Pegasystems European Insurance director Tony Tarquini on how the insurance industry must change its mindset or find itself relegated to the fringes by the innovators and disrupters

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I am biased. I want to see UK general insurance (UKGI) thrive and energetically take its expertise and passion worldwide, specifically, to those vibrantly growing, emerging markets that hold the key to profitable, sustainable growth.

But I am not blind. UKGI has a big problem. Others are being allowed to seize control of data-enabled distribution channels so crucial to success in today’s world. Learning how to win is something we ALL have to do. And despite a career dedicated to the insurance sector, I know I do not have the answers. At best, I have identified the right questions to ask about inevitable market innovations that will disrupt the market.

I do believe we are about to enter an Internet of Things (IoT) War, that it is absolutely possible for UKGI to win that War, but there is absolutely no time to lose.

Why ‘The IoT War?’

The IoT is a new, inescapable world of real-time understanding and visibility of risks being enabled now in insurance by fast-moving forward leaps in technology. These technologies link customers to the potential insight and actions of insurers through data via a six-layer stack:

1. Policyholders

2. Asset builder/owner (in this case, monitor/device manufacturers)

3. Data ownership

4. Analytics

5. Decisioning

6. Action

Traditionally, insurers have controlled (even owned) this entire stack end-to-end, directing action and reaction through solid, long-term experience. The beauty of IoT is that it creates a whole new set of complex questions, demands, threats and opportunities for all six categories. And, insurance, you are no longer the prime mover. You are by far not the only player and you may turn out to be the least important. Your stiff competition – those at risk of cutting you out of the value chain – include the FAANG companies (Facebook, Amazon, Apple, Netflix, Google) and global telcos. In my view, UKGI has already lost the war in two of these six areas, namely the monitor/device manufacturers, and data ownership. The remaining four battlegrounds MUST be won for insurers to remain relevant beyond being just claims payers.

So, how to win this war? - There are three key calls to action!

1. Forget Risk Mitigation and obsess about Risk Prevention!

The IoT changes everything: real-time data (or near enough with a 90 secs lag) means you can pinpoint and predict the who, where, when, why and how of risks and facilitate the fix ahead of time. This takes insurance to a completely new level of value to individuals, businesses and society at large. Think about the very best outcomes to date for young drivers from telematics (saving lives and driving mutual value) … attach rocket boosters, and apply it to EVERY risk.

2. Create NEW value added services from a constant dataflow … or watch others do it

Imagine a world where a marine fleet has an organised web of monitoring devices installed and controlled by the manufacturer. Updated every 90 seconds and facilitated by blockchain technologies, the data is transmitted and consolidated by a global telco, and used for day-to-day risk management by capital providers as a new form of self-insurance. Where does insurance fit into that world? That scenario might see Lloyd’s as an insurer of last resort, maybe not even a primary insurer, or even out of the picture altogether. This is not science fiction. The monitors embedded in farm machinery are a massive source of data for customers, operators and dealers, which, when combined with weather, soil and other data sources, is revolutionising productivity and efficiency in agriculture. But so far, this is not being used in any insurance guise, and certainly not by insurers. Why not?

3. Prioritise two-way customer visibility

Pega research tells us that just 4% of Insurers have the capacity to see and engage with their customers in omni-channel ie have a single customer view of all the possible routes through which customers engage. This means that 96% of insurers have separate, individual policyholders NOT customers. Until this changes, insurance cannot win the IoT War. This is NOT about Big data warehousing, although clearly there are enabling technology issues. It is absolutely about using real-time analysis and decision making to be with your customer 24/7, to understand, to stand guard for them and to apply empathy. Right now this means excellence in mobile, messaging and social media. That is where the TWO-WAY aspect comes into play.

This all adds up to changing the way we look at the world, and our place in it.

This is a personal battle-cry to create a real shift in mindset, informed by a better understanding of what is at stake, emboldened by actionable priorities, and energised by the conviction that if UKGI wins the IoT war, this would truly be the best thing for our customers.