As part of a series of articles we're calling The Future of SME Insurance, we've spoken to three of the most innovative companies in the insurance space about how technology and data is changing how the industry works and what they think the future will look like for both insurers and SMEs.
In part one we're speaking with C-Quence, an insurtech MGA, created to deliver a radical, powerful, transformative and highly efficient way of trading and servicing mid market commercial insurance, about the SME sector that they serve.
1. Has technology helped you to serve and support SMEs? What can you now do that you couldn’t do before?
Technology is at the core of our business. It has enabled us to create a new type of insurance business. We are a technology company delivering modern insurance solutions to the intermediated mid-market commercial insurance sector.
Unencumbered by legacy and empowered by cutting-edge technology -- combined with skilled underwriting expertise and the clever use of data -- we set out to provide a radically different way of transacting and underwriting commercial insurance. Our goal is to deliver the sophisticated products businesses demand faster, more efficiently, with better value and accuracy than the process that currently pervade.
By codifying underwriting rules we are able to use algorithms to largely automate the process. When a risk falls outside the automated route and is referred to an underwriter, our technology suggests a solution to the underwriter. Artificial Intelligence (“A.I.”) / Machine learning uses the underwriter’s decisions to further refine solutions or incorporate them into the algorithms thereby reducing the number of referrals over time. This helps underwriters to manage much larger portfolios than is possible using old world procedures.
This is the approach we took to build our ground-breaking trading / underwriting platform that empowers brokers to create and deliver customer specific solutions. Being Cloud-based, our platform copes well with remote access requirements – essential during a pandemic. We’ve dispelled the “too complex to automate” myth and won over brokers who, increasingly, are using our platform to deliver great service to their clients.
2. Which kinds of data are the most difficult to obtain when it comes to underwriting SMEs?
Structured and standardised data is a critical component in the continual push for innovation in Commercial Insurance.
The voracity for good quality data seems boundless and the irony is that all established insurers have enormous amounts of client data. Sadly, because of the way it has been collected and stored, it can be difficult to unlock. Instead, underwriters have relied on brokers / clients to provide or verify information.
Increasingly, however there are third party data sources that can be relied upon to provide a rich array of publicly available client and risk information and Insurtechs have been quickest to see the opportunity.
Useful for prepopulating and verifying client / risk information and combined with codified underwriting in the form of sophisticated algorithms one can create an extremely fast, accurate and reliable process for transacting Commercial Insurance.
Reinforce the process with the use of A.I. / machine learning and you are in a position to continually refine the process making it ever more accurate and efficient.
In addition, using rich external data coupled with lifecycle structured data creates a rich environment for heightened pricing and portfolio performance optimisation using modern data analytics tools.
3. What are the critical steps and stages of the transformation journey?
There are four key stages:
1. Have an in-depth knowledge of the industry
a. How it works i.e. underwriting knowledge; distribution, etc.
b. Knowing the strengths and weaknesses i.e. the “pain points” that add inefficiencies and cost -- causing frustration and undermining trust
2. Design and Build
a. Re-engineer the value chain for the benefit of all by eliminating the “pain points” and transactional frictions using the best methodologies and technologies
b. Change the experience of trading insurance to make it fast, easy and transparent to encourage behaviour change that accepts digital and rejects old-world custom and practice
c. Create a product framework that drives innovation and meets modern customers’ constantly evolving risk management needs (as opposed to the needs of the insurer)
3. Continual Evolution
a. Iterative testing of design to drive regular upgrades to processes and products thereby ensuring the different broker and customer needs continue to be met or surpassed
4. Constantly question your Mission
a. Are you delivering on your promise?
b. Could you do it better?
c. Are you delivering real value?
4. In your opinion, is the industry moving quickly enough to embrace the opportunity technology gives? What are some of the things that the industry could focus on?
No. The industry lags far behind other industries in using technology to modernise. Whilst it is true that change is happening and some new technologies are being adopted, the pace of change is still little more than tectonic.
However, there are catalysts for change, some of which are existential, that promise to accelerate progress. These include:
- ever rising costs;
- increasing dissatisfaction with service leading to lack of trust;
- shareholder demands to address profitability issues.
