Liz Green: 

Good morning, good evening, good afternoon. And welcome to ICMIF‘s next webinar, leveraging Insurtech, the pursuit of growth and resilience through technological innovation. Thank you all for joining us today. We are extremely proud and delighted to be welcoming Andrew Johnston with us. Let me just spend a few moments introducing Andrew is head of Insurtech at Willis Re in the USA as part of Willis Re central management team. And he leads the research and engagement on the emerging markets specifically focused on the Insurtech side. He also has his PhD, so he’s our doctor on the call today. And an interesting fact about Andrew is that he has served as an expert on historical consultancy to the United Nations before this. So a very interesting person to have on the call. Andrew’s going to talk about the latest global states, of insurtech and his presentation is going to differentiate from others, because he’s going to be specifically looking at this from a mutual perspective. 

So we’ve got something really different here, and we’re just so proud to have you on the call. And for all of you that joined us over in Auckland, you might recognize some of the themes. So Andrew, thank you so much for joining us. We’re really looking forward to hearing your presentation.  

Andrew Johnston: 

Thank you very much indeed Liz. And hello everyone thank you for hosting me. Just a quick note, apologies for the background. I moved house over the weekend and I’m in the basement of our new house, which hasn’t been finished. I also am suffering a little bit from hay fever. So if I sneeze sincerest apologies. But as Liz mentioned I am the global head of Insurtech for Willis Re. The reinsurance broking arm of Willis Towers Watson. And I’m going to speak to you today about Insurtech, what it means as a phenomenon, and how it can be applied to businesses in our industry. 

So hopefully I can take over there. That’s great. So Insurtech, obviously a lot of people have a view on what it is and what it means but to give a global snapshot at the moment Insurtech a phenomena, which would argue started in 2000 and whether there arguably Insurtech that predates 2012. As seen over 20 billion us dollars of investment into firms that are either risk originating and they’re possibly the best known Insurtechs because they’ve been building a brand all the way through to those technological firms that are offering backends software as a service type solutions to core parts of the functional chain. 

There are arguably 3000 insurtechs globally. The definition which we’ll tackle in this presentation is relatively vague. Lots of firms self-identify with the term who are arguably not Insurtechs and then perversely is firms that are absolutely insurtechs prefer not to take the term. But generally speaking, it’s the portmanteau of the word insurance and technology. So again, there are relatively broad definitions of what an Insurtech is, but for us, we’ve adopted this particular term and it’s the use of technology designed to squeeze out savings and efficiencies from the existing insurance model. 

So it’s not simply a case of throwing technology at the industry and calling it good. This actually needs to have a business proposition focus supported by technology with the expressed desire to squeeze out savings and efficiencies. And that can be, a fully baked end to end digital insurance company. That’s looking to break into a new market all the way through to looking to save costs around an incumbent process. But this is the view that we take. Generally speaking of those 3000 Insurtechs that I’ve mentioned most could arguably fit under this definition. 

So in terms of how you apply technology to your business again, it’s not about the technology for technology’s sake, the technology in some ways is the least interesting part of the journey. It’s actually understanding, isolating around a business proposition and using the most appropriate technology available to support that proposition. And we like to think of it as it relates to insurers and reinsurers in three distinctive groups. So it’s the fortification of an existing book of business, it’s the use of technology to help diversify and grow into new lines of business, and then it’s using technology to reduce known inefficiencies. And if you start to think about the business in those three pillars, it’s a far easier way of finding the most appropriate types of technology that can actually support you on that endeavor. If you don’t do that, what quite often happens is the technology in and of itself becomes the focus. And it’s actually very hard to find the right partner or the right organic initiative to ultimately either reduce costs or improve top line margins, which is ultimately what we want to do here. 

 Obviously, the technology is the underlying support mechanism. I think what we’ve done here on this slide is just give you some examples of the different types of technology that are being leveraged at the moment for three pillars that I mentioned previously. I’m sure lots of these names here are very, very familiar to you. We’ve seen things like blockchain come and go. There was undoubtedly an application for blockchain, but about two years ago, I think it was the most search term on Google. And we haven’t seen its application or adoption at a widespread level in our industry. And I think that was really for the reason that I gave before. It was almost like blockchain in of itself became too much of the focus and not as application to our industry. So if you think about it as an immutable ledger, how can you use that most effectively in our industry? 

