Majority of brokers don't believe that disruption will be detrimental

How technology can add much needed efficiencies to the insurance value chain

Majority of brokers don't believe that disruption will be detrimental


By Alicja Grzadkowska

Disruption in insurance is no longer viewed as the bully on the schoolyard, with more insurance professionals welcoming this process and looking forward to the change it will bring to the industry.

For instance, in Argo Group‘s recent report, “The Future of Insurance – 2019 Insights: Technology and Climate Change Creating Today’s Risks and Opportunities,” a majority of surveyed brokers said that they expect artificial intelligence will significantly disrupt traditional insurance distribution models, but they don’t think this disruption will be detrimental. In fact, 70% of brokers think AI “will enable them to work smarter and offer personalised solutions to clients,” and that’s not the only technology that’s being viewed favourably.

“Though we expect it will take years to deploy, we are beginning to see examples of blockchain benefitting the insurance industry,” stated Ian Macartney, head of innovation and digital for Argo, in the report. “Many insurance databases, for example, contain redundant, repeated information. By using blockchain, each party can maintain control of their own while offering a way to exchange needed information that isn’t document-oriented.”

In conversation with Insurance Business at InsureTech Connect (ITC) in Las Vegas earlier this year, Macartney commented more broadly on the technology environment and specifically, how the growth of the insurtech industry will impact traditional insurance companies.

“I think it’s good for the industry. I’ve been in the industry 32 years and for 32 years I’ve been saying we need to bring technology in,” he said. “We don’t adopt [enough] technology within the industry and some of that’s because people don’t like change. It’s not a sexy industry to try and disrupt, but the reality is that there’s a lot of opportunity to do so.”

He highlighted why it’s important for insurers to bring insurtechs into the fold and recognise that the insights they can provide are useful to the industry as well as certain lines of business over the long-term. Argo has been investing in insurtech companies through its Argo Ventures arm, and according to Macartney, “We’ve started to bring them into our organisation to help us solve some problems, which I think we needed to do. We have people who have been managing workers’ comp for 30 years. They don’t know how to change it, so we need [other] people to look at it and see why they do that [process], what we can do better, and can we challenge them to do [something new].”

The insurance industry is a heavily regulated one, so the insights of the insurers who have been in business for many years and know how to navigate the rules underpinning this industry are also vital to making this partnership work.

“Without each other, it’s not going to work. We should partner more because they’ve got some great ideas on how to disrupt or change our industry, but we understand it and we have the brand,” added the Argo leader.

Technology-based disruption is already helping Argo and other insurers improve their more antiquated processes, such as underwriting. Macartney says that the ‘green light’ analogy is applicable in this process and can be used in combination with data to give underwriters more time to focus on complex risks. Machine learning tools can indicate that when data on a risk comes through and the insurer should decline it based on a data analysis, it can be marked as red, versus green if it’s good to quote and amber when it should go to an underwriter for further analysis.

“What we do today in insurance is an underwriter looks at most things and they shouldn’t because the data gives you everything,” he said. “The data should automate it and say, ‘nope, decline it, decline it, decline it,’ and that makes the process much more efficient.”

In turn, underwriters will have more time to examine complex risks without spending time on a process that could be automated, helping companies like Argo grow their business.

Nonetheless, despite these benefits of technology, Macartney acknowledged that many still view these tools as a threat. However, the reality is that tech tools have historically changed the way people work for the better, the Argo head said, pointing to the example of email and how it changed the way we communicate. Not that there aren’t challenges in automating all insurance processes.

“It may be straightforward for the car insurance quote, but it’s not as straightforward on the P&C side. When you try to bundle together five different types of risk and automate it, it becomes complicated,” he said. “From that perspective, it’s really about starting to look at how we can make it easier for people to use it, and how it can be useful to the client, the broker, and our underwriting colleagues. I think that takes out a lot of the fear.”

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