1 Technology's Impact on the Industry
Until recently, most investments in insurance technology focused on distribution, policy administration, internal controls and security. Now, telematics, data analytics, wearables and social media are redefining virtually all aspects of the insurance industry. Emerging technologies are offering new opportunities and revenue. They may also substantially reduce losses, enabling insurers to offer lower premiums, while also creating risk through new sources of competition and the unprecedented pace of change.
The Internet of Things (IoT) — including telematics, body sensors and a variety of other monitoring technologies and smart devices — is challenging insurers to create new products, devise new pricing algorithms and underwriting methods, and revise how claims are processed.
As sensors enhance the ability to verify behaviours and predict, prevent and mitigate risk, insurers are beginning to shift focus from loss recovery to prevention/risk management and mitigation. Insurers are also offering usage-based insurance (UBI) policies to underwrite risk in a more granular way and technology is making it possible to offer a wider range of insurance choices based on risk allocation and risk reduction models — all at significant savings. Some auto insurers already provide policyholders with reduced premiums based on safe driving habits measured by in-car sensors. Telematics subscriptions are expected to increase dramatically, and drones and aerial imaging will speed up property damage assessments.
In the face of evolving consumer behaviours and expectations, growing competition, disruptive technologies and heightened regulatory oversight, P&C insurers need to rethink how they can remain competitive and ensure their long-term sustainability. Insurance companies need to invest heavily in self-directed services that use online/mobile channels and devices to meet consumer demands and lifestyle expectations. Service has the potential to become a key differentiator in terms of how insurers market their products, serve customers, structure prices and communicate.
Technology, big data and analytics offer great potential, enabling insurers to accumulate and understand the information needed to reach customers with the right product at the right time and price. Insurers will need to be strategic in assessing behaviours, risks, coverage options and standards and in structuring their businesses to leverage IoT data to improve operations, service and the overall customer experience. They will also want to consider strategic alliances, joint ventures, minority investments or mergers and acquisitions to acquire or develop certain technologies and expertise.
2 Insurance M&A
While many expected significant consolidation in the Canadian P&C insurance industry, instead we have seen a steady stream of more tactical, targeted deals. Among the key forces likely to continue driving M&A activity in the P&C and broker space are continued fragmentation, an aging population, low growth and low interest rates. The weak Canadian dollar and political uncertainty in the U.S. and the U.K. may also attract foreign market participants to Canada, including Asia.
In the last few years, Asian insurance companies have entered the U.S. insurance market through acquisitions, in part because their home regulators are directing them to diversify their markets. Domestic demutualization could also increase the pace of M&A activity in the P&C sector as some demutualized insurers gain access to capital markets to fund acquisitions and others are able to convert to a structure that allows them to be acquired.
InsurTech is a fast-growing sector worldwide and includes everything from companies focused on measurement devices (e.g., sensors, telematics) to those harnessing data to improve pricing, enhance the customer experience and improve bac
via www.mondaq.com
Recent Comments