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How Technology Impacts the Insurance Sector - Raymond Kairouz

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How Technology Impacts the Insurance Sector - Raymond Kairouz

  1. 1. X. International Istanbul Insurance Conference 2018 – HowTechnology Impacts the Insurance Sector
  2. 2.  I- Introduction:  I-1) Introduction to Chedid Re  II-2) Introduction aboutTechnology in the Insurance Sector  II- GlobalTrends ofTechnology in the Industry :  II-1) Blockchain and Insurance  II-2)Artificial Intelligence and Insurance  II-3) Internet ofThings IOT  II-4) Insurance Distribution Channels  II-5)AI v/s Human  III- Pros and Cons ofTechnology  IV- Regulation inTechnology  V- Conclusion Structure
  3. 3. • A Company of Chedid Capital • Founded 20 years ago • Is today considered the top reinsurance Broker in the MENA region. • We are registered and licensed Lloyds brokers. • Over 30 binders and facilities across all lines, some of which are exclusive to us in the region. • Chedid Re is headquartered in Lebanon, the Regional office in Dubai and has offices in London, Cyprus, Casablanca and Riyadh, from these offices. • We cover almost 45 countries in the Middle-East,Africa and part of Europe and we proudly serve around 400 insurance companies across those regions. • Chedid Re has built its reputation over the years on few main pillars: perfect synergy of customer centricity, solid management expertise, powerful partnerships and innovative products. I-1) Introduction: about Chedid Re
  4. 4. • The whole Group is fueled by the drive to continuously implement the highest standards of technology to better service our clients and reinforce the cooperation with our insurers and reinsurers. • Chedid Re engages technology though the following fundamental standards across all branches: 1. Advanced Customer Relation Management(CRM) platform – Realtime Data 2. Digital Quality Control Matrix 3. Decentralized Intranet platform 4. Cutting-edge Performance Enhancing Software 5. OnlineTraining and Work Library platforms 6. Claims Data Software (GAP) 7. Remote Emergency Response (RER) 8. Security assessments is conducted periodically through a high advanced sandboxing technology I-1) Introduction: Chedid Re andTechnology
  5. 5. Insurtech
  6. 6. • “Insurtech” refers to the use of technology innovations designed to improve efficiency and accuracy for both insurers and insureds. • The belief driving insurtech companies is that the insurance industry is ripe for innovation and disruption. • Insurtech is expected to lower and streamline the operational costs of the industry • Which in turn will benefit the insured with lower premiums and wider coverage. • Over $5 billion invested into insurance tech start-ups globally, and more than 10 times that in insurance tech spend. • Some megafunding rounds – such as the ones from Zhong An ($930 million),Zenefits ($500 million), or Oscar ($400 million) – have made headlines.The launch of US-based Lemonade andTrov as well. I-2) Introduction:Technology in the Insurance Sector
  7. 7. I- 2) Introduction:Technology in the Insurance Sector; some numbers Outside the US the distribution is much more dispersed.The number two investment destination, the UK.
  8. 8. I-2) Introduction:Technology in the Insurance Sector; some numbers
  9. 9. I-2) Introduction:Technology in the Insurance Sector; some numbers • Talent is a key issue for insurers, with 87% having trouble in hiring and, even more so, retaining people with the right skillset to innovate. • Insurers can attract talent by acquiring from startups, partnering with innovators, and fostering internal talent. • Further concern regards new data privacy rules, such as the General Data Protection Regulation (GDPR), and the possible conflict with innovative digital strategies.
