Everything you need to know about the insurance industry’s major – and essential – transformation
Members of our team travel across Canada and the United States to attend large-scale technology shows, some of which are related to the insurance industry. They noticed 5 recurring questions people had about Insurtech.
Here are the answers from our President, Jean-Sébastien Guy.
What are some opportunities for innovation in Insurtech?
Companies like Lemonade and Hippo not only offer insurance coverage in just a few clicks, but they can also process a claim in seconds (3 to be exact!). This includes verification of coverage, about 15 anti-fraud algorithms, bank transfers and follow-up with the policyholder to inform him/her that the claim is complete.
It’s no longer a question of opportunity, but one of necessity!
What are the biggest challenges of switching to and adopting Insurtech in Quebec and Canada?
Besides the classic “historically rigid, results-based business model and industry regulations”, we see the challenges as:
- Obsolescence of technologies used by traditional insurers
- Lack of qualified human resources
- Easy access to high-quality, complete and up-to-date data
Despite the fact that companies say they are aware of the challenge, in many cases the gap between their current situation and innovative technologies like blockchains and AI is so great that companies are paralyzed by the scope of the investment.
Especially in a market like Quebec with a low unemployment rate, which could be problematic, companies are snapping up quality resources.
In the context of AI, Insurtech, and particularly Internet sales, this is probably the biggest challenge. Unlike the United States, Canada lags behind in data accessibility, whether free or for sale.
Many initiatives are not achievable due to lack of data, or simply because the data is too expensive and offers no return on investment.
Concretely, where do you see opportunities for applying blockchain in Insurtech?
In many cases, blockchain will be replacing or improving existing business processes, and in other situations making innovations possible. At Korem, we focus on the “geolocation” aspect, which is already part of almost all interactions between insurers and policyholders.
Although there are very few concrete client cases at the moment due to the lack of maturity of the protocol and the current market’s low adoption rate, the fact remains that the insurance industry’s need for “localization” will not disappear with the arrival of blockchains. To the contrary, it will accelerate and become part of all business processes, meaning that there are many opportunities!
In this sense, we have seen the “proof of location” concept appear in blockchains. Several start-ups such as Platinio, XYO and FOAM are designing protocols and APIs to provide a certified and immutable location within a blockchain.
These protocols are generally independent of the GPS/GNSS-based latitude/longitude coordinate system, relying rather on other more accurate and secure geolocation methods, such as Bluetooth or low frequency connections.
However, blockchain comes with its share of uncertainties right now: everywhere in the world, energy producers are trying to control the meteoric growth of data mining companies. Hydro-Québec has already considered increasing its rates for data mining companies. Quantum computers could also be used to decipher blockchain encryption mechanisms in seconds, which would greatly reduce their added value.
How can insurers respond to the upheavals the Internet has brought about: mobile first, AI first, soon maybe blockchain first?
We are lucky to be evolving in a market segment that experienced the same upheavals 10 or 15 years ago when Google democratized geospatial to accelerate its integration into business.
A survey conducted by Insurance Nexus with 250 insurers operating in Canada shows that almost half (48%) of them are starting to see or are already seeing a good return on their investment in artificial intelligence. On the other hand, 24% of the companies surveyed say they do not yet see any ROI, and 16% do not believe they will get an ROI within the next two years.
In terms of AI, it’s quite simple: without data, there is no artificial intelligence or machine learning. Global IT giants (Google, IBM, Microsoft, etc.) already maintain a wide variety of technological solutions, but everyone is looking for data. “Data is the new bacon”!
We have entered the era of data monetization. Companies are looking to leverage their corporate data by redistributing it as standardized data sets.
Korem is already contributing to the AI movement, and this contribution will accelerate in the coming years with the largest portfolio of data on the market! This is all made possible by our ecosystem of strategic partnerships with more than 20 of the most prestigious suppliers in the industry, such as Pitney Bowes, HERE and Google.
What advice would you give to large companies as they face the Insurtech transformation and learn to collaborate with start-ups?
First, accept that we can’t be good at everything.
An insurance company primarily manages risk and customer relationships. Alex Veilleux, formerly of Desjardins, said that their role “is not to find the best microchip supplier in Asia.” We have to agree to form partnerships and surround ourselves with external experts specialized in their respective fields.
Second, realize that Quebec is full of innovative businesses and start-ups. No need to go to California, China or Bordeaux to find “THE” next young company that’s going to change the world.
The answer is often in our own backyard: it’s simply a question of taking a look at local “products”.