Added to these is the considerable disruption the Covid-19 pandemic has caused and continues to cause given the industry’s reliance on paper and people based processes.
Together these pressures are forcing change. Old excuses are no longer defendable and rather than try to defend the status quo industry leaders need to consider a more partnering approach or adopting insurtech solutions rather than trying to adapt old world remedies to new world problems.
5. What are some of the problems that insurtech can solve?
Insurtechs have the ability, and mandate, to challenge the status quo. The value they bring is new thinking, unencumbered by age old processes and can execute quickly. The result is:
- Expense reduction through the use of modern tech driven methodologies and the extensive use of expansive structured and real-time data
- Speeding-up and automating processes through-out the lifecycle, including the complex underwriting of sophisticated risks and claims servicing
- Elimination of repetition and significantly reducing administration
The speed, accuracy and consistency that digital technology offers transforms the service proposition, for example:
- Contact Certainty through full documentation instantly created at the point of sale;
- The use of data, particularly third party data to supplement client information for quotations and underwriting produced wherever and whenever required;
- Processing claims in new and innovative ways.
- The agility that technology offers is ideally suited to meeting the demands of constantly evolving businesses, industries, economies and the risks they face.
Risk and Portfolio management
- The use of sophisticated tools and techniques that facilitate real-time analysis means that individual risks can be much more accurately and consistently priced.
- The performance of underwriting portfolios is more closely monitored allowing forensic interventions down to the level of individual risks rather than across the portfolio as a whole.
- End to end expense costs can be closely scrutinised enabling the business to be run more cost effectively.
6. How customer-centric is the sector today? Where are the gaps that innovation can help solve?
The short answer is that it falls far short of being as customer-centric as it can be.
Technology and access to data means we can do so much more and when you are selling an intangible like insurance it is important to build confidence and trust quickly – at point of sale.
Why then does the industry often deliver error riven policy documents weeks or even months after the point of sale. Often difficult to read with a policy schedule that refers to a policy document much of which may be irrelevant because they have chosen only a few of the covers the policy may offer, or is amended at the end of the document with an
array of endorsements altering terms and conditions outlined in the base contract.
It is not difficult to construct an accurate policy document with only the covers, conditions, limits and retentions and endorsements that the customer has chosen woven in to each section. This can be done instantly at the point of sale.
The industry also needs to address the often complex, impenetrable language it uses so that customers can better understand what they have bought. Perhaps this would help prevent episodes like the current Business Interruption controversy.
Another frequent criticism relates to the relevance of questions Insurers ask when providing a quotation. Commercial risks can be complex requiring the underwriter to consider many variables. Technology and the intelligent use of data can both reduce question sets and ensure only relevant information is requested. This instils confidence and speeds up the process benefiting the underwriter, the broker and their client.
These are some examples of how technology can radically improve service.
7. How do you think the sector will evolve in the next three years? In the next 10 years?
Technology and data science will undoubtably have an increasing impact on our industry. It will be a case of change or be changed and there will be many opportunities in what will be a very dynamic industry.
The advantage we have, within the industry, is our in-depth knowledge of the complexities of insurance which those looking at the opportunity from outside do not. But that advantage is being quickly eroded so we have act.
Insurance expertise collaborating with new technologies and data science will accelerate the pace of modernisation bringing both evolution and revolution in equal measure.
The coronavirus pandemic has been an eye-opener for many within the industry. Already we are seeing winners and losers from the disruption it has caused and continues to cause. It has shone a spotlight on practices that quite simply broke and those that were barely impacted. For example, ways of working built around cloud based process continued to function as normal whereas working from home meant limited or no access to office based systems and tools.
Perhaps Covid-19 has been the long awaited catalyst that will force those reluctant to shake up the status quo into action. Insurtech is well placed to take advantage of the opportunity.
Optimistically we can look forward to a vibrant industry that attracts talent from many disciplines and has an improving reputation as we become much more sensitive and responsive to customer needs. Even anticipating those needs as data science and analytics provide ever more insights into the risks our customers face.
For more information on how tech is impacting insurance you can download The Next 10 Years in Insurance - a research report by Insurtech Insights in partnership with DueDil or why not check out our webinar - How real-time insights and technology are transforming pricing in commercial insurance.