  10. 10. I-2) Introduction:Technology in the Insurance Sector; some numbers The top ten InsurTech deals in 2017 raised $974m, half of the year’s total funding
  11. 11. I-2) Introduction:Technology in the Insurance Sector; some numbers Over $1.2bn was raised in the top 10 InsurTech deals in H1 2018
  12. 12. I-2) Introduction:Technology in the Insurance Sector; some numbers InsurTech funding on track for a record-breaking 2018 with $1.7bn in capital raised in the first half
  13. 13. II-1) Blockchain and Insurance
  14. 14. II-1) Blockchain and Insurance
  15. 15. II-1) Blockchain and Insurance  Blockchain is a protocol for the exchange of values/data over the internet which does not require an intermediary; to establish an ever-lengthening chain of blocks of data.  Blockchain Applications in Insurance will improve:  Customer Experience and Reduction of OperatingCosts  Data Entry  IdentityVerification  Premium Computation  RiskAssessment  Frauds Prevention  Property & casualty (P&C) insurance: .  Health insurance: Through the blockchain, medical records can be cryptographically secured and shared between health providers, increasing interoperability in the health insurance ecosystem.  Reinsurance: By securing reinsurance contracts on the blockchain through smart contracts, the blockchain can simplify the flow of information and payments between insurers and reinsurers.  A study shows that through blockchain 15% to 25% of reinsurance expense ratios which are typically 5%-10% of premiums could be removed (PwC, 2016)
  16. 16. • One of the important implications of blockchain are smart contracts: A contract is a paper agreement between two or more parties that is enforceable by law; a smart contract is an agreement between two or more parties that lives on a blockchain and is enforceable by code. • A contract which is capable of executing or enforcing itself.Automatically executed when a condition is met. • These would enable people to trade using the internet, without the need for a large centralized authority. • The limitations are that these contracts are currently not known to react to unanticipated events. • They often run on blockchains or distributed ledger technology (DLT). Eg Bitcoin II-1) Blockchain and Insurance
  17. 17. II-1) Blockchain and Insurance How Smart Contracts Work
  18. 18.  Example of Blockchain in Insurance: Blockchain Insurance Industry Initiative (B3i): a group established in 2016 between a vast array of insurers and reinsurers to discover the potential of integrating blockchain in the insurance industry; with a primary goal of improving the efficiency of the insurance and reinsurance industry by speeding up processes, enhancing security, and cutting costs down. II-1) Blockchain and Insurance
  19. 19. II-2)Artificial Intelligence and Insurance
  20. 20.  Algorithms used in Machine Learning (ML) are classified into three different types: a- Supervised: the algorithm is given examples to learn from, examples of the inputs and outputs are given to the system for it to learn how the right outputs should be, and then the algorithm produces the desired output based on our inputs. b- Unsupervised: the algorithm is left to independently discover specific patterns based on bulky input we feed the system, classify them and produce a beneficial output II-2)Artificial Intelligence and Insurance
  21. 21. • How are we going to accept robots in our lives? Being able to communicate with them will initiate new relationships and understandings known to us. • Voice command is the key to an app-less world. • Natural Language Processing: machines are taught to analyze natural language or human dialect. Its application in the insurance industry would be in the following forms: A. Clients chatbots: discussion-like interfaces where the customer would ask questions and the machine would automatically answer.This would help insurance companies enhance their customer service and reduce expenditures. B. Claim processing II-2)Artificial Intelligence and Insurance
  22. 22. II-2)Artificial Intelligence and Insurance 4 Ways AI Will ChangeThe Insurance Industry: 1. Claims: The average cycle time is 10-15 days. With AI-powered insurance claims, this average cycle time is reduced to 2-3 days. Reduced cycle time isn't the only benefit to automating insurance claims. Fraudulent claims cost the insurance industry more than $40 billion a year. 2. Marketing: With the integration of AI, insurance companies have an opportunity to use information collected from machine learning to develop marketing campaigns. Marketing campaigns based on human emotion that create a more meaningful message. Eg: USAA usesWatson for its virtual assistant. Her name is Eva. Customers will ask Eva questions about their policies. Based on these questions customers ask Eva, Eva will follow-up with automated email campaigns that offer personalized suggestions
  23. 23. II-2)Artificial Intelligence and Insurance 3. Underwriting: Insurance companies are developing their own AI tools to analyze risk.This will impact the amount of insurance, and the type of insurance people buy. Eg: FitSense is an example of an AI platform that collects customers health data from multiple devices. Meaning, FitSense's machine learning agent will comb through your LinkedIn profile, Facebook posts, tweets, etc. to provide data that assesses your risk. 4. Data: Gaining customer data isn’t a new AI trend for insurance companies, it’s expansion. It takes consumer insights to make their experiences better. This data gathered by AI may even improve customer behavior and experience. Every day nine people are killed and more than 1,000 injured in crashes that are reported to involve a distracted driver.This statistic above is why State Farm created “Distracted Driving Detection challenge”.
