We had so many great predictions for 2021 when we crowdsourced 20 InsTech London friends for their opinion, I've published it in two parts. Part One - the first six predictions - is here. And the radio edit podcast was published on 3rd January on and already providing very popular.
Here are the other five core themes we heard.
Climate Change – the time is now, not when
For Ruta Mikiskaite, Head of Client Solutions at Swiss Re our approach to climate change will see the most significant shift in the next 12 months. “We are going to see a reduction in the price of electric vehicles. Firstly, going down slowly but then a very sharp drop”.
Ruta expects that 25% of our panel will have an electric vehicle by this next year. Check-in with us in 12 months to see if that becomes true. In the meantime, you can find out more about what is happening with Swiss Re from our discussion with Ruta in the autumn and my interview with Gianni Biason, Head of Property and Insurance Solutions at Swiss Re.
"ESG isn't just a corporate philosophy, it's a personal philosophy"
Hayley Maynard, Head of Innovation at Chaucer, is expecting democratisation in the workplace driven by two things. Firstly, people have been “seeing their CEO in a T-shirt every day”, and ESG reporting will become a lot more significant.
Hayley believes that people are starting to realise that ESG (that’s Environmental, Societal and Governance) isn't “just a corporate philosophy, it's a personal philosophy. We can use our money and our voice to support the things that we care about”. ESG is one of our core themes for 2021, and the insurance has some way to go to catch up with the rest of financial services.
Peta Killian from Lloyd's syndicate Talbot agrees. She expects “an intense and renewed focus on climate change and the responses to it”. Peta cited a number of factors coming together such as “a dramatic demand driven fall in oil price, and the continued drop in the cost of renewable power generation”.
She expects that “investment in the climate change agenda is going to lead to significant impacts on oil companies, such as falling share prices and divesting of assets”.
"It's going to open up new industries... and new customer expectations"
Peta points out that Shell wrote off $22 billion in the value of its oil and gas assets this year, which she believes is just an initial signal of what's to come. "We’re now seeing a big shift away from fossil fuels in order to reduce emissions. There's going to be a rise in new companies, in renewables, utilities, carbon capture, electric vehicles and the insurance impact is going to be across the board”.
Talbot is getting directly involved in supporting the results of these changes. "It's going to affect existing portfolios and open up new industries, new clients, new activities, new risks and new customer expectations that we're going to need to respond to”.
Tackling tough problems with new solutions: supply chain, business interruption and parametric insurance
Despite the current challenges that exist in accessing the data for insurers - which we discussed in Part One - Ruta believes that the abundance of data sets will start to lead to innovative insurance breakthrough solutions, “especially in the business interruption or the supply chain space”.
"The rise of IoT… leading to the acceleration and development of parametric products"
This is consistent with Charlie Burgess of Munich Re’s expectation about the rise of IoT, the use of sensors and the data that this creates - leading to the acceleration and development of parametric products.
“I think this will increasingly be addressed for the SME and commercial markets. And I think it will manifest in more non-indemnification products, more IoT advisory services, and more advanced analytics.” Download our report, “Parametric Insurance: 2021 outlook and the companies to watch”, to learn more about what is happening in this area.
Paul Prendergast of Blink Parametric launched a new product in the Lloyd's Lab in 2020 and agrees with Charlie. “Parametric is not the solution for everyone, but it's certainly going to have a place to play" and he expects to see more companies “partner to go mass market” with parametrics.
Cyber – still hidden threats
"expect attention among regulatory organisations towards the catastrophic potential from insurers growing their cyber exposures"
“I think we'll see a step change next year, in the maturity of the cyber insurance market”, says Rebecca Bole, Head of Industry Engagement at cyber modeler CyberCube. “Cyber insurance is one of the fastest growing classes of business and despite the size of some of the losses, there is still profitability in the market”.
Regulators and rating agencies have started to consider the impact of cyber, but Rebecca expects more. “There's a real shift in attention among regulatory organisations towards the catastrophic potential from insurers growing their cyber exposures and building portfolios of cyber risks”.
Look out for “governance structures to develop stress tests" and regulators "asking much more pertinent, well-informed questions, really probing into how the industry is developing cyber insurance".
"HD DT, harvest today decrypt tomorrow"
Paolo Cuomo, one of the original InsTech London partners and now Head of Strategy at Brit, has been drawing our attention to quantum computing recently. His prediction was not about using quantum computing for improved pricing or prediction of natural catastrophes – that’s still five or more years away, but Paolo warned of the approaching problem of HD DT, "harvest today decrypt tomorrow” – a new form of cyber attack.
“The concept of harvest today decrypt tomorrow is to steal confidential data that can't be easily decrypted now, but which may still have some value in five or 10 years time”. So, the forward-thinking criminal steals it now and will be using quantum computing to decrypt it sometime in the future.
