There are certain truths hidden in plain sight that occasionally demand a dusting-off and exposing to the light. Denis Kessler, the CEO who has worked miracles at SCOR, speaking last week to the London Insurance Institute did precisely that. For him all the transformation we are experiencing in the industry is down to one thing: modern technology. Barriers to market entry have crumbled because computer models now allow capital investors to replicate the skills that underwriters have honed over centuries. Due to global connectivity, the insurer no longer has more or better information than the customer; evaporating asymmetry adding to the pressure on insurers’ profit margin. That Kessler was addressing the London Market, seen as antiquated in many quarters unresponsive to change, added a frisson to his comments.
If the digital revolution gathers pace and continues to reshape the industry, as Kessler predicts, then to remain relevant, London has to urgently embrace and harness the power of technology. With such a patchy record on reforming process this seems a tall order. Perhaps, however, a part of the answer might ironically be very close to hand. Formed in 2010 and located less than one mile from Lloyd’s, ‘Tech City’ now comprises 1,300 digital companies clustered around the so-called silicon roundabout. Fast becoming a world centre for enterprise and innovation, crusty insurers might cast more than a wary eye northwards to what the bearded ones are up to in Shoreditch.
Last month UK Government Data Services and the Environmental Agency opened flood level data to over 200 developers and engineers meeting at the Google Campus for a daylong event ♯Floodhack. 16 teams then pitched their digital solutions to aid communities hit by the recent severe weather and floods to a Cabinet Office judging panel. As an exercise in collaboration between the public sector, big and small companies and start-ups, ♯Floodhack was impressive. Apps such as ‘FludBud’, ‘Don’t Panic’ and ‘MyState’ were amongst the shortlist selected, all reaching out to an insurance buying community, but without any input from insurers in their development. A wake-up call for sure.
In a knowledge-based industry, the physical proximity of talented people who can share ideas and emulate each other is a powerful dynamic. It is as true of Lloyd’s in EC3 as it is in Tech City, E1. If each community put aside their sartorial and hirsutal differences to co-venture genuinely inventive approaches to product development and customer experience, the outcomes could be exciting. Insurers need innovation and the digital masters want capital. This might be the sort of virtuous partnership to fend off the challenges Denis Kessler highlighted to his audience last week.
One thought on “On the Digital Revolution”
Good Post. Two points:
Information asymmetry hasn’t evaporated – it’s just as pervasive as ever. Lots of data only leaves you informed if you have the same analytical capabilties as the other party, which in insurance is rare.
The floodhack is interesting – shows that most innovation in insurance will be done in partnership with third parties, who will engage if the ‘trust climate’ is right. And absorbing innovation doesn’t just happen. It needs a corporate culture that encourages openness, critical thinking and diversity. That’s why a firm’s ethical culture, which connects qualities like those, matters. I’ve explored this from an insurer’s perspective in this blog – http://bit.ly/1jCSPGn