From Furry InsurTechs to Industry Allies

One of my favourite quotes of all time comes from Mark Twain who once said “When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much he had learned in seven years.” I used it at my late fathers’ funeral in recognition of his patience during my troublesome teenage years. This came back to me when I reviewed the first half of 2024. One of the features of my year to date is how well I’ve been getting on with the insurance industry – better than at any other time this millennium and I was wondering why.

For context, I should say that for the last 25 years of my career I have been involved in the digitalisation of the insurance industry. Originally, as a platform builder and more recently as a partner of InsTech – a “community for the curious” which sits in the nexus between insurance and technology innovation. It champions solutions, whether from startups or big tech, that have the capability to make insurance better. So, I’ve always been on the outside selling in, relatively free to express my views and I have done that with a degree of candour that has occasionally involved rocking the establishment boat. Usually, by complaining about lack of technology investment, foresight and leadership.

But I find myself doing that less and less. I don’t seem to be upsetting people so much either – although there are the occasional exceptions! Am I softening at the end of my career? I wouldn’t be the only one to get more conservative and traditional as I aged. Or has the progress that the industry has made in recent years brought it closer to my more reformist agenda?  I think it’s a bit of both and here’s why:

• Disruption is dead. As I and many others have observed before, the whole “Insurtech” scene has stopped being about disruption and is now about partnership and collaboration. That’s a big and very helpful shift in aligning interests. 
• There’s less silly stuff going on too. Gone are the days when the airwaves were full of talk of blockchain, crypto, peer to peer (remember that?). They’re now consigned to the fringe where there are niche issues areas to work in where they are finding their part to play.
• Gone too is the brief era of crazy valuations fuelled by cheap money and generalist investors funding ideas that were either misguided or too far ahead of their time. There’s less money and it’s seeking out well managed businesses which are profitable (or have a clear path to profitability) and proven propositions. Sanity reins. 
• There’s more realism about the role of IoT in underwriting. Data from devices has a role, but in insurance — whether life or non-life — dynamic pricing based on real-time data on the state of the asset or the life being insured, isn’t going mainstream any time soon. 
• And then there’s Generative AI. Counter-intuitively, the hype around GenAI has increased interest and investment in the use of AI for analysing and modelling data. In days of yore the industry would have batted GenAI away as yet more Silicon Valley nonsense. Instead, it has provided a second wind for AI adoption (not just GenAI) and stimulated much needed investment in the underlying data infrastructure required to run enterprise grade AI solutions that are scalable, secure and fit for regulated industry.

These are the ways in which the innovators have changed. To return to Mark Twain, this is what us “teenagers” have learned and how the dynamics have changed, but it’s not the whole story. The other big influence is that there’s currently a real alignment between what the insurance industry wants and what is being provided. The industry is now well-served by some top-notch solutions spawned in the InsurTech era, thoroughly tested in the heat of battle and built and supplied by companies that understand the industry and what it needs.

The focus for the insurance industry is to get more efficient, select and price risk better, get more from its talent and provide a better service to its customers. The exact same dynamic applies to underwriters and claims handlers. To achieve both, the industry needs to get smarter with data (both ingesting and analysing it) and give underwriters/claims handlers the toolsets they need to optimise how they use that data. Then there’s the legacy drag, as most insurers are trying to do that with considerable continuing dependence on an ageing legacy stack.

Hence the excitement about the latest data ingestion tools, triaging inbound submissions/claims, underwriter/claims workbenches, algorithmic/augmented risk selection, more dynamic pricing engines, data ecosystems, automation capabilities and so on. This is where the insurance industry has changed the most. These solutions have been around for a while in various stages of maturity, but insurers now accept that they all have a big role to play in achieving their ambitions. And, after a few years of great underwriting results, there are funds available to invest in return for the long-term benefits of adoption.

Before you think I’ve gone completely soft, I have still got a few beefs. While sentiment towards technology investment has never been more positive, the pace of change is still far too slow – no longer glacial, but in some respects the climate is changing faster. Nothing illustrates this better than the continued reliance on spreadsheets and PDF for moving data around with all the inefficiencies and inaccuracies that it entails. I think I will have retired before these stop being the industry’s default data migration tools. 

And then there’s the worrying proliferation of that old insurance habit of what I call “herding”.  This refers to the reluctance to pursue change unless it’s clear that most of your peers are inclined to do so too. This usually involves a breakaway pack that kicks things off and then everyone else follows in their wake with a business case based on FOMO. The corollary of the latter is that it is all too rare to find an insurer seeking competitive advantage through being different, let alone much better. All too often boards sign off on strategies designed to keep companies from falling behind, rather than getting ahead.

Reverting to the more positive me, let’s finish with some real evidence for these observations. InsTech had a busy June running some big events in which some of the biggest companies in insurance participated. Working with them, we were also able to get a record number of grandees to contribute their insights. And it gets better. Not only are we engaging (for the first time really) with real industry influencers, but even contrary old me is aligned with the insights they provided! Let me take a couple of extracts from my interview with Andy Marcell, the Global CEO of Aon Reinsurance Solutions in early June.

 Later on, when asked to comment on the motives for such a vast investment Andy said:

Those are the sort of observations we’re used to seeing from the big consulting houses, tech and data service vendors and the ragged cohort of technology adoption protagonists like me. All have a vested interest in change in one form or another. It’s much less common to see commentary of this nature from the leadership of big brokers who are themselves one of the main gatekeepers to better data. That’s a big bold statement to make in public and a real sign of the times. 

For some observations from the other end of the spectrum (start-up world), here’s an extract from last month’s podcast with Charlie Blackburn from Azur Technology and Graham Elliot from the newly launched Crux Underwriting. The latter is setting up a new technology-enabled insurance business 9 years after the last one. I asked him if there was any difference this time round.

So, there we have it. Mark Twain was nearly right, but the insurance version would be like this “When I was a furry InsurTech animal of 14, the insurance industry was so ignorant they could barely bear to be around me. But when I got to be 21, I was astonished at how much we had both learned in seven years”.