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Chasing trends

27 November 2018 Jonathan Faurie

The financial services industry is an industry that is heavily influenced by trends. This may or may not be a good thing for the industry. However, chasing trends may prove to be detrimental for an insurer’s business model.

I recently received a copy of an article from the SoMe magazine that was written by Olav Cuiper, Executive Vice President Head of EMEA RGA International Reinsurance Company, where he discussed why these trends can be so dangerous. 

Data changes the way you insure

“For years, we have been talking about Big Data. Data is data; as an insurer you have always had data at your disposal; nowadays, there is just more of it. Today’s data is also much better and, when used properly, technology has made it much easier to exploit,” said Cuiper. 

He added that, by itself, there is nothing that special about Big Data. Smart data, however, is a different story. That is where the challenges will lie during the coming years; developing new services based on smart data, that will make life easier for customers. 

It comes down to data refinement. Several short term insurers are using telematics to profile clients and identify their driving behaviours. If the data is not refined, it is meaningless to them. 

Changing what and how you insure

Technological advances make new things possible in our society. 

“Thanks to medical technology, we now live longer and healthier lives. The smarter medical science becomes, the more manageable and affordable it makes healthcare. It is a win-win situation all around. Technology is making risks more manageable in multiple class of business. The point is, what are we doing with it? People’s reasons for insuring themselves remain largely the same. In its basic form, insurance will not change. It is what you insure, and how, that changes,” said Cuiper. 

He adds that the only thing you will still have to insure against is causing damage to others. Suddenly, it makes insuring a car very straightforward. Nobody knows exactly what the future will look like. But if you look carefully enough you can see the outline. 

A future where we will have driverless cars on the road is not as far fetched as it may seem. When this becomes a reality, insurers will have to look at what or who they insure. Insuring a physical asset such as a car is simple; will short term insurers be saying the same thing when they have to start insuring people instead of physical assets? 

Partnerships change the way you operate

“I do not believe that Apple or Google want to be insurers. A few years ago, Google ran a comparison site for car insurance in the UK; eventually, they refocused solely on their core business of generating advertising income. Being good at what you do does not necessarily make you good at what you want to do in the future. You do not have to be able to do everything. This also applies to insurers. Rather than chasing every innovation, it makes more sense to go back to your core business and decide from there how you can best serve your customers,” said Cuiper. 

He added that insurers need to go back towards what their core business is; covering the financial risks that exceed an individual’s or a family’s capabilities. That is not something Google can easily emulate. As an insurer I would opt to fall back on your business capabilities, aiming for very satisfied customers. 

“For a long time in the industry, we have stressed that you have to innovate or die, but that does not mean that you have to do everything yourself. For many insurers, innovation has proved to be difficult and costly, in terms of time, energy and money. Insurtech could be perceived as a threat to traditional insurers. However, startups and tech companies also represent opportunities. Sometimes it is simply better to forge a partnership with a specialist that has exactly the right expertise and experience,” said Cuiper. 

Editor’s Thoughts:
Entrenching trends into business models may benefit your business significantly. However, is this type of entrenchment easily achievable? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

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