This article was produced by (E) BrandConnect, a commercial division of The Economist Group.
Digitalisation, new forms of risk and new customer demands are radically changing the insurance industry with the promise of lower prices and better products for consumers and more profitable business for insurers. Companies must adapt to this new world and create sustainable business models for the next decade, warns KPMG’s Mark Longworth.
“Ninety per cent of the world’s recorded data was produced in the past two years,” says Ed Klinger, CEO of Flock, a provider of on-demand drone insurance that has raised more than £6m since it was founded in 2015. “In an increasingly autonomous world, the amount of data being recorded is growing exponentially.”
InsurTech startups such as Flock and Wrisk in the UK and Oscar and Hippo in the US are confidently disrupting the insurance industry. Coming from the technology sector rather than from traditional insurance, they use their considerable strengths in data analytics to improve risk management and customise offerings to the market. “We will enter a world of continuous underwriting; insurance will be seamless and digital by default.“ Ed Klinger, CEO of Flock
Mr Klinger says focusing on this data will mean the end of traditional annual policies that are both a gamble for the insurer and a hassle to renew for the customer, and the advent of insurance that is, as he puts it, automated and invisible. Drivers (and, later, users of autonomous vehicles) will see the price of their insurance changing on a minute-by-minute basis, depending on the route they take, road conditions and, in the case of a human behind the wheel, the quality of their driving—incentivising them to take less risk. And customers will pay for insurance instantly or in retrospect. Flock has already sold thousands of hyper-personalised policies that operate in this way, says Mr Klinger. “We will enter a world of continuous underwriting; insurance will be seamless and digital by default,” he predicts.