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Maarten Ectors – The future of insurance

The following article is a summary of the talk Maarten Ectors gave at the Camelot Networks Big Round Table event, 5th May, about the future of insurance. To read more from Maarten, follow the link at the bottom of this page.


Insurance yesterday = clunky

I recently changed from fixed employment to consultancy. This meant that my private health insurance for my family which was set up through my employer was coming to an end. When I asked for a quote to continue paying myself, the health insurer asked for almost 1000% more compared to the best price on a comparison website. I am still the same person than yesterday. Although I started the journey online, I still needed to talk to broker to finalise the process because my family did not fit the basic assumption that we never claimed on our private health before 🙁 so we ended up having to take two insurers for different parts of the family.

Some steps were really ridiculous. My wife had to provide a list of all issues she raised with her GP in the last 10 years. I had to provide an insurance certificate from my previous insurer before my policy would be valid. How hard can that be? It only took a week including my previous employer and me asking 6 times. I personally called 5 times and every time had to wait for at least 1 hour on a call centre queue with a message that my call was important to them. Only after I filed a complaint and threatened to go to the regulator did they finally provide the certificate. One of my new insurers, a big name, send a paper letter to confirm my direct debit was set up. So ESG compliant! This is the experience a customer gets when they want insurance today based on products and processes that were designed yesteryear.

Insurance today = digital

In the pre-digital era, to win from the competition you had to have the biggest economies of scale and best efficiencies. Which meant, bigger call centres, more branches, more intermediaries,… ran more efficiently. All of this is irrelevant today. A great mobile app allows anybody even in the most remote Scottish highlands or islands to sign up through self-service. Super efficient and great economies of scale. The new digital rules to win are: market fit and speed. Which basically means do customers love your product and can you deliver it faster than the competition so they do not copy you and run away with the market?

I am going to make a surprise statement: I love Lemonade Insurance. Did I tell you I love Lemonade Insurance! They have a simple policy contract, and via the mobile app it is easy to sign-up, fast to claim,… Most importantly: their biggest sales channel is the word of mouth of their happy customers. They do not need to spend many millions on marketing to push a clunky product.

However ask any insurance expert and they will bring up the limitations of Lemonade and the fact they are not running a profit. This is similar to the Nokia experts I would talk to a decade ago who would point out that the first iPhone did not have 3G, or telecom operators who would say Facebook was never going to make money [afterwards they bought WhatsApp and disrupted the voice and messaging market],… These experts do not understand that VCs will pour in lots of money if your solution is having a positive network effect and customers really want it. Lemonade beats all insurers in market fit and speed and because their costs to build a fully automated backend can be shared over more customers over time, there is a positive network effect and profits on the horizon.

The biggest disruptor to insurance today however is: Tesla. You go online, buy a Tesla and click to add insurance while buying the car. No more clunky comparison websites when you get home. Given the car knows how you drive, Tesla can easily give discounts for activating auto-pilot or penalties for driving too close to the car in front. The biggest disruption will happen tomorrow when self-driving cars make insuring the driver irrelevant.

Insurance tomorrow = AI on the blockchain

How can we insure in the future any type of risk without having necessarily years of data? To do so, two techniques will be important. First of all underwriting and pricing will be done via artificial intelligence [AI]. AI will enable to scan millions of pages of unstructured data and find relevant information to understand risk. The whole process of insurance can be automated via smart contracts and crypto tokens on the blockchain. This is the most disruptive technology I have seen in my lifetime and I grew up before the Internet, was close to the birth of the mobile phone, cloud computing, AI, IoT,… [transparency notice: I am an advisor to a blockchain startup].

How will the future of insurance look like?

One week before my talk, Alexa asks: “Hey Maarten, I see in your Google Calendar you have a remote speaking event. Do you want more info on the public speaker insurance from Zhong An?”. If I say yes. I get a notification via WeChat with the details of my policy. Via one click, I approve access to my health records and an Internet speed test. I now get a price and with another click I buy. If I am sick or my Internet is down, all attendees will receive a bottle of champagne via Amazon and my apology for not attending.

So how does this work?

The WeChat mobile app will be able to check my Internet provider and speed. Zhong An takes my risk and converts it into one or more Crypto Risk Token(s) which they offer for sale on a distributed risk market [a.k.a. The Lloyds of London disruptor]. Whoever wins the auction for my risk tokens determines the insurance pricing. Via AI my health records can be evaluated and the risk of me being ill can be predicted. This way the risk of me being ill can be insured. Via smart contracts, Internet outage can be reinsured to a specialist reinsurer.

If my health records reflect that I am unable to attend or there is an Internet outage in my street then Champagne is automatically sent. Any conflicts I can resolve via chatting with an Uberized claim handler who will be assigned to help me. All automatically. Most of this is already in the making by companies like NexusMutual.io, Etherisc.com,…

Unless insurers truly innovate, they are at risk of becoming the next Blockbuster in a world of Netflix. Just moving legacy products to the cloud will not cut it. If you are interested in exploring how to better innovate, let’s talk.

Further reading