For 50-odd years, the way insurance has worked has remained the same. But in the last few years, catalysed by the pandemic, the rise of digital solutions and insurtech looks to break down historical insurance preconceptions have emerged.
Recently, big tech companies have expanded to cover a wide range of financial services. Amazon has even explored moving into the insurance industry, with the launch of its ‘Amazon Insurance Store’.
While big tech companies could put pressure on traditional insurance options, it also appears there is a significant opportunity for collaboration between the two industries. So, are big tech companies friends or foes for the insurance industry?
To answer this, The Fintech Times asked a number of industry experts for their opinions and perspectives.
Eoin Lyons, CEO of Opal Group, the technology and administration provider to the financial services industry, explains that there may not be one definitive answer to the question.
“Big tech companies will be friends to consumers who want insurance but foe to some parts of the industry. Digitisation has totally reshaped customer expectations for frictionless experience in many sectors but this has yet to really impact life insurance.”
Collaboration ‘beneficial for traditional insurance companies’
Chris Kessler is the vice president of corporate development at digital insurance solution platform Bold Penguin. Kessler discusses the importance of collaboration between big tech companies and the insurance industry.
“Generally, as new risk types emerge from the digital world where consumers and businesses manage a growing footprint, the collaboration between big tech and the insurance industry will be beneficial for traditional insurance companies. In this model, data and exposures from big tech will be leveraged by the insurance industry to underwrite risk.
“Even for existing exposures, untapped data sources may be tapped to more effectively and profitably underwrite risk. However, with the potential that underwriting models and new risk types rely heavily on big tech, power dynamics may shift and the value chain could experience disruption (e.g. big tech forming relationships directly with reinsurers and disintermediating the current state value chain).”
Big tech companies are ‘primarily an infrastructure consideration’
Risto Rossar, founder and CEO of insurance software solution provider Insly, explains big tech companies won’t compete with insurtechs:
“Big tech companies, such as Google, Facebook and Amazon are primarily an infrastructure consideration for insurtech companies, much like the internet itself. So, it isn’t a case of whether they are ‘friend or foe’ to insurtechs, but whether insurtechs can learn to live with them.
“If you take the example of the internet, there is no way that an insurance company can ignore the internet and survive. The same applies to big tech. Insurance companies must learn to do business and perform in that environment; understand how it affects their customers, revenues, and costs. It isn’t something they can control.
“I don’t think that big tech itself is a threat to insurance companies, despite moves by Google and others. Insurance might seem very profitable, but it is a difficult, capital-intensive and low-margin business. Big tech companies will soon realise that there are much better ways to make money than competing with insurance companies. Their influence now is all about changing the landscape and the environment where insurance companies are operating.”
‘The makings of a beautiful friendship’
Tech companies can ensure that collaboration can benefit both industries, says David Lewin, VP of product at bolt Insurance.
“This has the makings of a beautiful friendship if tech companies can build that trust with traditional insurers, and traditional insurers understand how to best leverage their tech partners. Technology must be used to enhance customer experiences, provide better management of the risks being insured and ultimately streamline and modernise the insurance experience to improve its reputation among potential buyers.
“Tech companies must learn how to clearly articulate their value proposition to the insurance industry with clear KPIs and ROI. They must also come in with a growth mindset to learn the industry, speak the language of the industry and understand the current pain points in order to build sought-after solutions that can create competitive value.”
‘Are they friends of the consumer?’
Dan Brennan is head of partnerships and customer success at cross-border payment service Vitesse. Brennan explains the impact data from big tech companies could have on the insurance industry.
“Perhaps the question is are they friends of the consumer? Many don’t have access to the likes of wearables and/or don’t want to share their data. Does their privacy have an impact on their premiums? Can too much data have an impact?
“I personally want to be free in the knowledge that I can enjoy a few hours at the pub watching the Six Nations without my premiums going up. If you get your steps in daily, great because it can reduce your premiums, but it might not reduce mine. So the answer is probably yes. They are a friend of the insurance sector.”