will accelerate. I am particularly buoyed but some of the amazing Insuretech people I have since leaving the corporate world and have no doubt we will see more and more success stories.