Will You Survive the Great #InsurTech Disruption? - Risk & Insurance : Risk & Insurance

In insurance, whoever holds the data, holds the power.

That’s because data is the key to effective risk assessment and underwriting.

Big Data and analytics are forcing insurers to adjust their processes when it comes to collecting and using data. With the expansion of the Internet of Things, sensor technology, machine learning and artificial intelligence, there is more information available than ever before.

The abundance of data – and the technology used to capture it – is driving profound disruption in the relationship structure of the insurance industry. As the traditional gatherers and guards of massive amounts of data, insurers face threats from new, tech-savvy competitors who can adapt to changes more quickly.

“There are very powerful trends coming together to cause serious industry disruption. That can be a big threat, but if insurers start responding now and embracing the change, it could also be a big opportunity,” said James Dodge, Senior Consultant, Advanced Analytics & Data Solutions, Milliman.

InsureTech Overturning the Status Quo

James Dodge, Senior Consultant, Advanced Analytics & Data Solutions

Technologists, data scientists and their deep-pocketed capital backers are jumping in with both feet. Though lacking insurance expertise, they see the vast opportunity to harness the data that insurers need. In doing so, they present a threat to traditional insurers, especially smaller and mid-size companies who lack their own large data stores.

“Not a lot of Insuretech companies actually want to be in insurance,” said Robert Meyer, FCAS, MAAA, Principal, Consulting Actuary, Milliman. “It’s a highly regulated industry that requires a lot of capital, and few have actually jumped into the pool of taking on risk. But they are positioning themselves as the purveyors of data.”

Distribution is a key area of focus for many Insuretech startups. Specifically, the new players think they can disintermediate brokers for small and mid-size accounts.

But there are other ways that technology can profoundly change insurance distribution.

Original equipment manufacturers (OEMs), especially in the case of IoT-enabled ‘connected cars,’ are one example of a new competitive threat to traditional distribution. Instead of providing auto coverage through a traditional carrier, they may try to capture more margin by partnering with an InsureTech startup.

“Say, for example, a young InsureTech firm builds a great app and sells it to a reinsurer. The OEM may decide they want to offer that as a value-added bundled of

via riskandinsurance.com