It’s not something that responds very quickly, it’s not something that can think or negotiate, it’s a binary tool that wants to create an immutable truth, but people’s imaginations were running away with themselves and that technology went away. What we are seeing is a huge adoption of artificial intelligence or AI and its associated sub-sectors things like machine learning. We’re also seeing a big growth in cloud services, as people are increasingly going cloud based and actually taking their legacy system and putting it up into the cloud. It allows companies to be much more agile, it allows companies to be much more remote and obviously doing this sort of COVID era, it’s particularly useful for people that are maintaining the system. 

 Just to give you an idea of the size of Insurtech and what’s happening I’ll throw up some data points here. This is the total investment to date from Q1 of 2014, we do have data on 2013 and 2012, but for the sake of the graph we started at 2014. And as you can see, there’s been a steady rise of investment into Insurtech globally. What you will see is in the earlier days, there was a significant proportion of the investment dollars going into the life and health space. It’s slowly PNC focused, Insurtechs are ebbing away at that sort of earlier competitive advantage. A lot of people ask me why Q2 of 2015 was so high that was essentially driven by two deals. So that was a Zenefits and ZhongAn in China that received an enormous amount of funding. 

But generally speaking, what we’re seeing in the later quarters is that there are an increasing number of deals being done by volume. Q1 2020, took quite a large hits. And we think that that was mainly driven by COVID because the first three or four weeks of January finished very much in the vein of 2019, by the end of February and the beginning of March, a lot of people were just holding back for an investment perspective particularly the investment vehicles of incumbent players. And like I said, we think that was a distraction from COVID. And then most recently Q2 bounced back, but there were fewer deals being done. And I think what we’re seeing now is this emergence of people being prepared to write bigger checks for less risky Insurtechs. So what that’s creating is a growing gap we know those firms that can secure seed and series A funding and then those firms looking to secure series B onwards. 

But that’s a natural evolution of any burgeoning investment space. And what you have is a growing desperate network where you have the non-industry investors. So that’s traditional P and VC funds happy to write lots of checks and costs wide nets in the earlier rounds. And then you have what we call CVCs, which are the commercial VCs associated with insurers and reinsurers. Like I say, wanting to write less risky checks, but larger checks for firms that have a proven track records. And we are now starting to see those two worlds grow quite a gap between. 

In terms of where the businesses are focused, these are the Insurtech specifically, as you can see the vast majority of Insurtechs of focusing their attention on product and distribution. So this is very much a front end play. And most of the Insurtechs that are best known, certainly by the general public would fit into this particular brands. But actually it’s losing competitive advantage over time. We are seeing an increasing number of Insurtechs coming into the backend office support arena. So specifically around claims things like document management systems, policy administration systems, and we are seeing these Insurtechs have a very, very fruitful impact for insurers and reinsurers, where they are able to triage systems, where they’re able to reduce inefficiencies, and speed up execution time. 

And we believe that particular trend is going continue to grow. And in some cases we have actually seen Insurtechs that have begun their proposition in products and distribution as a space, realigned the same technology to be backend facing. And they have in fact, supported the backend of an insurer or reinsurer. Part of that is driven by the difficulty associated with procuring new customers, but also navigating regulatory environments, which as you know, is extremely complicated, and there’s arguably being some naivety around certain Insurtechs who think that they can come in with a fancy UX, a fancy brand and just steal market share. And it’s obviously a lot more complicated than that. 

Just in terms of where we’ve seen businesses focusing in terms of quote, bind and issue has been arguably the largest for, Insurtechs. And it doesn’t have to be that they can do all of those three things simultaneously, but they do have an ability to do one of those three things. That might seem surprising, but actually, if you think about where technology is going at the moment, it’s really still at that iceberg edge where we are putting technology into some relatively straightforward processes, which are removing the labor intensity of things like quoting, things like binding and issuing contracts. And to give you an example with quoting, we’re seeing a number of Insurtechs using APIs that can sit in third party data providers, which can give instantaneous quoting information to underwriters so that they can make better decisions. So it’s not so much that of their decision making tools, but their advisory or consultative tools direct to underwriters. But as you can see, like we saw on the previous slide, claims is increasing and backend. So policy admin and central management systems is also increasing. 

