After the rollercoaster of 2020 it’s a brave soul that’s willing to commit to what 2021 will look like. But running a global network of talented and successful people means that Robin Merttens and I have been able to dip into the collective wisdom of 20 of our friends and supporters from InsTech London.
In return for a bottle of wine (thank you PKF Littlejohn) and an hour on Zoom we were able to crowdsource what is top of mind from some of the best people to predict the year ahead – those that are part of making it happen.
"the collective wisdom of 20 of our friends and supporters"
One investor, two reinsurers, three consultants, five Lloyd’s syndicates, six growing insurtechs, and three others – all that was missing was the partridge and the pear tree.
You can now get the audio highlights (scrubbed and polished to perfection by the ever patient Peter Roach), and my match commentary, of the event on the InsTech London Podcast Episode 118. What follows are the dominant themes impacting risk and insurance that our panelists recommend you look out for - and why. We agree with Robert Lumley of Insurtech Gateway though – the skill of making good predictions is about following the direction of travel.
Turned out there was a lot to talk about, so you're getting this in two parts. Part two comes out tomorrow.
Here it comes - from some of the sharpest minds at PKF, Munich Re, Swiss Re, EY, PWC, Deloitte, Brit, Talbot, Convex, Wakam, Chaucer, Concirrus, CyberCube, Blink, Riskbook, Flock, Zego, Insurtech Gateway, Voice of Insurance, Miller and FintechOS.
Insurers must regain trust - consumers want more certainty
Charlie Burgess runs Munich Re international specialty business and his responsibilities now include Munich Re Digital Partners. A major issue for Charlie is that trust in insurance has been dealt a double blow in 2020 - and resolving that must be a priority in 2021.
The rejection of Covid related claims has accelerated the need for people wanting more certainty between their loss and receiving a payout. This, according to Charlie, will drive more interest in new types of insurance such as parametric. We agree, and wrote at length on this in our October report "Parametric Insurance - 2021 outlook and the companies watch". (Still free to download at the time of writing but going behind a paywall soon).
The use of "price walking", the practice by which insurers charge their existing customers more than their new customers, has also undermined confidence in the market. Look out, Charlie says, for a “short term rush to offer great deals by insurers to win new customers before the new regulations come into place”.
Ultimately though, the impact will go deeper, he predicts, further fuelling the rise of trusted brands from outside of insurance stepping in to replace traditional insurance brands, particularly in personal lines insurance. Nick Pester picks up on this theme in some detail with his prediction coming in Part Two.
"2021 will be the year everyone starts to love insurance"
We shouldn’t be too despondent though. Nigel Walsh, partner at Deloitte, reminded us that the insurance industry did pay out billions of dollars in Covid related claims in 2020. Nigel predicts (or should that be "hopes"?) that 2021 will be the year everyone starts to love insurance – and that the industry will finally fix its complicated wordings.
By the way, Nigel got his homework in early and has already published his predictions for 2021 - and I learnt what gets Nigel going when we spoke earlier in 2020.
Better integration of technology, better standards and Lloyd’s Blueprint gets underway
By far the most popular prediction across our panelists was the rise of the platforms – our experts expect to see meaningful developments in the use of platforms, integration between technology and, in London, the progress and implementation of Lloyd’s Blueprint Two. John Needham, partner at PKF, and our sponsor for the night, is still hearing concerns from insurers he talks to about the lack of ability to integrate with the new tools that are available, and "frustration that they are having to choose a mainstream platform to play it safe". Could this change in 2021?
Charlie Burgess welcomes the direction Lloyd’s is taking with its Blueprint but warned implementation will take longer than planned. Charlie expects "a flurry of automation or digitalization amongst the Lloyd’s of London market players, both addressing the plumbing and digitalization in whole or some of the more complex risk products".
Chris Payne, partner at EY sees the development of a “more pronounced two-speed architecture model” as established companies grapple with overcoming legacy. According to Chris people are “waking up and realising that they want something leaner, where they can stand up new ideas or quickly test them, and then decide how they want to launch, whether through a new platform or more easily through their main platform”.