Paolo pointed out, “I think that's relevant for the insurance industry because today cyber insurance is a short-tail class. This concept of HD DT would turn cyber insurance into a long-tail class, completely changing how we think about the risk". Ed Gaze, from the Lloyd's Lab, agrees. Paolo predicts that, he at least, will be discussing that more next year.
Embedded in insurance and look out, Amazon is coming
Embedded insurance is a topic we are definitely going to be hearing more about. Serge Corel from Wakam knows this area well. “There are many platforms and brands who are going to want to sell insurance products, by embedding them into the purchasing process - so you will buy a product or service, and you'll be adding insurance at the same time and that will create opportunities for new entrants”.
Serge sees this as a chance to reduce some of the “insurance gap” by making the customer journey simpler and making insurance more relevant, especially to younger generations. "It will make people better insured”.
"Amazon will be making its major play in the insurance market"
Rumours of Amazon entering insurance at scale have been around for a while. But could this be the year? Yes, according to Nick Pester. “It’s something which has been mentioned over and again, but this is the year that is going to come to fruition. Amazon will be making its major play in the insurance market in 2021”.
He has two reasons. First, the impact of the pandemic. "There's probably nobody within the country that doesn't use Amazon. It's in everybody's lives. Its major intention is to be the lifestyle platform for consumers”.
The second reason is what Nick has discovered as a result of piecing together some of the things that Amazon has been up to over the last couple of years.
“They've been very quiet about it, it's below the radar in some respects. Amazon is licenced for insurance distribution within Luxembourg, there are passports to rights already across the EU and I suspect that it has already applied for extended UK permissions to continue being able to use those insurance distribution rights within the UK. It's already offering accidental damage cover on some of the gadgets it sells”.
Nick goes on. “In November 2019, Amazon started to provide its Seattle based employees with in-house health insurance. In 2020, it is partnering with insurtechs in Africa and India to offer motor insurance.” And look out for Amazon Prime. “Amazon Prime members will get additional benefits as part of that cover. The Amazon Managing Director in India has said that the next step will be to expand into health, private hire, cabs, flights and travel”.
"All the pieces are in place, we just can’t quite see them yet"
All the pieces are in place, we just can’t quite see them yet, but Nick says, “this is the year where Amazon really do take advantage of some of the upheaval and change within the market”. Yes, we agree.
More M & A, but fewer experienced board members and advisors?
"tonnes of money coming into insurtech"
Paul Prendergast expects lots more M & A activity, and not just from outside of insurance, “some of the big insurtechs are going to be big buyers for next year". As Paul reminded us, Hippo bought Spinnaker and Sheltr, Zego bought Drivit, Next insurance bought Juniper Labs.
“Those guys are built to move fast. The big incumbents will have to move fast too if they want to get their hands on good insurtech. I think that's going to make it very, very interesting". Paul predicts “tonnes and tonnes of money coming into insurtech following 2020”.
Robert Lumley of Insurtech Gateway agrees – “there will be some very large amounts of money coming in next year, on the back of platforms that we've already heard about, with more IPOs following, and then more money coming into the Insurtech space”.
"But above all", says Robert, “we'll see more money coming into a much more mature insurtech space next year, because people really are now very serious about it".
Mark Geoghegan, the Voice of Insurance, reminds us that there is life beyond (and before) insurtech. “We've got a hard market” (that means rates are going up in the commercial insurance markets). “So now the people who would have been your allies, entrepreneurial, really experienced people, angel investor types of people to sit on your board – well they've now disappeared because they've gone off to raise a billion dollars. So their headspace is going to be full of trying to make real hard money today, in a hot market, which hasn't come around for 14 or 15 years".
But on a positive note - let's love insurance - and we're all going to have more energy
Christian Kitchen, of Miller - "After we've left our Zoom nightmare, and this COVID fugue, there's going to be a real energy and enthusiasm that we've still been able to do all this digital interaction, and that technology has helped us. And I think that's going to be the thing that really pushes us over the edge.”
On an even more positive note, Nigel Walsh, Deloitte, takes it one step further. "Ladies and gentlemen, I am going to tell you next year we are going to fall in love with insurance."
Thanks to all our guests for their great contributions. Martha Notaras, Managing Partner at Brewer Lane Ventures wasn't on our panel, but, like Nigel Walsh, she'd got her homework in early with her usual great predictions. As one of our previous popular podcast guests - and someone who tells it as it is, it is definitely worth reading.
Well, I think you will agree, that is a great set of insights from a one-hour conference call. The direction of travel is clear, but no doubt 2021 will have some surprises for us all.
We'll be continuing to tap into the collective expertise of our global community with our weekly podcasts, events and writing - bringing you the stories of innovation, leaders and thinkers from around the world. Contact Matthew Grant on LinkedIn if you are interested in finding out how we can help you find your partners and share your vision.