To give you a geographic breakdown of where these firms are, perhaps unsurprisingly the majority of Insurtechs are in North America, but we are also seeing a growth in Europe, specifically in claims. That seems to be an area where we are noticing a number of digital TPAs growing. And we expect that to continue to grow just given the tactile nature of the claims experience. This is arguably only the second time that an insured might need speaking to their insurance company. And this is really an area where insurers can demonstrate their metal to their clients. And this is a huge area of opportunity for technology to come in, improve that user experience, improve triaging processes, help claims adjusters, get the right claim file to the right person, and settle things as quickly as possible. It’s also a great area to detect fraud. And we’ve seen a number of Insurtechs using natural language processing technology to scam through claims files, looking for indicators of fraudulent behaviour to help again, speed up that process. 

There may be some Insurtechs here on the left hand side, whose names you’re familiar with. This is a slide that demonstrates which Insurtechs have raised the most amount of money. Perhaps and surprisingly, the largest is Oscar health who are looking to IPO this year. And then third down Jong-Hyun is the company I mentioned that supports that enormous raise in the second quarter of 2015. Well two underneath is roots insurance, which is a telematics auto insurer in the states, which is essentially looking to move away from demographic data only and actually move more into behavioural based data. So traditionally in the states, at least auto policies are written based largely on data that can be got from the DMV and things like that. And credit score routes are actually allowing the insure to download an app, dry for a couple of weeks. And then based on the telemetry reading and the phone it will tell routes what driver you are, and you will then get a policy that is supposedly more, fairly priced based on your behaviour and not purely on your demographics. 

 So who’s investing? Surprisingly, most of the investment has come from traditional investors who see Insurtech as a great opportunity for speculative exits, recognizing the need for technology to play a bigger role in our industry. But as you can see in the purple there, the CVCs or the reinsurer or insurer investment vehicles have also become very, very acting in this area. And in 2019, they were almost on parity with the traditional investors. And this is all less about speculative exits and much more about supporting innovative technology that can actually support the underlying business model. And also securing partnerships with Insurtechs who are not necessarily looking to offer their solution to everybody, but to select few insurers and reinsurers and invest into one vehicle to secure those partnerships. 

But as you can see, it’s a growing space and we anticipate that over time, the VCs may actually drop off when they realize that the industry actually only needs a certain number of Insurtechs to be operating in this space and reinsurers and insurers, CBC vehicles may take over as the dominant investment party. Just trying to get this. Oh, it looks like the slide is frozen.

In terms of the breakdown geographically, this is the number of deals that we’ve seen as this is the number of rounds raised again, perhaps not surprisingly in North America or in the US we’ve seen the most with 706, and then the UK is shortly after it, 118, and then China. We have certainly seen a large growth in East Asia, particularly in China, but also in South Asian India, there’s a growing number of Insurtechs that are securing investments. And these are investments that are typically supported by insurers, reinsurers, but also big technology firms. So Google are particularly active in India at the moment as our Amazon looking to support burgeoning digital insurance companies that are looking to support quite niche products into relatively underserved markets. 

This is just a snapshot of the Insurtech ecosystem. Obviously this represents a very small percentage of those 3000 companies that I mentioned, but it just gives you an idea of the types of focuses that the Insurtechs are putting forward. So on the top left hand corner, possibly of most interest to this group, we have the peer to peer group, which are arguably digital mutuals. And then we have the health care sector, we have the sharing economy, sector, life insurance marketplace, backend service solutions, data IOT products, UBI, which is used as patients clearance, which is usually supported by some kind of internet of things or telemetry, but it just gives you a good idea of the breadth and scope. 

And quite honestly, there’s no part of insurance that hasn’t got some attraction from technologically based firms. Certain lines of business certainly lend themselves better to the use of adopted technology. So for example, relatively straightforward products in the personal line space are easier to support both through origination, but also backend support than say very, very complicated commercial products. But needless to say, every single part of our value chain has had some interest at least from Insurtech themselves. 

