Exclusive: ‘Igniting innovation’ – Hélène Stanway, AXA XL, Nigel Walsh, Deloitte and Tim Hardcastle, Instanda in “The Insurtech Magazine”

As a critical part of the financial system, insurers couldn’t but rise to the digital challenge posed by the pandemic. The crisis busted myths around ways of working, but where does the industry go from here? We put that question to three experts in the field: Hélène Stanway, Global Head of Technology Innovation at AXA XL, Deloitte partner Nigel Walsh, who leads on insurtech, and Tim Hardcastle, Co-founder and CEO of insurance
SaaS provider Instanda

Many would argue that the insurance industry has been fashionably late making its entrance to the innovation party – daunted by legacy systems and, until recently, content to fulfil its role as a ‘necessary evil’ with a captive audience it only really needs to engage with at onboarding and in the event of a claim. 

However, that’s rapidly changing, with COVID-19 forcing a re-evaluation of the possible, and the realisation that a more customer-centric approach will be essential to maintaining margins and market share in this industry, as in others.

A year of historic turmoil has, perhaps surprisingly, also been a transformational one for insurtech, with startup launches, game-changing innovation and impressive fundraisings that signal a seismic shift in the way insurance is done.

Key to this turnaround is automation, with McKinsey predicting that, by 2025, 25 per cent of the industry will be using automation to overcome the bottlenecks and manual processes around claims processing, underwriting, policy administration and customer service that have weighed it down for decades. Tools such as artificial intelligence (AI) and automatic data extraction to validate claims and identify fraud are emerging at pace.

More omnichannel services are also helping to improve customer experience through self-service portals where insurers and customers alike can find answers, execute transactions or make their claims. Smart contracts, powered by blockchain data sharing, are enabling quicker, more accurate risk decisions, and fairer pricing. And risk prediction and mitigation is an increasing focus, using Internet of Things (IoT) devices and apps to monitor, among other things, personal behaviour with an inventive combination of data gathering and gamification to reward healthy living, which has the meritorious effect of offsetting life and health insurance payouts.

When it comes to specific innovations over the past tumultuous year Ki is notable for being the first fully-digital, algorithmically-driven, follow-only Lloyds of London syndicate, developed by UK insurer Brit in collaboration with Google Cloud innovations, to enable brokers to place their follow capacity more quickly.

The global Chubb Studio platform, launched last autumn, is another. It gives the Swiss insurer’s partners digital access to its consumer finance products, streamlining how it distributes them worldwide while enabling its retail, ecommerce, airline, telecommunications, banking and fintech partners to tag its insurances onto their own products and services.

Among the top five global insurers, AXA used 2020 to bring its new Construction Ecosystem (CE) to market. It aims to simplify risk management in a highly  complex industry, where projects can be affected by anything from the weather to supply chain and site safety issues. Taking its lead from mapping apps showing satellite views, traffic volumes and nearby businesses, CE aims to offer a ‘digital ecosystem’ to deliver risk insights in real time, using data from its own collaborators, as well as  developing technologies for monitoring site conditions, worker behaviour and other factors.

AXA’s Digital Risk Engineer (DRE), another debut last year, enables companies to monitor the health of their buildings and assets using IoT devices
to capture information from connected systems such as energy, water (including sprinklers), heating, ventilation and air conditioning (HVAC), detecting anomalies in real time in order to intervene early and avoid or limit the severity of incidents and thereby claims, too.

Meanwhile, startups like American renter and homeowner insurance company, Lemonade, notched up phenomenal growth in 2020 – it hit the one million-customer milestone after just four years in business. Meanwhile, US small business commercial insurance provider and unicorn Next, and homeowner insurance vendor Hippo, raised hundreds of millions of dollars to be valued at between $1.5billion and $2billion. And this investor confidence is reflected even in the beleaguered travel sector, with tech-driven specialist travel insurance provider, Battleface, raising $12million in Series A funding from US venture capital firm Drive Capital, and French flight disruption travel insurance startup Koala raising $1.6million in seed funding led by Gateway.

Amidst all this excitement, we brought Hélène Stanway, global head of technology innovation at AXA XL, Deloitte partner Nigel Walsh, who leads on insurtech and disruptive technology within insurance for the firm, and Tim Hardcastle, co-founder and CEO of insurance software-as-a-service (SaaS) provider Instanda, together to talk about the key influences on the industry, and what the future might hold. 

Stanway’s job is to focus on IoT, ecosystems and AI, ‘making sure these technologies solve problems and are closely connected to business strategy’. Nigel Walsh describes his focus as helping clients ‘work out how they get the most from new technologies in traditionally legacy estates, to drive good things’. And Tim Hardcastle’s insurtech has been purpose-built to help organisations across 13 countries, including AXA, accelerate their digitisation plans.

All three agreed that COVID-19 has rocket-propelled transformation.

“The last five years have been pivotal in terms of the appetite, readiness and preparedness of companies to embrace and work with new technologies,” says Hardcastle. “We’ve seen an increasing trend towards AI, chatbots, robotics and analytics, and delivering value to insurance customers. When you slot COVID into that picture, there’s been a dramatic acceleration in the last six months around just the simple use of technology. Every chief executive of every insurance company around the world has had to get used to leading her or his teams virtually and this has been a real wake-up call.”

Stanway adds: “COVID has made people realise that the barriers they thought were there are not, it’s just about adaptation. At AXA, we haven’t missed a beat in terms of innovating and launching, and we’ve had some really proud moments, launching CE and DRE.”

