Who is going to be the largest insurer or reinsurer that doesn’t retain underwriting risk?
It was a serious question, and when Anup Seth, of Aon Insurance Managers, posed it he was sitting alongside the chief executive officer of one possible contender, Slice Labs.
Insurtech start-up Slice is focused on the on-demand economy for which it provides on-demand insurance.
If someone is using their car to provide a taxi service they can buy insurance to cover the specific times they need that liability protection. Likewise, a vacation property owner can purchase insurance coverage that matches the times when they have guests.
As an insurance industry disrupter, Slice has grown rapidly since it was launched two years ago. It operates in 36 states across the US.
Describing how customers buy insurance on their mobile phone, Tim Attia, who heads Slice, said: “You tap a button you become a business, you tap a button again you become a person again. We are insuring and protecting that period of time where they are acting as a business.”
The company has a homeshare product for clients who rent out vacation property, such as through Airbnb, and a ride-share product for drivers operating on networks such as Uber and Lyft.
“With on-demand insurance, we wanted to reimagine insurance. We were playing with time, so we removed the annual policy. We have policies that last only for a period of time. Can we get more premium, or more rates by making it convenient at the same time trying to build a digital insurer and take all the costs out?
“We took an insurance company and we put it in the cloud.”
Slice is backed by XL Innovate, Horizons Ventures, Sompo and Munich Re. Its insurance programme uses publicly available data, gathered by computer programs, and harnesses the power of machine learning and artificial intelligence.
Mr Attia was among a panel of speakers that discussed innovation and disruption at the EY Global (Re)Insurance Outlook forum, which was held in association with The Insurance Insider, at Hamilton Princess.
Fellow guest Mr Seth, managing director of Aon Insurance Managers, said: “Breaking up the components of an insurance policy into the different risk perils and then finding investors with appetite for those specific risk perils and putting the two together — once you develop that ecosystem, that will be a real disrupter for our industry.
“If you take Uber — it is the largest transportation company that doesn’t own a vehicle. Airbnb is the largest hospitality serving company that doesn’t own a hotel room. So who is going to the largest insurance or reinsurance company that doesn’t retain underwriting risk? That’s where we are heading as an industry.”
He said establishing customer familiarity with a brand name was a key factor for new entrants to the market. Mentioning major UK stores Tesco and Marks & Spencer, he said customers loyal to those businesses would be more likely to buy insurance they offered than purchase from a less familiar start-up company.
And he said new technology, such as telematics, were taking off and had the potential to change many aspects of the insurance market. Telematics can refer to a device fitted inside a vehicle that measures how well it is being driven, allowing the driver’s insurance risk profile to be rated in real-time.
Likewise, data from wearable technology such as Fitbit bracelets that measure aspects of a person’s health, can give an insurer greater insight into an individual’s health and daily activity.
“You might feel that intrusive, but that’s what is happening. They are using that data to understand your behaviour so that they can rate you accordingly,” he said.
Data analysis was also highlighted by the third member of the panel, Jay Rajendra, chief analytics officer at Arch Capital Group.
He described three main areas of technology disruption in the insurance sector as being the customer experience in buying insurance, and how easy that was to achieve; the opportunity to reduce costs; and gaining a better understanding of customers and a richer picture of them using data analytics.
The panel also discussed the need for new skill sets in the industry, such as data scientists who could analyse large volumes of data and create insights.
Mr Rajendra said: “Change is hard for people and almost impossible for insurance companies. We have been immune to it for a long time.
“The opportunity for me, beyond the technical skills, is really that person who can bridge the gap. The person who can see the opportunities to use the new technologies and apply them.”
Giving an analogy of the type of person who could provide a crossover between the industry’s traditional skills and new technologies, he said: “Think about one side of the community speaking ‘blue’ and the other side speaking ‘red’. [If you have]someone who can speak ‘purple’ — that’s really where you can generate value.”