We live in a world of rapid change. By next year, every single person on earth will create 1.7 MB per data every second of the day. We’ll conduct 40 000 online search queries every second, using the more than 50 billion smart devices in use around the world. Just in 2017, in fact, more data was collected by humankind than in the previous 5 000 years of civilisation. Technology is creating a revolution, before our eyes.
Yet, the insurance industry is lagging behind. In a recent article, The Economist warned that the “future of life insurance is happening without insurance firms”; that the slow and plodding giants of the insurance industry are in danger of being overtaken by reinsurance firms and Big Tech businesses. Businesses that have been quick to see the potential in combining technology with insurance principles to create products that better meet clients’ needs.
In its quarterly Insurtech Briefing, US research firm, Willis Towers Watson, reports an upward trend in the number of investments being made by reinsurers in private tech companies. One needn’t look far to find examples of technological advancements in insurance being pioneered by players other than the insurers themselves. In the US, IBM and The Weather Company are using big data weather analysis to help insurers better predict and manage short-term insurance claims. In Israel, Tel Aviv-based tech start-up, Atidot, has harnessed artificial intelligence, machine learning and predictive analytics to help US-based life insurers to optimise their books. And Big Tech firms like Amazon, Apple, Facebook, Google and Tencent have all expressed an interest in establishing themselves in the financial services sector. Just recently, Apple launched its first credit card, begging the question – what’s next? And what are the potential ramifications for the employee benefits offered by insurers?
The fact is, employee benefits are about people, not about data. In our increasingly complex world, success hinges on our ability to embrace complex technologies and data, and use them to provide people with simple, personalised solutions. Studies have shown that the proliferation of data has created a dual desire among consumers for customisation and control. Employees are no different – according to US insurer Metlife’s latest employee benefits research, 72% of employees surveyed agreed that having their employee benefits customised to meet their needs would increase their loyalty to their employer.
Unfortunately, the structure of most group risk solutions available to employees have remain unchanged for decades. Insurers have been slow to harness the processing power of new technologies to re-engineer their products and create more convenient, appropriate solutions for their clients. As a result, current group risk offerings in the market still present trustees and advisers with the following challenges that may hamper their ability to adequately meet the needs of the members they seek to protect:
Barriers to claim: subjective, onerous claims criteria for disability – including yearly reassessments
Limited choice at claim-stage: rigid pay-out structures may be disconnected from need in terms of prognosis and economic conditions at time of claim
Limited flexibility: difficult for employees to access more cover or retain cover if they move on
Mismatch between cover and need: multiple-of-salary can mean younger employees are substantially underinsured for their income need.
The problem is that people’s expectations have been reshaped by the world they live in. They expect the same level of personalisation, sophistication and user-centric design from financial services products as they do from tech-enabled offerings like Uber, Netflix or Apple Music.
In BrightRock’s view, the industry is in urgent need of needs-matched solutions that provide employer groups with personalisation and control, through:
Certainty of claim: objective, clearly defined claims criteria for disability claims – without yearly reassessments
Choice at claim-stage: choice of pay-out structure at claim based on prognosis and economic conditions at time of claim
Flexibility and portability: ability for employees to easily access more cover or retain cover if they move on
Alignment between cover and need: choice of a multiple-of-salary or proportion of future pay cheques to meet income need.
In a changing world, we all face a choice. Do we maintain the status quo, or do we use technology to better meet employer and employee needs?