Pitfalls and potential of innovating in life insurance

By

09/08/2017

OPINION | In the burgeoning fintech landscape of the last few years, so-called ‘insurtech’ has been late to the game.

Whilst the picture is beginning to change, life insurance still takes a back seat relative to other insurance sectors, financial services more generally, when it comes to embracing new technological tools.

Why so? One perspective is that the scale of opportunities elsewhere in fintech, notably in lending and payments, has been more obvious and accessible. In our closest adjacent sectors – general and health insurance – entrepreneurs have been able to exploit the opportunities presented by more readily-available data to innovate underwriting, by shorter product lifecycles to enable test and learn, and by consumers who are arguably more accepting of new entrant brands.

It is also true that barriers to entry in life insurance are high in terms of both capital and regulatory requirements. The Australian Securities and Investments Commission (ASIC) is very alive to the regulatory complexity for start-ups and their focus in this area is very welcome.  The so-called ‘regtech’ space is growing rapidly and Artificial Intelligence (AI) has many applications in the compliance sphere.

For existing players, legacy systems and products are also features of the Australian life insurance industry. But they need not be the constraints they at first glance appear to be. Advances in AI and machine learning, combined with digital, open up significant opportunity to tackle legacy, remove effort and create frictionless operations. As we invest to ‘liberate’ the data that exists in our legacy systems, our mindset can be about how we can transform the staff and customer experience rather than simply upgrading systems.

The potential of these technologies is for always-on quicker service, for example, more conversational underwriting through the use of intelligent chat bots. The related benefit is the freeing-up of time and resources for our people to focus on doing even more for customers.

For incumbent life insurers, the biggest gains will arguably come from transforming the way we work to radically change our operating economics, rather than the search for a single disruptive “uber of life insurance” business model. There is scope right through the life insurance value chain, from sharper targeting of risk pools and more personalised pricing, to, perhaps, fully automating insurance contracts using blockchain technologies.

The life insurance sector has built up complexity over many years, innovating product features sometimes at the expense of consumer understanding and experience. But that is changing. At TAL, for example, we have been getting the actuaries and the underwriters together with the IT developers and the UX (user experience) designers to work together to challenge and reimagine the customer experience.

We do not have all the answers. With this in mind it is important that we as life insurers are part of the conversation with the start-up community, exposing the challenges we face and looking for opportunities to solve them together. Perhaps that requires some bravery on our industry’s part but frictionless operations mean better management of risk in the financial system and, ultimately, the Australian consumer will benefit.

Fiona Macgregor is chief customer & innovation officer at TAL Australia.

If you work in the group insurance sector and would like to learn more about emerging best practice consider attending the upcoming Conexus Financial Group Insurance Summit, of which TAL Australia is a platinum sponsor. For more information about the event, to be held in Sydney on August 29, visit the website or contact Emma Brodie via [email protected] or +61 2 9227 5708.