Specialty lines: the next frontier for insurance innovation

Reflecting on the journey of insurance innovation so far, do you view the role of insurtech as a revolutionary or evolutionary force? Can you think of any specific use cases where insurtech played a significant role in reshaping the face of the industry?

Reflecting on the last decade, I perceive Insurtech as an evolutionary rather than revolutionary force in the insurance landscape. While disruption has undeniably occurred, and many have tried to disrupt traditional business lines with innovative product solutions, established players in the industry have proven resilient. I can confidently say that established players do not receive enough credit for their long-standing success in the industry and are unlikely to be replaced by any Insurtech anytime soon. However, notable use cases include the improvement of customer experience through the implementation of user-friendly interfaces and digital solutions. Many Insurtech’s took advantage of advanced technologies which allowed them to enter the market quickly and test product-market fit, while mostly focusing on traditional business lines (home, auto, renter) and some new product innovation (commercial lines, on-demand, or micro-duration coverage for smaller or episodic risks). The strategy was simple yet needed, improving new UI/UX and being digital first, while providing a holistic customer experience. All of this was encouraged and enabled through smartphone penetration and mobile data surge. The initial wave of Insurtech successfully navigated the industry towards digitization, convincing various stakeholders of its inevitability.

Emerging technologies like AI and blockchain have garnered substantial hype for their disruptive potential. How do you anticipate these technologies will impact and drive innovation within the realm of specialty lines insurance, if at all?

Both topics have been around for quite some time now and the insurance industry has explored them both. B3i, the Blockchain Insurance Industry Initiative started in 2018 and worked on enabling and accelerating the insurance and reinsurance industry with distributed ledger technology. However, the initiative was shut down in 2022 due to lack of support to continue with the venture at this stage. Conceptually, I think it remains a very interesting opportunity for the industry and in general blockchain technology could enhance security, data integrity and help reduce costs and contract uncertainties. The challenge is that each major participant in the insurance industry would need to uniformly adopt and overhaul traditional IT systems. Some participants however found ways to incorporate blockchain within use cases and continue to explore potential avenues, most notably within parametric insurance for natural hazards and catastrophes.

The role of AI however is significant within the industry and will continue to grow over the coming years. While Generative AI holds promises, I believe that its adoption within the broader industry and across the value chain will take time. AI has been used and explored within the underwriting and claims sector and will continue to play a critical role. The notion of instant automated underwriting which is supported by a combination of machine and deep learning models will be mostly ubiquitous. Advanced algorithms that handle initial claims routing, increasing efficiency and accuracy, while increasing focus on risk monitoring, prevention, and mitigation.

Looking ahead: which areas of insurance product lines do you predict are ripe for significant transformation?

The specialty insurance sector emerges as the next frontier for digital transformation, necessitating a distinctive approach compared to the initial Insurtech wave. Startups entering this domain can leverage technological advancements from prior Insurtech experiences, facilitating a smoother market entry. Numerous transformation opportunities exist within specialty insurance, particularly in addressing the intricate and time-consuming aspects of underwriting and distribution processes. Insurtech startups have the chance to streamline these processes, utilizing technology to enhance efficiency and accessibility for customers.

In underwriting, where manual efforts often slow down the specialty insurance process, technology and sophisticated data aggregation offer a significant opportunity for modernization. Drawing from successful models in other insurance lines, this approach aims to expedite the underwriting process and align it with contemporary standards. Similarly, in distribution, where agents and brokers play a pivotal role, technology-driven platforms can support and enhance their workflows and risk assessment processes. This not only facilitates direct distribution but also allows for embedded approaches, combining for faster and more efficient product dissemination.

Beyond process streamlining, innovative product development is paramount, particularly in promising specialty insurance categories. Examples such as Medical Malpractice insurance and Non-Damage Business Interruption (NDBI) insurance offer opportunities for digitization, presenting avenues for startups to apply advanced technologies like machine learning and insurance-linked securities structures.

In summary, the specialty insurance sector offers a fertile ground for digital innovation. Startups can draw insights from past Insurtech experiences, employing proven strategies to streamline processes, introduce innovative products, and elevate the overall customer experience within this dynamic and diverse market.