But is this entrenched industry capable of delivering meaningful digital change?

“You’ve got to put it into context,” says Walsh. “We’re not talking about a transaction system that people engage with daily, like Spotify, Amazon or retail outlets. [Insurance is] something they engage with on acquisition, and hopefully never to claim. So, innovating a process that people don’t necessarily want to engage with on an ongoing basis isn’t normally front of mind to get spot on at the outset. That said, [the pandemic] has been a good accelerant. We didn’t have a choice, we had to get here for the wheels to keep turning because we are an inherent part of society.

“I guess my challenge to the industry would be, how could we have done better? And, importantly, how do we not go backwards from this point? How do we now leapfrog forward and say ‘what can we do to reimagine what we had in the first place, as opposed to just digitising it?’. That’s always been one of my worries: how do we not just take the old process, make it a bit quicker, faster, smarter, and that be seen as good enough? Which we see a lot in financial services.”

But there is a problem implementing that, says Hardcastle.

“Technology capabilities today are in excess of what the industry has capacity and capability to handle. The human element, the business change, the organisational change, the cultural change, the behavioural change, that’s needed to grab and take full advantage of what’s available, is the challenge the industry is grappling with,” he observes.

“The available technology is so ubiquitous, so cost-effective, and everything on the planet is going subscription-based so that we pay for what we consume. It’s a myriad of opportunity, but the issue is pointing it, directing it, organising it, getting the coalescence of the teams in working with it in the right way to create value for the customer.”

Walsh agrees: “There’s going to be a moment where the model of insurance switches to a subscription or recurring revenue-style bundle, that brings everything together and embeds it into the asset we’re protecting, whether it’s a journey, a physical property, a warehouse, a ship, or whatever. And that changes the narrative. Technology is there by default.”

The emphasis then will shift to ‘predict and prevent’, says Stanway, reducing the number of claims but making insurance even more valuable as ‘product sitting alongside service’. Culturally, though, that still requires a change in mindset to one where tech becomes an enabler of customer outcomes with every area of a business working with it as one team.

“It’s great to hear what AXA is doing because there’s a fundamental issue in many corporate IT functions, which is that they are partly about keeping the lights on, running all the big systems and infrastructure. And it’s tremendously difficult for any leader who’s responsible for keeping the lights on to fully engage in innovation, and bringing new technologies to bear for the organisation,” says Hardcastle.

Walsh believes ‘there’s a fundamental difference between those that see IT as a service provider and those that see technology as a business partner for getting to customer outcomes’.

“But where you have those two side-by-side, in the same tribe, or squad, or team, you get a much better outcome.

“We’ve seen an inordinate number of people just say ‘we can’t transform 300 years of legacy, at this speed, at the right price point’. This is where we see new platforms, like Instanda, coming together to reorchestrate and solve those problems, creating new opportunities from scratch, as opposed to saying ‘let’s spend lots of money transforming your legacy estate’.

“You can migrate later, if you want to. In fact, one of the beauties of the subscription market in particular is that you can migrate on a monthly or annual basis, and be off the old platform, at least in the general insurance space, in no time at all, which gives you a really unique opportunity to refresh the estate when you need to.”

Customer experience must be the driver, though, cautions Stanway.

“It starts with the data, rather than documents, and added service. We, as an industry, should be telling clients stuff about their risk that they don’t themselves know. The big tech wind of change that’s coming through is bringing personalisation. If we can find ways to create little moments that light someone up through telling them something they don’t know, that will generate loyalty and drive better, long-term margins.

“And when claims do happen, if you service them in an amazing way, you create loyalty for a long time. This is simple stuff that I don’t think the industry necessarily gets, because a lot of senior leaders have a more technical, underwriting mindset, but customer experience is a big opportunity.”

Collaboration will be the enabler for this. “[The industry] will become more ecosystem-based, bringing together multiple solutions to solve one or more problems,” continues Stanway. “Because, while we’ve got price comparisons and people want to shop around, they also want to go to one place with a holistic view of their risk and say ‘I want my property here, my cargo here, to buy this sensor device and access this data about what’s around me in terms of theft’.

“Organisations that make meaningful sense of the different data, will win because the client then gives complete transparency of their risk, and the insurer can make product and premium decisions accordingly.”

Hardcastle has seen that begin to play out already. “A South African bank we’re working with has built an ecosystem of services around owning a pet. That immersion, putting arms around the customer’s world – understanding the asset at risk, that people care about, and how to help them ensure they’re not ultimately suffering a loss – will lead to the industry needing enhanced capabilities, like real-time risk pricing. Given the data we’ve got at our disposal, that’s not an impossible task in the near-term.”

And there are other lessons to be learned from around the world, according to Walsh.

“If you look to Asia, or even India, where people were never insured or you didn’t have the same level of developed product that we see here in the West, they’ve quite quickly leapfrogged all the legacy we’ve got and gone straight to more modern products like microinsurance, with the likes of BIMA. They’re not adopting faster, they’ve just not taken the same path. They’ve seen what’s worked for us and what hasn’t, then developed products that are more fit for a modern age.”

He uses the example of microinsurance in agriculture to illustrate how the industry could migrate away from tradition.

“It allows you, for example, to plant a seed and, should there be no rain, automatically provides a claim through a parametric trigger.

“That sort of stuff is really exciting.”

This article was published in The Insurtech Magazine #05, Page 32-33