What is the most hyped InsurTech concept?
At the 2017 InsureTech Connect Conference, the favorite answer seemed to be blockchain, although Munich Re Digital Partners CEO Andy Rear was hesitant to join the crowd. “I’m tempted to say blockchain but then you might ask me what blockchain is and then I’m not going to have any idea,” he said.
Matthew Churchill, head of Futures at Hiscox, added that if tech guru Rear can’t understand blockchain, then it doesn’t make sense.
“I wouldn’t sign with my blood that it’s not going to change things,” said Carbonnier of Euler Hermes Digital Agency.
Louis Carbonnier, global head of Euler Hermes Digital Agency, questioned the impact of blockchain in the short term but at least he acknowledged blockchain might have impact down the road. “I wouldn’t sign with my blood that it’s not going to change things,” he said.
Eric Boyum, a managing director of Aon Risk Solutions, was more generous, which makes sense given Aon is one of the members of the Blockchain Insurance Industry Initiative B3. “We don’t know what it’s going to manifest into, but it’s real,” he said. While some may see it as a “long term industry infrastructure type of a play,” Boyum contends that’s not the complete story. He believes there will be solutions that may not be blockchain per se but that are distributed ledger technologies, or “DLT-inspired.”
To be fair, blockchain has shown progress. A blockchain consortia now has several dozen insurance industry members who are developing a reinsurance product. Microsoft and ship operator Maersk are building a blockchain-based marine insurance platform. AIG and Standard Chartered Bank have piloted a multinational insurance policy using blockchain.
For conference co-founder Honig, the status of blockchain begs the classic early bird question: “Do you need to be a first mover regarding blockchain in order to get its benefits or is it OK to actually have a fast-follower strategy?” Honig leans toward being a fast follower when it comes to blockchain. “The early bird gets the worm but they never point out that the bird that slept in until 10 a.m. that morning is doing fine.”
Honig said the next 12 months will determine if blockchain can be put to practical application or if it’s just too difficult.
Rear, the InsurTech pioneer and Munich Re Digital Partners CEO, chose peer-to-peer (P2P) insurance as the winner of the “most hyped technology” award, referring to it as “a misunderstanding of both peer-to-peer and insurance.” He said that P2P lending platforms make some sense in theory at least because there is someone who needs money and someone who has money to lend on opposite sides of the table. “But with peer-to-peer insurance, we’re both on the same side of the table. We both have cars that we want to get insured.” And “I really don’t care if I’m sharing my insurance with my friend, and I certainly don’t want my insurance [company] to give money away to some charity that I know nothing about.
“I just want insurance at a good price, which covers me and gives me a good user experience. The rest of it seems hype to me.”
The best-known InsurTech that adopted the P2P model, Lemonade, learned early into its operations that P2P was not perfect and it stopped making that pitch. Lemonade’s co-founder Shai Wininger candidly wrote on the company’s own blog back in January, reflecting on its first quarter of operations (Q4 2016): “If I had to choose one thing that didn’t work as we had hoped, it’s our use of P2P to describe what Lemonade is. We looked for a term that would encapsulate our ideas around affinity groups, giveback and the fact that we don’t treat customers’ premiums as ‘our money.’
“In retrospect, it created a lot of confusion. People seem to read so many different things into this term, so we now describe ourselves using phrases like AI and Behavioral Economics. Call it what you may (and we get it, P2P wasn’t a winner) but in a nutshell, Lemonade is a tech company doing insurance, and not an old insurance company with an app.”
Live and learn; turn lemons into lemonade.
The Year of AI?
Honig noted that artificial intelligence gets hyped a lot but believes that it actually lives up to its hype. AI is where there has been a legitimate breakthrough in last two or three years, he said.
They can listen to the spoken word and understand it. They can read and sometimes write simple sentences. They can look at pictures and video and tell what they see. They can make simple interpretations. And that’s a big deal because a lot of the menial work of white collar workers in the back office is work that a seven-year old can do, he said.
Often, back office workers find themselves in the position of having to do both menial tasks and much more sophisticated work. If a machine can do the menial work, then that can have a big impact on the nature of back office white collar environment, he asserted.
So is this year when AI makes a difference in how the back office operates? And what about AI in underwriting?
Honig thinks human underwriting is at least “pretty good.” So, AI and machine learning might bring incremental, but not major, improvement in underwriting.