Just a breakdown for those of you in the US, California has obviously seen the most number of deals. Again, just based on the location of most of the VCs, that’s perhaps unsurprising. But we are seeing hotspots in Boston, Chicago, and the Des Moines, Iowa which are increasingly looking to support Insurtechs, both from a regulatory perspective, but also a local embedding perspective. 

This is a more US targeted map. Again, some of these companies you may recognize in the top left, Oscar was the most capitalized company but we’ve also seen a large growth in home oriented Insurtechs specifically looking at renters or personal products. And then the auto space, a number of companies here looking to get into that behavioural based model that I was describing in groups. Metro mile have a paid per mile model where you pay for the miles driven rather than paying for an annual policy. If your car then to be sat in a locked garage for the year. We’re also seeing a big growth in small commercial. So these are companies that are looking to offer relatively flexible bulk products to small businesses. And these are businesses that could be one person to say, five people, and in the COVID area, in particular we’re seeing a growth in demand for small light touch products that cover everything with the exception of worker’s compensation, just to be available from the shelf. And in some cases, some of these Insurtechs have their own products and our own balance sheet and in other cases, they’re small digital brokers. 

In Europe, as I mentioned the UK currently dominates in terms of number of deals but Germany and France are also an active player. I would argue that Insurtech really began in the UK specifically in London and has since become a global phenomenon. And again, just looking at the European Insurtech map here certain products are identical or similar but obviously in the UK, there’s been less innovation around life and health for obvious reasons, but perhaps more growth around the renting space or products that lend themselves well to living in highly concentrated areas. 

So how do we make the most of Insurtech specifically for mutuals? So largely speaking, despite the technological innovation and despite the available technology, there has not been a fundamental innovation around capital structures. So traditional capital structures are still holding very, very well, but most insurers now are looking at technology to try and innovate around the edges. A lot of Insurtechs have been very, very good at changing the look and feel of our industry specifically through the user experience, like I said, haven’t fundamentally changed the structure of the underlying insurance itself. 

What we have seen is Insurtechs are very, very good at creating the spoke products and going after underserved markets and empathizing very, very well with people that possibly have an unfavourable bias towards insurance companies. And what’s been really, really interesting to see is that increasingly people are very comfortable with buying insurance online specifically after a enjoyable quoting and binding process. And what we are seeing is that this has raised expectations across the board for people to offer that experience. Now, obviously with highly complicated and complex products in say, commercial people still want to speak to a human being, they understand the rationale for filling in lots of questions as people generally have a very good understanding of their risk. Certainly in the personal line space, we have seen a big reduction in questions asked, a big reduction in human to human contact and a big reduction in processes that take a long time. 

So, as I said, the underlying has not fundamentally changed, but the look and feel has changed a lot. And a large amount of that has either been driven directly by Insurtechs themselves or the Insurtech phenomena almost kick starting our industry into adopting technology at scale. What’s particularly interesting is there has been a growth in the Insurtech P2P model that’s peer to peer, so these Insurtechs are looking to go after like-minded groups of people that either have been underserved historically, or looking to find a product differentiation or price differentiation, and Insurtechs have been very good at creating a net or a fence around those groups and offering them products where everybody sits as part of the cooperative with the risk. So you basically have a fundament, a digital mutual, which is obviously the oldest insurance structure of all, but it’s been repackaged in such a way that modern day consumers can appreciate being with other like-minded people who potentially lower risk than the average person on the streets. 

But what they’ve been particularly good at is like I say, creating this digital interface, improving user experience, creating products that are possibly better suited to 2020, really extolling the virtue and value of a mutual model, and obviously through proper sharing, that’s been adopted by some. So for example, in the UK there is a company who Bought By Many and they originally went into the space where they product for diabetics wanting to buy travel insurance who wouldn’t be penalized for being diabetic. And they’ve evolved their product now to be in pets. They’re specifically looking for people who own dogs who have previously had punitive pricing based on out of date data. 