"Blueprint Two is going to be exactly what we've always wanted"
Christian Kitchen – head of technology and innovation at brokers Miller is also bullish about Lloyd’s "it's going to crack it this year. Blueprint Two is going to be exactly what we've always wanted. The core data record and the digital spine is going to be the framework that all of us build our new solutions on".
Christian went on “now will be the chance for the agile organisations out there, including some of the brokers, to take what Lloyd’s is doing and build out the solutions and the end to end journeys that we've all been waiting for". Christian is also optimistic about the new opportunities this creates for what he refers to as the "real Insurtech companies", to start focusing on "groundbreaking solutions", as opposed to continuing to try to find work-arounds for legacy systems.
Karl Lawless, Sales Director at FintechOS adds “five months of lockdown was five years of digital transformation, and I only see that accelerating next year." Karl believes the age of the large transformation project is over. "Rather than insurers committing to the traditional big-box solutions that cost tens of millions of pounds and take 3 – 5 years to deploy, there's now an opportunity to deploy best of breed digital components, going down the Lego block approach".
Karl reckons we will start seeing components glued together with automation, giving a cutting-edge platform to those that use this approach. Having spoken to Gary Hoberman, CEO and founder of Unqork earlier this year I am sure low code and no-code will be a big part of this. And with Unqork having attracted $365m of funding according to Crunchbase, clearly I'm not the only one to believe this.
Your platform will be arriving shortly
Glynn Austen-Brown, partner at PWC, brought a global perspective to the predictions, with a reminder that we all expect technology to make things more convenient and for technology to give us our time back. Insurance will be the next frontier for simplicity. “Look at what people are doing in China. Look at WeChat or Grab. We are going to be moving much closer towards that platform economy that is so prevalent in the Far East” believes Glynn.
"most of the insurance market is still going to be your friend because they're not so nimble."
Mark Geoghegan formerly editor of Insurance Insider and now the “Voice of Insurance” podcast host advises us to look and see what technology choices the recently capitalised speciality insurers such as Inigo, Vantage and others make. Unlike the previous wave of start-ups 15 years ago these companies, with large amounts of investment, can choose to go with the new solutions and not rely on legacy (but will they, I wonder?).
Meanwhile, Mark predicts that “most of the insurance market is still going to be your friend because they're not so nimble. They decided that they wanted to digitise three or four years ago and they're finally starting to get round to doing it."
"the new bread of brokers is really good for reinsurance innovation”
Ben Rose, co-founder of new reinsurance platform RiskBook picks up on something Christian Kitchen mentioned. The challenger brokers rise to prominence in 2021. With the Aon and Willis merger coming up, and the acquisition of JLT by Guy Carpenter that we’ve already seen, Ben reckons that the new bread of brokers, which he observes has been recruiting many star players in 2020, “is really good for reinsurance innovation”.
Ben's list of challenger brokers to look out for includes TigerRisk, Beach, Capsicum, Gallagher, Hyperion, Lockton, McGill, BMS - all are small compared to the big two. As Ben points out, they can't replicate what the two giants are doing so they've got to think digitally and how they can use innovation. “They can't afford the traditional six person, account team to look after a single client, so they are going to have to explore automation to handle those bigger deals and perform all the analytics expected of them with a much smaller team”.
Ben and co-founder Jerad Leigh are watching closely as these brokers start to move faster and spin up partnerships with start-ups to bring a digital service that's been missing from the reinsurance ecosystem for quite a while. This is a topic I discussed at length last month with Rod Fox, CEO and Co-founder of TigerRisk, and this summer with Barnaby Rugge-Price, CEO of Hyperion. And you can learn more about RiskBook from Ben when he joined us for the UK leg of the ITC World Tour.
Look out for our own, InsTech London, view of e-placing platforms later this month with the release of our next deep-dive report. Robin Merttens’ is the executive editor on this one, so expect some robust analysis.
