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Marking my 2016 homework and looking forward, my 2017 InsurTech year ahead.

It's that time of year to reflect on the year that just passed us by in a what feels like a flash, mark my predictions from last year and throw some light on what I see 2017 holds in store for us all.

In my post from this time last year (here) - I made a number of predictions, I wanted to recap on how I did. Feel free to jump in and see how close to the mark I was and share your perspectives.

Reviewing 2016 - how did I do?

1. FinTech and InsurTech.  We have seen some heavyweight investment (more so in the USA and Asia) and no major failures to my knowledge. Trending up. Marks 1.

2. Evolution of IoT. Evolution here is continuing, but not at the pace I expected. New firms such as Concirrus have sprung up with some great examples of managing & leveraging the ecosystem, plus many others of course. More below. Marks 1

3. Digital & Data.  Progress, yes, pace and traction ahead of what's expected, not in my view. yet, but it feels like it's matured for sure. Marks 1.

4. M&A continue, but will slow. I think this has slowed this year, with the latter half the year focused on Brexit and the US Election in two of the three major regions, now with folks working out where that leaves FinTech/InsurTech. Marks 1.

5. Will the CDO Survive? In short, Yes. No sign of my Chief Customer Officers yet! (although after writing this, I came across 3 Chief Customer Officers, so it's a start). Have you ever asked an insurance company 'who owns the customer' or multiple people inside the insurer this question? That means for me we will still be product centric rather than customer centric. Marks 0.

6. New Business Models.  Lots of talk in this area, including here at Deloitte in our Turbulence Ahead report. We identify four business models for the future, These are 1) Individualisation of Insurance, 2) Off-the-shelf Insurance, 3) Insurance as Utilities and finally 4) Insurance as Portfolio. They will take longer for this to materialise, but without doubt are coming. See my colleague Emma Logan describe these hereMarks 1.

7. What we buy & sell. We are still in talking mode, although the ideas here are evolving rapidly. Expect an all risks policy in Q2 2017. Marks 0.

8. Cyber is the new digital. An increase in the number of products and players, but still no personal cyber policy. I expect that in 2017 still. Marks 1.

9. Partnerships & Bundling.  In short, Yes. Marks 1.

So in summary, I'm marking this as 7/9 or 78% - good effort, but my I may have been more ambitious than the pace I expected or hoped for.

Moving into 2017

Re-reading the above, I still feel they are all valid and will continue to push forward, be it the end of the CDO, the birth of personal Cyber or an All Risks Policy, I have been involved in enough conversations over the last 12 months to say these are very real, some closer to seeing the light of day than others. Moving into 2017, here's my Top 10 trends to watch:

