As part of a series of articles we're calling The Future of SME Insurance, we've spoken to three of the most innovate 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 3 we're speaking with QBE, a global insurance group that helps businesses build resilience through risk management and insurance.
1. Has technology helped you to serve and support SMEs? What can you now do that you couldn’t do before?
Technology is the key enabler of our SME proposition which is centred around e-trading business with minimal manual intervention. The ability to manage high volumes of enquiries in an automated manner allows the business to focus resources onto those tasks that generate the most value.
By transacting in a digital environment, we can collect and analyse large volumes of data for analytical purposes. This analysis feeds our decision and rating engines allowing for constant improvement in the way we underwrite and price risks.
Supplementing the information that we receive from brokers with carefully chosen external data allows for a richer view of the risk and reduces the need for brokers to refer cases to us, thus providing a smoother, quicker and more efficient service.
2. Which kinds of data are the most difficult to obtain when it comes to underwriting SMEs?
Data about what a company does and how it operates is the most difficult to obtain, e.g. trade/business type particularly where a company has multiple activities within its portfolio, flexibility in the size of the workforce, trends in turnover, experience of the company. Much of the insurance assessment is based on snapshots in time and this may not always give a realistic impression of the company.
The trade or type of business has long been held to be a key factor in establishing the level of risk in insurance which makes it important to have accurate data when segmenting and analysing claims data.
For limited companies we can use public data e.g. SIC code from Companies House to get a view of the company’s business type. As many SMEs are not limited companies there is no easy way of validating the information provided at point of quote, meaning that similar companies could choose different business descriptions leading to inconsistent results.
3. What are the critical steps and stages of the transformation journey?
Having full and accurate data, applying appropriate algorithms and having the technology to deploy the results efficiently and with minimal constraint at point of quote.
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?
The industry is moving at different paces within the SME sector with the adoption of technology seemingly being focussed on improving processes behind the scenes rather than at the front end where consumers or brokers would see it. Companies with personal lines operations are probably furthest ahead as they can utilise the synergy between their various business units.
From discussions at industry events there appears to be a lot of focus on data and technology; particularly with regards to AI and machine learning. However, there is probably not enough being done to overhaul IT infrastructure within companies meaning that new technologies have to interact with legacy systems and data structures making them sub-optimal in many cases.
Technology centric start-ups have emerged but have struggled to get significant growth as brand and underwriting pedigree remain important considerations in the SME market.
5. What are some of the problems that insurtech can solve?
Access to and processing of data, both structured and unstructured. Identification of new sources of and trends within data that can be leveraged through sophisticated modelling techniques to gain a commercial advantage. Improved technology at point of sale that can effectively identify needs and suggest appropriate solutions. Fraud detection tools, particularly at point of quote/sale but also as part of the claims handling process would have benefit.
6. How customer-centric is the sector today? Where are the gaps that innovation can help solve?
The sector has strong intentions of being customer-centric but perhaps fails to execute this as well as they would like due to the constraints of technology, insurance product construction and strong data to understand the needs of consumers. Insurance is sold primarily on features rather than benefits which can lead to the feeling of insurance being a commodity or reluctant purchase rather than an important product that we believe it should be. Helping customers manage risks and allowing them to focus on running their business should be key objectives of any insurance company.
Insurers can do more in the SME market by using data and technology to segment and better understand their customers’ needs. This ability to differentiate product features for a market that contains a diverse range of companies will enable insurers to provide tailored products and services rather than selling a commodity.
The greatest areas for innovation are centred around the claims journey. This is the area where the end customer has the most interaction with the insurer as sales and servicing are often managed by the broker in the commercial insurance market. Our own developments around the use of data and technology have helped to speed up the claims journey without compromising on the quality of decisions being made when assessing and settling claims.
7. How do you think the sector will evolve in the next 3 years? In the next 10 years?
The SME sector will continue to become more data and technology driven with an expectation of fast and flexible solutions to suit businesses that are also constantly adapting, particularly those operating in the micro SME market. There is also a likelihood that shorter term policies, almost pay as you go in nature, will become more prevalent to enable companies to flex their insurance needs as their workloads or activities change throughout the year.
There will probably be an increase in sales through the direct channel at the smaller end of the market where simpler insurance requirements are managed by policies that are built around customer needs.
Faster access to claims services with technology aided estimation is likely to be a key area of differentiation, particularly to attract smaller businesses where quick access to funds is essential for ongoing trading. Apps to speed up motor claims are already in existence and could be extended to other product lines.
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.