By Precious Nduli – Head Technical Marketing, Discovery Insure

A lot of disruption is caused by tech companies across industries. The result is that consumer expectations have changed, ultimately giving birth to the connected customer. These customers want products that are mobile-first, transparent and personalised.

 

Changing consumer expectations also appears in the financial industry as a result of fintech (financial technology). Fintech is “computer programs and other technology used to support or enable banking and financial services, making them more efficient.”[1] Examples of fintech include online-banking, payment networks and peer-to-peer insurance.

 

Fintech presents itself in the insurance industry as insurtech (Insurance Technology), which “is a set of innovative business models and platforms that bring in new customer experiences by applying innovative technologies in the insurance industry.”[2] Insurtech has become popular and has seen a 248% growth in global investment between Q2 2016 and Q2 2017.[3]

 

The disruption caused by insurtech is largely due to the constant connectivity and huge volumes of data generated by many telematics devices, wearables and the Internet of Things. Using this data, insurtech has enhanced the risk assessment, pricing, service solutions and product development for many insurers that have adopted big data analytics. Insurtech has also changed the way that insurance is distributed – from online distribution and peer-to-peer insurance all the way to robo-advisers.

 

Even though 74% of insurers see ongoing sector-wide innovation, most are not considering addressing disruption with new forms of improvements yet.[4] However, 79% of CEOs agree that companies that don’t embrace big data and fintech may face extinction.[5] As a result, insurers need to adopt key survival elements within their organisation. They must make sure that their business model is agile and that they invest in developing large tech capabilities. By combining technology with the skills of their actuaries, they can disrupt their value chain to redistribute profits to clients in the form of accurate risk assessment and pricing.

 

For example, Discovery Insure’s Vitality drive programme, uses telematics devices to incentivise drivers to improve their driving behaviour. They then reward their clients and ensure safer roads for society by using their insurance savings from fewer claims as good drivers have fewer and less severe accidents.

 

The need to respond to this disruptive environment is not just vital for insurers – it’s also crucial to advisers. Even though fintech has bought about the arrival of robo-advisers, 67% of clients are uncomfortable using an entirely digitised service as their primary financial adviser.[6] As a result, we see the relevance of financial advisers who can offer personalised service, emotional and trusting relationships and the ability to advise clients with complex cases that an algorithm cannot be applied to.

Therefore advisers must react to this disruption by becoming connected:

  • To clients, by maintaining a constant, personalised relationship
  • To big data, by harnessing it to identify and attract key target markets. This can be done by partnering with insurers who provide their brokers with insurtech innovations. With increased access to technological advances, brokers can better understand their clients, improve their selling strategies and engage with new markets, thus benefitting the brokers.
  • Online, by creating interactive websites, use social platforms and webinars, videos and apps to interact with clients.

 

Clients need to feel that their financial advisers are available to them at any time and through many forums.


[1] https://en.oxforddictionaries.com/definition/fintech

[2] http://massimociaglia.me/2017/01/06/7-insurtech-startup-to-follow-2017/

[3] https://www.financierworldwide.com/fw-news/2017/9/14/insurtech-investment-increases-in-q2-2017-as-reinsurers-wise-up-to-opportunities

[4] Opportunities await: How InsurTech is reshaping insurance, Global FinTech Survey, PWC June 2016

[5] Accenture, 2014. Big Success With Big Data

[6] https://www.wsj.com/articles/can-robo-advisers-replace-human-financial-advisers-1456715553