And this particular company has raised a lot of money this year and are doing extremely well. The Insurtech itself is essentially supporting the middle box here, which is the vehicle which is collecting premium and fees. And then pushing that out to the affinity group through a great UX. But like I said, the underlying structure has not fundamentally changed, but the look and feel of the structure has changed. And Insurtech, ability to distribute product and distribute the nature of these P2P models has been extremely impressive, certainly the last 18 months. 

This is just a snapshot of some of the P2P Insurtechs that operate globally. I’m sure some of these are familiar to you, but there’s, Friendsurance in Germany, Pineapple in South Africa, Inspool UK, insPeer in France and then Bought By Many, which I just mentioned to you now. And they all essentially have taken the mutual model and supercharged it with technology, but their underlying premise was to go after a group of people that felt underserved, they were looking for a specific product or looking for a specific type of experience with their insurance company. 

Where we have seen great implementation. As far as the competitive advantage that mutuals hold over stock companies is that technology is fundamentally a long-term investment and mutuals are in a much better position to make the most of this position because they’re not looking necessarily to be too quarterly focused. And what’s fantastic about that is you can take a longer term view of the investment required for technology, and you can actually boil down the requirement into those three core pillars that I discussed at the beginning. So that’s fortifying your book looking to grow and diversify into new lines or some new geographies, but also reducing known inefficiency through technology. And what’s been fantastic for the neutral model is that you can take that long-term approach, break things down into those three buckets and look for the right partner over time. What’s also fantastic is that, like I said, Insurtechs can understand affinity groups hey very well go after affinity groups that want to understand or better understand the empathetic model, the mutual model. So companies can partner with those types of Insurtechs that really understand an affinity group well, and make the most of that. 

Again, it’s just sort of just recapping that modern day consumers also want price transparency and the mutual model obviously lends itself to that very, very well. But what’s really great here as an opportunity is the P2P Insurtechs can actually solve some of the distribution problems that mutual insurance might want to take advantage of obviously with the mutual model as companies grow and they expand geographically, they incur some costs, Insurtechs help circumnavigate some of those problems completely. And point three, is the point I made earlier. This is a long term, never ending financial commitment and firms that do not have to be too myopic. I guess you can say about returns can make a better long-term strategy that will ultimately serve the end consumer for a longer period of time. 

Making the right choices, why is the industry doing this? Is to go after underserved markets? Is it to push for innovation’s sake? Is it to get the return on investment? Or is it the need just to be part of the digital journey? And we’re seeing a number of clients of ours and a number of insurers and reinsurers around the world, struggling with these issues of why are we doing this? What’s driving our engagement? And ultimately it’s got to be around. Like I say, there’s three pillars, fortifying your position in the market, understanding who you serve, why you serve them and where you been successful, understanding how you can leverage technology to diversify into new lines of business or into new geographies, or understanding how you can use technology to fundamentally improve certain known costs across the board. And to my earlier point, it almost renders technology to be less interesting. It’s less of the focus, it’s understanding at a core business level how you can make the most of a facilitation tool, which technology can be. 

Just in terms of what’s being created at the moment. This is a list of data that’s been created. And as you can see in 2020 relative to 2005, there is an enormous amount of readily available data. And one of the things that we’re seeing Insurtech supporting incumbents doing very, very well is understanding how you can make the most of that data and not all data is created equally. So unstructured data needs to be augmented, needs to be enriched and understood. Similarly structured data needs to be understood in terms of how it can impact core decisions, whether it’s at a pricing and underwriting level, or whether it’s at a claims level, but all of this data is readily available. And the Insurtechs that are being extremely successful are either directly using data to impact their own decisions or supporting those who are looking to make better decisions. 

So the push for innovation, how can we get involved? Well, the first thing is to understand that this is a long term position and it is a long term investment. And what we are seeing is a lot of companies are still really in tier one, which is looking to understand within your business, how you can have relatively simple adoption of technology to improve existing processes. And that’s been a hugely successful journey for a lot of companies that have been able to find the right partnerships or the right technology, what we’re starting to slowly see is a number, sorry, a small number of those firms. And now looking at number two, which is to really test the [inaudible 00:31:17] of their business and using technology and sophisticated business propositions to really push the boundary of a possible. And that’s understanding how you can use technology to engage with different consumers, go into new markets, launch new products, but that does require a level of support from the top, and it does require people to start thinking internally a little bit differently. 

