Amidst all of the worrying over Amazon’s eyeing of the insurance market, many have been consoled by the idea that entering a complex, highly-regulated industry is no easy feat for a newbie – we know Google has already had a failed crack at it.
But the vast amount of data held by tech behemoths, and the insight that it can offer into consumer habits, may well give them an edge over insurers still struggling to get to grips with technology, according to some.
“It wouldn’t take much for a big tech giant to start offering insurance, given what they know about people already,” Sanjay Parekh, CEO of Cocoon, told Insurance Business.
The insurance industry has been slow to adapt to technology so far – but for good reason, says Parekh.
“Insurance companies generally have established processes that have worked well for decades, and in some cases hundreds of years. They’ve been built at a steady rate, and built for a very process-driven industry that’s very highly regulated,” he said.
In contrast, the tech industry isn’t subject to much regulation, and exists in a state of continual advancement and transformation.
“In many ways it’s inevitable that the two different approaches are quite often in conflict. Having said that, the insurance industry in general needs to try and look at ways of departing from its standard processes to incorporate some of the technologies that are available,” the CEO said.
The danger lurking for incumbents is the pace of change, which could take them by surprise should they fail to keep up.
Short-term, the industry may go on unscathed – indeed we have seen many insurers posting healthy profits recently – but that’s likely to be a different story in 15-20 years from now, says Parekh.
“The insurance industry is a data-driven industry, ultimately, and there are lots of very large technology businesses that know a lot more about customers than the insurance industry itself knows,” he said.
Andrew Holderness, global head of corporate insurance at law firm Clyde & Co, echoed similar sentiments in a recent interview with Insurance Business, highlighting the power behind e-commerce giant Amazon.
He said: “If you have, as Amazon clearly does, a customer base…in the high millions, and the data behind all of that as to what it is that you and I are buying, and where we are buying it, etc, you have two very powerful pieces of information.”