  1. Speed. Almost all conversations start with we are not moving quickly enough. Both from a transformation and modernising the legacy estates through to quite simply getting products to market quicker. No longer can we wait 6 months to launch new or updated product. We know it can be dome almost in near time. As an example, look at those who managed to capitalise on Pokemon Go insurance cover, not the cover itself but the speed at which it could launch and capitalise on trend (you could easily argue that the cost of the policy it wouldn't make any difference to the business, but the point here is speed, not value). We will move from fast walking, to jogging and sprinting. Caution, this is still a marathon and there is a long way to go still. In fact, as Rick Huckstep wrote recently, the sheer speed at which this market has grown in the last 21 months is part of the challenge and attraction.
  2. AI, Cognitive & Machine Learning. Artificial intelligence has been long banded around as a material disruptor. On the back of collecting/orchestrating the data - it's critical to drive material insight and intelligence from this and allow organisations, brokers and consumers alike to action subsequent decisions. In 2017, AI comes of age with some impressive examples including Voice. In 2016, we saw Amazon's Echo and Google Home product launch along with Insurers already trialling it, see here for Liberty Mutual's example. Imagine asking freely, 'am I covered for? or 'what's the status of my claim' Adding this skill to the mix will likely be table stakes. In addition, AI will augment other solutions to drive value, e.g. Robotic Process Automation which I also wrote about here. All this still boils down to getting a (better) grip on our amazing data we have already whilst in parallel leveraging the vast open data sets available to us.
  3. Line of Business focus shift. The InsurTech world will make a definitive shift from all the wonderful personal lines examples to SME (the next obvious candidate) to more speciality and complex commercial examples. Will Thorne of the Channel Syndicate wrote recently a great piece on this too in November, here. Whilst the challenges are harder and more complex, I believe the benefits are greater once we get to them. We will unlock the first few here in 2017.
  4. Believers. The market has polarised somewhat, those that believe it and are pushing hard, and those that don't (or have a different focus and near term objectives). This ranges from those who worry about the next 90 days, 1/2 year results to those that are actively looking to cannibalise their business and investing £100's of millions to find the most efficient way to do this. Here there is no right or wrong, with hundreds of organisations strewn across the path from each polar opposite. I still believe that more will move to the cannibalise route as the first carriers start to unlock material value in 2017, including continued startup acquisition. Oliver Bate (Allianz) had some interesting and positive perspectives on this during their investor day in November, see their presentation here.
  5. Scale & profitability. Over the last 12 - 18 months, I have seen some great startup organisations, internal innovation & disruption teams, VC's and more across the globe. Now is the time to work out how we industrialise and scale these. This is the very same challenge that the banking & FinTech community are going through. If you are an insurance company with 30m or 80m global customers, should I be worried about startup X with 10,000 or 100,000 customers, and if they do manage to scale - can they do so profitability. It reminds me of a recent article about how unprofitable Uber is (here) but with millions of engaged customers, they have our attention now. Profitability will become front and centre. In fact, Andrew Rear over at Munich Re Digital Partners put together a good post on what they look for and why he and the team chose the 6 they did, it's here and well worth a read.
  6. Orchestration. With all of these startups in InsurTech now, we will quickly need to understand where and what role the InsurTech plays. Are they are platform play, end product play, point disruptor or more. Regardless, given the volume and velocity of data generation, the importance of both API connectivity and the ability to orchestrate these will increase dramatically. Again for me, table stakes.
  7. External Disruptors. In our Turbulence Ahead The future of General Insurance report released earlier this year, we identify 6 key external disruptors - that are happening regardless of the Insurance Industry. These are 1) The Sharing Economy, 2) Self Driving Cars & ADAS, 3) Internet of Things, 4) Social & Big Data, 5) Machine Learning & Predictive Analytics & 6) Distributed Ledger Technology. I say regardless, as if I shared the automotive or utilities report, these external factors could equally have as much of an impact. The key for me within Insurance is to identify what role we will play. I believe we will firmly continue to be the partner of choice for many of these given our very societal and necessary position in the global economy.
  8. Micro Insurance. What I mean specifically here is the growth of micro policies, covering specific risks for specific times. Whereas we typically see annual policies 1.1 policies per customer, we will see 8-10 micro policies covering a shorter period of time (episodic or usage based insurance) as per our business models described in the Turbulence Report above. This will be true for all lines of business. We have already seen some great launches in this space including Trov, who have partnered with Munich Re in the USA, AXA here in the UK and SunCorp in Australia. So global access through partnering with established players and a new way to market to the next generation. Whilst we switch this on manually by swiping left and right, given some of the external disruptors and location based services, this will be very much automatic going forward. Insurers will need to find new ways to orchestrate, partner and find value to bring to clients from these. It wont just be one, it will be many they orchestrate to deliver clients everything they need, especially exciting if you are a composite insurer or working in within the gig economy.
  9. Blockchain & DLT. I almost didn't include blockchain specifically here, however two factors have led me to include this for the first time. 1. The number of requests we are now seeing in the market for both specific solutions here and more education and use cases and 2) the fact that 9 of the 18 startups in the FCA's new Sandbox are Blockchain related. In 2016, we saw lots of PoC's examples, trials and the first live insurance product on the blockchain, see here for more information on FlightDelay. Some use cases are more developed than others, some markets more suitable that others (still looking for good examples in personal lines), so I believe this will evolve in 2017, but no scale breakthroughs. However, along with the World Economic Forum, we firmly believe that 'The most imminent effects of disruption will be felt in the banking sector; however, the greatest impact of disruption is likely to be felt in the insurance sector'. Personally, we still must ask and challenge with Why Blockchain, just because you could use it? It needs to be the right solution for the right business problem. Horizontal use cases such as Digital Identity or Payments offer compelling use cases that can easily be applied within Insurance. Blockchain in many ways for me feels very much more like an Infrastructure play in the same way we would do core systems transformation, eg Policy, Claims, Billing, Finance etc.
  10. Business as Usual, for now!. Partly related to #4 above, we still need to run our business. How we do this and how we setup for the future will be another challenge, not just from a technology perspective, but from a people and organisation design perspective, how we work, collaborate and more. What are the transition states from our current models to a new world in 12, 24, 36 months' time. Again something we are seeing a lot of today by forward thinking organisations that are putting plans in place now for their new organisations in years to come. This will become particularity more important as we embed, partner and acquire startups and move to new ways of engaging and working with customers.

Interestingly, there is now also so many accelerators, garages, hubs etc - that startups all now have a lot of choice and options as to where to incubate and grow their startup. A whole new challenge on the rush to Insurance Disruption.

Finally, two other observations that I wanted to share.

  1. China. Whilst I don't spend any time here, it's hard not to be in awe of what is going on, specifically the speed and scale at which things are happening. Looking back at the Zhong An interview with Bloomberg, China's first online insurer on what they are doing with Technology including blockchain, but importantly their scale - $8bn Market Cap in 2 years, 1.6bn policies sold, raising $934m and the only concern from the COO, Wayne Xu - we are not moving quick enough!. Worth a watch. Step away from this and look further to whats happening with disruption in general with Alipay and others from the BAT (Chinas equivalent of GAFA - BaiduAlibaba and Tencent) group is simply amazing. There's a good FT article here worth reading on Tencent, the killer App Factory and the sheer speed and scale of disruption.
  2. Community. The global InsurTech (and FinTech) community is an amazing group of people from around the world that have come together across border and time zone to further challenge and develop the market. Whether you look at London's InsTech London from Paolo and Robin to the Global InsurTech community, Each geography has its own unique features, mature players, startups, labs, accelerators, regulators and of course independent challenges. We don't always see eye to eye which makes it all that more rewarding as your challenged from industry veterans and outside in thinking entrepreneurs. This years InsureTech Connect in Las Vegas with over 1,600 people was truly amazing to see. It has clearly moved far beyond the small isolated hive of activity with varying levels of maturity to a globally recognised movement. It was great to meet and see so many carriers, startups, VC's, regulators and partners all in the same room looking to further the conversation and debate around Insurance and InsurTech. This community will no doubt continue to grow at pace as we look for InsurTech successes and I look forward to seeing how the 2017 discussion, debate and collaboration continues.

As always, I look forward to your feedback and views here too! What I have I missed? Here's to an exciting 2017!

Nigel Walsh @nigelwalsh



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