And then finally three, this is an area that we’re not really seeing too many insurance playing in at the moment because this is really the next step. And that is to go truly digital, where we are labouring technology with previously menial tasks. And we’re looking to put technology into a decision making position rather than just a consultative position. And to be quite honest, the technology at the moment is generally not sophisticated enough to help insurers to make those decisions. But an example, long-term of where we might go is the insurance that would support driverless cars, but obviously to a degree, the technology needs to drive that story. 

So what’s the push? Why are firms doing it from the other side? Are consumers demanding more of insurance companies? Are media placing expectations on insurance companies to be digital? Is the benefit of technology now being extolled to the degree that you ignore it? Are your competitors using technology better than you are? Is there a fear of missing out? So what we are seeing as to my point earlier is that consumers in general are much happier purchasing products online, whether that’s insurance or shopping, but insurance needs to keep ahead of the game in terms of understanding where clients’ heads are at. And there was a survey done in 2018 and 2019, which demonstrated most people are not only happy to buy insurance online, but they’re happy to buy insurance from big tech firms. 

And I’m talking about Google, Amazon, Apple even. And we just need to be aware of the fact that in certain lines of business, consumers might be quite fickle and certainly are happy to support the lifestyle brand companies, those big tech firms who arguably know more about the insured than certain insurance companies do. So it’s just understanding where people’s heads are at. We can order a cab through Uber and it arrives at the door and we don’t need to answer any questions. We can rent a movie from Netflix without having to leave the sofa. It’s just about understanding how we can make the most of that. We know more about insureds or would be insured than anybody else, but they’re expecting a certain experience from the insurance company. 

In terms of how you can deploy your focus is obviously the capacity deployment side, which is through distribution and product. And then there’s the use of capital to actually invest in the backends. That’s less about balance sheets, it’s more operational capital. And specifically firms are looking at data analytics, sales marketing, and admin, and obviously claims and fraud. And this really comes back to those three pillars that I was talking about before. So it’s about understanding the business model, breaking it into those three parts against the deployment of capacity, whether it’s through the balance sheet, or whether it’s through operational investments, and then understanding how you can use technology to support those processes against one, two and three. 

I just give you some examples of some names there. But in the claims and fraud section, there’s obviously a number of companies which are using things like chatbots to reduce the reliance on individuals, but also companies like Tractable that are triaging claims so when the claim comes through to the handler, he or she knows exactly what to do with that claim in a very effective way. 

This is the last part of the presentation bit of shameless self-promotion here apologies. Every quarter we put out the Willis Re Insurtech Briefing, which is an overview of the previous three months. Every quarter we pick a theme and we focus on businesses that we think are interesting or worth following. I think Q2 is available on the ICMIF websites and Q3 will be out in about 20 days, is focused on commercial insurance, Q2 was focused on personal property insurance. But I’m told that it goes to a lot of people and that people enjoy reading it and nothing sorry, and nonetheless, there are the investment numbers in the quarterly, if you’re interested in following those. I have a team of 30 people across the globe who are looking for best in class Insurtechs. 

We conduct a huge amount of research, but we’re looking for companies that we can bring to our traditional insurance company clients who can support those three pillars. And to date, we have supported a number of clients across the globe. We ourselves have vetted about 1200 of those three thousands. And like I said, we’re constantly looking for opportunities for our clients. And what we typically do with Insurtechs themselves to understand what’s going on in the space is that we conduct towards research, we then help clients understand within their own businesses where we could leverage technology, and then we assess the benefits of using technology, and that in some ways is actually the most difficult part of all of this, because certain problems can’t simply be sold using technology, but they’re actually people issues or market issues. 

But if there is the ability to use technology to derive a benefit, we will then offer up to our clients a number of alternatives with anonymized briefing on each company. And then we will facilitate an engagement and then ultimately we’ll help to host pilots and things like that for a business outcome. So not a FOMO or fear of missing out outcome, but a genuine business outcome that makes sense for our clients. 

