Insurance Innovation Will be Shaped by Regulators

It’s no secret: Innovators and regulators often clash. But both are needed to help enable a dynamic, consumer-friendly property/casualty industry in the future, insurance and InsurTech industry experts said recently.

“There will be more innovation and empowerment of the consumer, but [the future] also might generate, unfortunately, traditional regulations,” Nevada Insurance Commissioner Barbara Richardson predicted during a panel discussion at the 2019 InsureTech Connect Conference, held Sept. 23-25 in Las Vegas. “We still have traditional consumers who aren’t ready to make a move.”

Richardson said that regulation can and will help determine where innovation can fit into the insurance landscape. It will also enable carriers, InsurTechs and consumers to enjoy the fruits of innovation in the best possible way, she added.

“We are trying to see where openings are so we can help steer and guide people to be considering other ideas,” Richardson noted.

Brian Gaab, managing principal for strategy and innovation at CSAA Insurance Group, said that regulation is appropriate for InsurTechs and other “innovation houses” as well, as soon as possible in the development of new products and services.

“We have a common goal,” Gaab said. “We want to protect people and we want to bring insurance to more people who need it.”

Turning to Richardson, Gaab noted that she and other regulators also “want to make sure everyone is getting insurance in a fair way and what they need.”

Andrew Robinson, Co-CEO of Groundspeed Analytics, a data science and AI company that serves commercial P/C insurance carriers, brokers and MGAs, said that working with regulators has been a positive experience so far, particularly in recent months.

“I find that the industry tone around this is very different than even 24 months ago,” he said.

Gaab predicted that the future insurance environment will need “more regulation” than exists right now, as technology invades all parts of life, from the underwriting process to ridesharing and more.

“The insurance industry hopefully will be proactive and not reactive to broader economy changes,” he said.

The panel covered a number of other topics, including:

• Partnerships. Kassie Bryan, head of Solutions, P&C Americas for Swiss Re, reaffirmed a growing insurance industry practice of partnering with InsurTechs in order to access innovative technology and approaches.

“There are fantastic opportunities for partnerships,” Bryan said. “One of the keys is recognizing there is room for innovation across the entire insurance value chain and each of the companies here [at InsureTech Connect] brings something to it.”

Insurers in the past have been slow to innovate, however, and Bryan said Swiss Re is trying to approach the idea differently.

“We recognize we want to be faster and want to partner with new companies,” she said.

Speed isn’t everything, however, Richardson cautioned.

“You want to pick your partners wisely,” she said, adding that once partnerships are formed, both sides matter to regulators.

“Established carriers have a tendency to want to be the front man with insurance regulators,” Richardson explained. “We want to hear from innovators too.”

• Future trends. Guy Fraker, chief innovation officer for Insurance Thought Leadership, said he sees the industry heading into new directions that are far less dependent on underwriting.

The industry, he said, is “moving away from writing and recovery and toward prevention and prediction.” Part of that includes a shift to “real-time underwriting” enabled by technology, Fraker said, though the shift makes traditional underwriters nervous.

“It is a shift that is just inevitable,” he added.

• Generation Z. Some members of the panel argued that older carriers, or “incumbents,” will remain at least partially relevant to millennials and Generation Z, the generation that follows.

“It is going to depend,” Gabb said. “Some of them will; some of them won’t. I don’t know if it is necessarily a generational thing, as opposed to an evolution of technology and the way consumers [view] insurance.”

He noted, for example, that younger customers will likely be drawn more to covering individual items rather than traditional, broader coverage sought by older customers and provided by traditional carriers.

Richardson said she still sees a place for old-style carriers, in part because of their trustworthiness compared to some potentially suspicious online options.

“I just had a friend who said ‘I found this great online homeowners protection and saved 75 percent,'” Richardson recalled. There was one catch: It was a scam.

The friend, she said, lost thousands of dollars because of the bogus online business. Online insurers, she said, will need to ensure integrity the way that older carriers do in order to stand out from the suspicious pitches.

“At some point there has to be a crossover to protect consumers at the same time,” she said.