The insurance industry is the last of the financial services sectors not to have succumbed to Silicon Valley-type disruptors but that is going to change, the chief operating officer of IGI has said.
Speaking on the topic of innovation in insurance, Hatem Jabsheh said: “Change is closer than the industry thinks and more disruptive than they can imagine.”
The former Goldman Sachs trader said insurance was the last of the financial services not to have had its business model turned on its head by innovation and automation.
“The financial services industry comprises banking, insurance and investment,” he said.
“Banking has been disrupted. Investments has been disrupted. You don’t think reinsurance is going to be disrupted as well?” he questioned.
The executive said that just few years after leaving his post with Goldmans in Chicago to set up his own practice in Jordan, his old team had been decimated and replaced by machines.
“I don’t know why the reinsurance industry thinks it can’t be automated,” he said, adding: “Trust me, there are people out there looking at us.”
“One of the big boys will do it,” he said, pointing to Amazon and Google’s push into the US healthcare insurance market. “With their technology and user profiles and data, insurers won’t be able to compete. Are you telling me if a company like Google finds our business lucrative, do you not think they would enter and compete in their own way?”
However – so far – Jabsheh said that while he had seen digitisation in the market, he is yet to see innovation.
“I can’t say there’s nothing out there - innovation is being applied internally within companies, but it’s just a swarm of mini innovation.” He said the investment industry created high frequency trading by using Artificial Intelligence, algorithms and scientific methods and applied it to trading securities.
“But there’s nothing innovative about PPL, for example,” he said, adding that the Lloyd’s electronic placing platform was just passing the risk through a specific software rather than following common practice.
He said the platform was designed to create operational efficiency, but in reality “it’s a centralised repository of information – that’s all it is.”
He said that blockchain has the ability to enhance market change once it has been broadly adopted by the industry. It will give the assured more transparency and greater ownership of the insurance purchasing process.
The distributed ledger system will allow the assured to transact with more participants whereby they will get the most competitive pricing.
The executive went on to say that blockchain will drive down the expense ratio and broker acquisition costs, although he fears that those savings may not be passed on to the end client by certain carriers because margins have been squeezed for so long.
Meanwhile, he believes the role of the underwriter will change to become a portfolio manager, while the broker will become more like a consultant, and the distribution will be managed by the blockchain.
“Everything now is going to be technology driven and people will pivot into different roles,” he said, noting that smart management will train employees to evolve into these new roles.
Jabesh said the future he envisions will give insureds “a better service, better pricing, better coverage and more transparency”.
Finally, the elephant in the room that no one wants to discuss is the perception of insurance. Buyers look at it as an expense rather than an asset, whilst sellers look at it as a dependency rather than a partnership.
“Technology is about to change all that,” he concluded.