And we have a relationship with Plug and Play globally, and that’s another entry point for us to meeting Insurtechs. They’ve been a great partner for us for the last couple of years. We’re one of the anchor partners and with full candour they see some Insurtechs that we otherwise wouldn’t see which has been a great relationship for us. So in terms of your potential involvement with us or through Insurtech directly, there’s obviously opportunity to invest, there’s the opportunity to leverage your balance sheet to allow a sort of digital MGA type in short to benefit from that for a fee, there is the strategic alignment where you would support the business and Insurtech business that is burgeoning in a space that you support, or you can license the technology that they have developed for your own co-existence. And then finally, this is the team. So Liz, that is the end of the presentation. So back to you. 

Liz Green: 

That’s great. Thank you so much Andrew, I’m sure that I’m not alone in saying it was extremely useful. And what I found from your presentation was it was refreshingly different because of the focus on our mutuality, which is what binds us together as a group. And as you know, mutuals continue to outperform the total market. And we are so grateful that when it’s continues to be such a loyal partner with us on a supporting membership basis. But I am flooded with questions, which goes by, well with the day we’re having hay with lots of rain and lots of weather, but there’s lots of questions for you. And a little bit of time so I’m going to be picky. If that’s okay, Andrew. 

And pick my way through a few. But what I’m going to start off with is you mentioned blockchain earlier, which as you say was one of the most searched words on the internet for a while. And I have to say I was one of those people who just didn’t understand what is it about, so should I know about it? And we’re being asked here and there was a lot of hype about it as a merging tech insurance opportunity. But do you see in the future, this becoming a case for blockchain in the insurance or the reinsurance industry, is this something that’s going to re-emerge and we’re going to start to choose again, so we need to know. 

Andrew Johnston: 

Okay, that’s a great question. So the first thing I guess to note is that blockchain is one brand of what’s called DLT, which is Distributed Ledger Technology. And it’s certainly not the only game in town, but it’s probably the best known because it’s associated with Bitcoin. I maintain the position, if there is a business case that that warrants the use of distributed ledger technology. And that is the best technology to promote that use case. There’s undoubtedly a value there. The issue is that blockchain became so hight that actually became quite expensive and the relative benefit of blockchain against something like Microsoft Excel was still weighted heavily towards Excel because most people have on their computer anyway, and blockchain was very much a nice to have. But should the price come down or should blockchain become more flexible, I could see how it might have a lot of value for say the accounting part of an insurance company or the role of a CFO. 

But people at a time were hoping that it might respond to parametric cover in very thin margin business. And you might spend 10 million implementing blockchain for a hundred thousand GWP, it just didn’t make any sense. So I think that there is underlying value in the technology, but it’s understanding that in the broader business case, recognizing what you might make, recognizing what the savings are relative to the implementation expense. And like I say, they’re certainly not the only game in town. But I don’t see it going away either because we’re seeing blockchain is used for Bitcoin, for example. So it’s not going away. Just hopefully the expense will come down. 

Liz Green: 

And we’ll continue to seek your advice as things continue to evolve on that one. But thank you very much focusing that question and as to very topical. So COVID here we are again, how do you see COVID impact in the Insurtech space? 

Andrew Johnston: 

Yeah. Really great question. I mean, I think firstly, any comment I make henceforth is outside of the human impact, which is obviously been great. And I don’t want to make light of that. From a operational perspective, in some ways it’s been a godsend because it’s done what no individual firm could have done, which is it’s forced the industry to really take digital seriously. And like I said, I understand the human impact and I’m not trying to dismiss that. But firms have been talking about going digital for decades and then this happens and you have to, right? And in most cases, insurers and reinsurers have been very well prepared. And to our mind, at least business from a broking perspective has very much been business as usual, but just with backgrounds. 

But in terms of the Insurtech space I think never more so than now, the role of technology has been compounded. And it is clear that technology is a huge part of the future of our industry, somewhat perversely however, because insurers and reinsurers may feel a little bit more conservative about the short term future, some Insurtechs might struggle to get lifeline. So longterm good, short term bad and for the individual companies, it could be really difficult for the next year or so, but for the phenomena at scale, this is an amazing validation of the technology that they’ve been creating. 

