We had a chat with Insly’s CEO and Founder, Risto Rossar, to find out what his predictions are about the insurance market in 2021. We couldn’t help to talk about COVID-19 impact, since it has massively affected the entire world. Topics like how AI could leverage the insurance market and what are the main challengers for insurers, MGAs, and brokers this year were also discussed. Take a look and enjoy!
How do you see the impact of the COVID-19 pandemic? How has it shaped the insurance market? And what will be the impact in 2021?
As history has shown, the insurance market doesn’t really get hit by a crisis as much as other industries do. In fact, we can even say that short and long-term winnings from the current crisis outweigh the losses. The logic is pretty simple – during lockdown people can’t physically go out, drive their cars, etc., so losses have decreased.
There is a slight exception regarding travelling, namely travel interruption insurance, but the overall number of losses is definitely more modest due to all the restrictions. Thanks to that we could, instead, see pretty good financial results and increase in insurers’ profits in short term. Although, a smaller number of losses has caused a fall in premiums. This has had a negative impact since the turnover of companies was cut down.
Due to the crisis, insurance providers have realised the need to reorganise their business processes. This, in turn, resulted in higher investments in technology to create opportunities for remote work and digitalise customer communication.
Where is the insurance market heading in 2021? What do you predict for the insurance industry as a whole?
It’s inherent for the insurance market to change really slow, nothing ground-braking will happen in a year. Though, the market will start focusing more on the policyholder and products will be designed around his life. The services will become customer-centric, so, in the future, customers wouldn’t need to think of buying a new policy or notifying their insurance provider of changed risk, when they move or travel somewhere. I love to bring the following example: my insurance provider should know when my daily route from home to work has changed and reassess my risk automatically; it shouldn’t be my responsibility to notify them.
If insurers had the same amount of information about us as Google and Facebook do, and they knew how to handle it effectively, it would be possible to offer better products already today.
Currently, insurance companies have so little information about their customers compared to tech and social media giants, like Google or Facebook. If insurers had the same amount of information and they knew how to handle it effectively, it would be possible to offer better products already today.
We are slowly moving towards reality, where we won’t have to fill in endless questionnaires to get a home insurance policy. I’m not sure how fast we will get there, but, eventually, we will. And that kind of market will be prevailed by those who have access to information.
We see the adoption of innovative technologies among market players. Can you explain how data-driven solutions, AI, and machine learning leverage insurance services?
AI has both positive and negative impacts on each sector. Insurance is a quite simple industry, and I think the kind of AI that could autonomously manage insurance, already exists by technological capabilities. If the same amount of money that is being invested in AI in military or self-driving cars industry, would be invested in AI in insurance, the sector would already operate without human resources. Let’s be honest, a self-driving car is 100x more complex than running an insurance company.
If the same amount of money that is being invested in AI in military or self-driving cars industry, would be invested in AI in insurance, the sector would already operate without human resources.
Unfortunately, insurance is too marginal of a business to attract AI these days. Nevertheless, in 2, 10 or 15 years, AI will become more commercial, and we will see it being implemented in insurance. There is a serious possibility that the same could happen in insurance what has already happened in the technology sector – the world would have only one insurance provider like we have one Facebook. I mean, if you have the knowledge of how to run an insurance company with AI, one international unit could assess most risks better than any local UW. That’s when local insurance providers will lose their competitive edge. In the short term, this could reflect positively, since the prices will fall for many customers, but I’m not sure whether it will have a good impact in the long run.
Already today, AI can forecast where a traffic accident will happen, or will you vote for Trump or Biden. The same way, in 20 or 30 years, AI could predict the probability of a house catching fire or what our lifespan will exactly be. In that case, no insurance provider would want to take that risk, because it’s too determined.
If AI could foresee when exactly losses would occur, insurance would lose its point.
We must keep in mind that the more precise the risk assessment is, the less insurance maintains its core idea. The concept of insurance lies in the fact that we don’t know risks, nor can we predict accidents. If AI could foresee when exactly losses would occur, insurance would lose its point. So, we must be aware, because AI can have very dangerous effects on insurance, as it has on military industry or on democracy. So, we mustn’t look past these threats when discussing AI in insurance.
What will be the main challenges for insurers, MGAs, and brokers this year?
Basically, in order to succeed in insurance, you need to do two things great: sell efficiently and underwrite good risks. Of course, these two are sometimes in conflict. 2021 will definitely be a gamble considering risk assessment. E.g. casco UWs will have a challenge in their hands when defining casco prices – during lockdown, there will be no losses, since no one will be driving cars. But nobody knows what will happen in the next 12 months. Society is really uncertain when it comes to risks.
2021 will definitely be a gamble considering risk assessment.
The key to success in 2021 is simplifying the buying process for customers with the help of technology. We see many start-ups that have simplified the buying process of a specific product, e.g. home insurance, raising investments. In that sense, there’s a lot of copying of simple and user-centric insurance models, e.g. many countries have their own Lemonade.
The key to success in 2021 is simplifying the buying process for customers with the help of technology.
Traditional insurance companies have not succeeded in redesigning and simplifying products with their legacy solutions, which is why start-ups that show solid sales figures will continue to attract attention. Consumers are fed up with complicated processes, and since new and younger tech-savvy generation is taking over the market, the need for hassle-free products will prevail – insurers that are not able to provide this, will miss the train.
Stay tuned for the next part of the interview with Risto Rossar, where he will share ideas on the future of insurance products and distribution models, talk about investments and funding of insurtechs, as well as Insly’s goals for 2021.