Data powered customers and risk reduction
Jenny Williams from Convex picked up on the theme of data, and she is thinking about it from a platform perspective too. Jenny pointed to the recent news that S&P has acquired IHS Markit, a company that provides financial services and many insurers with data, for $44 billion. “We'll see more partnerships and acquisitions in the data ecosystem space.” She added “lots of different companies offer different variations of data on different assets and their risk and perils. Companies (and InsTech corporate members) such as e2value and Hazard Hub are doing well in the US”.
The challenge though, according to Jenny, is that each specific data set requires expertise to collect and curate. Jenny is looking out for “more of a one-stop shop, targeted partnerships that may help reduce the offering overlap, while expanding the breadth of useful data that's available to us”. We go deeper into this topic in my interview with WhenFresh CEO Mark Cunningham.
Flock is another successful growing Insurtech company. Christen Smith, Head of Sales echoes a point made by many others "customers and brokers aren't going to be happy with the old solutions or with the old way of doing things. UBI (usage-based insurance) won’t be good enough anymore".
Christen added “we're going to have to take the next steps into exposure-based insurance and really move the needle to impact consumer behaviour.” Flock has recently expanded beyond offering commercial drone operator insurance into broader commercial insurance, no surprise then that for them “it's going to be a big year for stepping things up a notch in the space of connected insurance, and really delivering for consumers and brokers in a new and different way than has been done before.” Watch this space we say.
"customers are looking for more services that are aimed at risk prevention"
Glynn Austen-Brown picked up on an emerging but powerful theme around customers that are “looking for more services that are aimed at risk prevention and other value add services, for example boiler servicing, energy bill usage reduction and help with home repairs”. Glynn also sees this as driving more partnerships and more embedded insurance “things like Uber and Airbnb partnerships will become much more prevalent in regards to services and products that insurers offer. Customer stickiness will be everything”.
Data powered automated syndicates
Andy Yeoman, CEO of Concirrus expects to see meaningful progress from companies using data and algorithms, what he refers to as “technology-fuelled market entrants”. We’ve seen Brit insurance launch the Ki syndicate and gain £500m investment this year (my discussion with James Birch and CEO Mark Allan of Ki has been one of our most popular podcasts).
Andy expects the newcomers are “going to use those algorithms to replace the work, whether it be submissions, or some of the underwriting decisions” and their role will change “we're going to see their use move from follow syndicates, to lead syndicates. And in doing so, all those organisations are going to create investable asset classes because they'll ultimately have a predictable yield.”
This will make insurance attractive for more external capital, with “trillions of dollars of pension funds monies” coming into the market, maybe not in 2021, but soon after. You can learn more about Andy Yeoman and Concirrus from our discussion last year).
But we need to deal with the data ingestion problem
"we're talking about the really funky messy Excel spreadsheets"
Of course, all these great opportunities for using data will fail if insurers can’t get the data they need. Jenny Williams is hoping that 2021 will “see some real progress in the very difficult area - submission and ingestion of data in commercial and specialty lines”. The problem that Jenny refers to is caused by the volumes of valuable data that is locked up in email attachments in non-standard forms that are received by underwriters.
Whilst the data may now be getting to the underwriters it's hard or expensive to extract. Jenny explained why. “It’s not just about ingesting standard forms such as ISO or ACORD, we're talking about the really funky messy Excel spreadsheets with merged cells, multiple tabs and complex risk details that require real expert interpretation to identify the statements of values, loss runs, engineering reports, etc”.
Jenny is encouraged by some proof points from companies such as like Eigen Technologies, Groundspeed, EY, Expert AI, who are amongst those she sees leading the way. There is more need for collaboration between the technology and insurance experts but for Jenny it “feels like we're at a tipping point and this might be seriously commercially viable next year”.
That’s enough for one article. Take a break, stretch your legs and - if you want to pick up the thread before reading Part Two - plug in the InsTech London Podcast Episode 118. CII accredited for CPD in the UK.