Liz Green: 

Wow, thank you. That’s that was a really good answer thank you. So I have two sides of the coin questions as well. I think probably got time to deal with both of them. Let’s start with the question that’s just come in, it is a case of when rather than companies like Amazon or Google start offering to write insurance policies, will they be the true disruptors of the insurance industry other than Insurtechs? 

Andrew Johnston: 

A brilliant question. So what might be disruptive for one person might be a great opportunity for somebody else. So I would always bear that in mind. Google and Amazon have partners with local insurers to offer products or solutions. And then in London you’ve seen the brick key initiative, which is supported by Google Cloud. Do I think that there a great distribution opportunity for incumbent insurers? Yes, I do. Do I think that they understand certain consumers and consumer behaviour? Well, yes I do. That should be seen as an opportunity. I think for as long as Google in particular is making money from Google ad clicks, they have more to gain from offering the picks and shovels than they do to actually having their own balance sheets. 

And if you think about the complexity that they would deal with the local regulators in terms of walls around data, that could be a headache that Google just don’t need, right? How do you prove that you’re making adverse decisions based on what you know about somebody’s shopping behaviour, for example. But I think that they are an ever present existential threat to companies that don’t see this as an opportunity. And I think it would be naive to think that they don’t pose that threat. Quite honestly, I think the main disruption in the traditional sense would actually be towards the Insurtechs. So I can see that Google and Apple would actually damage their opportunities more than ours. 

Liz Green: 

Fair enough. Good to hear. So lastly, obviously we have lots of smaller members in our wonderful network of organizations and I’m sure they’d be very interested to know from those smaller sort of the emerging market perspective, what’s your advice in terms of those steps per centuries and then shore effects sort of eco space? 

Andrew Johnston: 

Well, I mean, please firstly, reach out to us and speak to us and we would love to help you understand just through our research and give you examples of what’s worked previously for others. But I think it’s just understanding that you don’t need to solve all of your problems on day one, even if you perceive them as a problem or not. And the first thing I would recommend is that you almost hold up a mirror to yourself, understand your own business, and pick an area where you think that light touch cheap technology could have the biggest impact. And that may be on claims triaging, or it may be on supporting certain underwriting decisions, or it may be launching a very light touch, easily deployable product into an underserved market. But the mistake that we see a lot of our clients trying to make at least, and we consult them off the edge is that they’re trying to do everything at once. And they’ll say, “Look, we want to update our system.” And then you find out that actually there’s one legacy system, isn’t a legacy system at all, but it’s in fact, 50 years of Frankenstein’s out of date technology. And if you take away one piece, everything else falls down. 

So it’s about understanding at a small scale first, how you can have the greatest impact on profit shares or efficiency, or time-saving relative to the cost of the technology. But technology’s never been cheaper than it is right now across the board. So like I said, I think step one would probably be to speak to us or somebody else that’s done a lot of research, understand exactly what it is that you want to try and achieve and try and understand that in business terms, not in technology terms, that’s a huge mistake that technology becomes the focus and not what you’re trying to achieve. And it’s taken two or three years for some big companies to understand that difference. 

Liz Green: 

Yeah, exactly. And very much the message that was echoed by James, I think back in Auckland. So our members who wants to get some advice, who want to dig a bit deeper on this long. They can get hold of you, they can come through, or they can come directly to you Andrew and continue this conversation. And as much as I’ve loved to sit and talk to you for hours, and we do have more questions which I’ll ask you to answer and we can take those offline, I’m afraid and I’m going draw our conversation to a conclusion. But I’ll just take a couple of minutes just to close off with some unashamed promotional for some webinars that we have coming up. First of all, I’d like to say that Andrew’s webinar will be available, it’s being recorded and it’s being downloaded and will be available for you to download very soon and we’re pretty quick on that one.  

But it’s my absolute pleasure though to thank you again, Dr. Andrew Johnston, you’ve been an absolute delight. 

The above text has been produced by machine transcription from the webinar recording. ICMIF has made every effort to ensure that transcriptions are as accurate as possible, however, in some cases some text may be incomplete or inaccurate due to inaudible passages or transcription errors. Listening to or watching the webinar recording will allow you to hear the full text as delivered during the webinar but this is available in English only. Our transcriptions are provided to enable members to select the language of their choosing using the dropdown menu above.