The threat from online giants like Google, Apple and Amazon is very real – and it’s insurers rather than brokers who need to worry, according to FinTech specialist Mark Broadhurst.
A major consumer survey carried out by Fujitsu this week revealed that almost a quarter of UK respondees would buy insurance from big digital players – especially if insurers can’t keep their customer-facing technology up to date. That might seem to be a fanciful idea but Broadhurst, who has a career in insurance dating back to the 1980s taking in the likes of Aviva
and General Accident, insists the data-savvy digital newcomers are nimble enough, brave enough, and close enough to the consumer to enter the market.
Now head of insurance at Intellect, a high-tech systems provider, Broadhurst told Insurance Business
there are three reasons why the industry should be worried – legacy systems issues, failure to capitalise on the full potential of ‘big data’ and loss of control of distribution channels to the end consumer to aggregators and intermediated channels.
“I think it absolutely is a threat,” he said. “Insurance companies traditionally have ailing legacy and systems problems which hinder
their ability to innovate and launch new products in a timely fashion, so even when they acquire structured data, they find it very difficult to deploy that across their business.”
Newcomers don’t have the legacy issues facing traditional insurers, Broadhurst explained, and they are adept when it comes to using data – and not just the structured data insurers rely on, from credit reference agencies, Companies House or flood risk indicators, but unstructured data from social media or even comments on local news articles which can provide a wealth of information about the sentiment surrounding a business or even an individual. It’s an area in which the industry cannot afford to ignore.
“The first issue is systems and capability and legacy, the second part is implementation of data,” said Broadhurst. “Anyone who is going to survive in the new world has to embrace data in a much more holistic and automated fashion. That’s a fact.”
The third issue, distribution, should generate some fears but also offers some hope, according to Broadhurst. He believes the commercial market is unlikely to be in Mark Zuckerberg or Jeff Bezos’s sights – good news for brokers – and it’s consumer-direct players who have most to fear.
He said: “Insurance companies have by and large lost the distribution play and have become manufacturers of products. I don’t see the likes of Apple, Google, Facebook and Amazon taking London markets, or commercial even at SME level, but they may well take commoditised personal lines business both in life and general insurance. If these companies play, who controls distribution? I think Google and Amazon control distribution better than insurance companies, therefore their ability to take that distribution footprint and sell them insurance is evident. The segment I think they’re going to move into, whilst vast and a real threat, isn’t the whole industry.”
Broadhurst has strong opinions on where insurers have gone wrong, and where they need to focus their efforts now. “Ask yourself this question,” he said. “If the industry was more collaborative, would aggregators exist? Insurers should be promoting quality and value but instead they have allowed others to enter their space and quote on price only. People are picking companies who are one-star and two-star de facto-rated based on price differentials that are pence. How can a quality five-star de facto-rated company compete on an aggregator site when it’s driven by things that are not in the consumer’s best interest? Surely focusing on price alone does not represent best value.”
Broadhurst insists the industry must shake off it’s resistance to avoid new entrants making a significant impact in the market. “Amazon and Google have a greater appetite for risk and tend to deploy innovations far more quickly than the traditional insurance model,” he said. “Unless insurers are willing to follow suit, they will find themselves stifling innovation and chasing the market. Insurers have done a fantastic job to modernise the way the industry engages customers. Investment has been sparse in terms of replacing legacy and what they have delivered in light of a regulatory headwind has been impressive but this challenge is even greater than the ones they have already faced. The market has clearly shown its adaptability to respond to the challenges of the past and will need to do so again.”
Broadhurst believes insurers need to pour resources into improving the experience for customers, creating user-friendly portals which allow them to quickly and simply self-serve online – omni-channel, multi-product and multi-device, allowing the user to buy new products or amend existing ones, or manage their personal information, on an automated basis. “If you can’t do that,” he warned, “your game is up.”