  24. 24. II-3) Internet ofThings IoT
  25. 25. II-3) Internet ofThings IoT • A decade ago there were about 500 million devices connected to the Internet.Today, there are 10 to 20 billion. In five years, there could be 40 to 50 billion. • Nowadays Connecting regular internet-isolated objects to the internet is easier and cheaper • This allows the devices to: • Generate data from their surroundings • Transmit the data autonomously to users
  26. 26. II-3) Internet ofThings IoT • This will affect the Insurance Industry on the following levels: A. Pricing:As sensors are becoming smaller in size and cheaper, they will soon be placed in various devices; helping reducing information costs by almost 60% B. Distribution C. Underwriting D. Claims management
  27. 27. II-3) Internet ofThings IoT
  28. 28. II-3) Internet ofThings IoT 4 real-life examples of IoT in insurance: • Progressive Snapshot: Progressive, the US car insurer, is using its usage-based-insurance (UBI) telematics program to monitor how its car insurance customers drive.To date, the company has made over 1.7 trillion driver observations and says that its prices are based on “how you actually drive, rather than just on traditional factors like where you live and what kind of car you have.” • Liberty Mutual: partnered with Google’s Nest to implement connected smoke alarms in the home, enabling customers to reduce the risk of a fire, and in turn reduce their home insurance premiums. • Erie Insurance: using drones for property inspections in the event of a damage claim. • Beam Digital: provides a smart toothbrush to every customer and monitors their oral health, as well as using this information to support a dental insurance plan.
  29. 29. III- Pros and Cons ofTechnology • Advantages ofTechnology in the Insurance Sector: 1. Generating new business: online or digital marketing processes can aid insurance providers to reach out directly to the vast magnitude of online buyers. It is much easier to target new buyer audiences online rather than reaching out to them physically. 2. Reducing customer acquisition cost. 3. Reduced operational overheads: Process automation can go a long way in reducing workforce and employee cost by substituting humans for technology enabled processes and devices. 4. Making policy underwriting easier and quicker: policies are clearly explained on portals and interested visitors can communicate directly with the agents using online chats tools and video conferencing facilities. 5. Target ideal customers to enhance brand value: As per market research the cost of branding activities in the U.S. rose to 5.5 percent in 2015 to reach more than $560 billion. It gives an idea how much important branding is.The biggest advantage is you can target prime customers very effectively using marketing insights facilities and analytics tools.
  30. 30. III- Pros and Cons ofTechnology • Advantages ofTechnology in the Insurance Sector: 6. Achieve higher ROI:Technology helps to drastically reduce working capital and offer a tremendous opportunity for insurance companies to churn out higher profit margins. 7. Lower Insurance rates. 8. Fraud Prevention: through Digital Signature Technology and Data analytics. 9. Lower underwriting cost:The number of internet-connected devices and sensors is projected to reach 50 billion by 2020, which will have a significant impact on the availability of real-time information that insurers can use for better pricing/underwriting. 10. Billing efficiency: automated systems can inform and remind customers of approaching due dates for premiums. 11. Specialized insurance: Machine learning is vitally important here. It has the capability to learn and analyze billions of patterns and identify suitable underwriting clauses as well as identify specific customized plans for the customers based on the data provided.
  31. 31. III- Pros and Cons ofTechnology • Downfalls of relying solely onTechnology: 1. One thing that robotics cannot provide v/s humans interaction in long-term relations which nourish trust and understanding between a policyholder and financial advisor/broker/agent. 2. The underlying algorithm are not transparent, and biases could be built in, both unintentionally and intentionally, leading to inappropriate advice. 3. Implementation Costs Upfront: the goal of new technologies is to make business more efficient. In the end, the efficiency should be cost-effective; however their initial implementation requires time and money. Additional employee training in required sometimes which could lead to a decline in customer service. 4. Security Risks: cyberspace has become a great model for illegal activity including hacking, hijacking and stealing company or client data 5. Employee Concerns: innovative technology may reduce the dependence on a workforce, the flip side is that employees lose jobs in the process. 6. Increasing Regulations: Protecting Data and using it ethically are the top priority of regulators.The Insurance Industry is more sensitive as others as it collects confidential information from clients.
  32. 32. IV- Regulation inTechnology • Regulatory changes are required to be clearly written out, adapted to technology, implemented and monitored regularly in order to ensure strict compliance. • This is ultimately the biggest challenge facing insurtech companies today such as customer privacy laws as well as others which they will have to deal with on a national and international level.
  33. 33. IV- Regulation inTechnology What is Regtech: • It is the technology that brings together of 3 key elements: 1. Regulation 2. Data 3. People • This is implemented in order to enable firms to achieve a culture of compliance promptly in the absence of heavy human manual capital. • It is becoming more and more crucial as levels of regulation rise and focus on data and reporting increases, allowing cost saving while preventing non compliance and fines. • We can expect this disruption to make regulation highly data acquisitive and to involve the use of real- time information, and the incorporation of algorithms and analytics. • JP Morgan has executed COIN which reviews contracts to ensure regulatory compliance and reduced 360,000 hours of human effort in to less than 1 minute reviewing the same contracts.
  34. 34. IV- Conclusion
  35. 35. Thank you