I read an article recently in Risk & Insurance about three trends that will disrupt the insurance industry in the next decade. The article interviewed Assaf Wand, CEO and co-founder of Hippo Insurance, about what trends he expects to play out over the next five to ten years. And while there has been much written about these types of trends (including here in this wonderful blog) Wand reminded me why captive insurance really surfs these trend waves very well.
- Nontraditional players will enter the market in force.
Sure, the article is focusing on the news that retailers like Amazon and Walmart will become more active in the insurance world with their huge presence and direct connection with their consumers. Things like travel insurance, shipping, potentially marine on the commercial side could be the next frontier for these behemoths according to Wand. Captives, however, are the original “nontraditional” players in the insurance market going back decades. And looking ahead, captives are well positioned to take advantage of emerging opportunities such as automakers insuring risks from driverless cars.
- An explosion of data will change the underwriting equation.
“Data sources are going to keep on multiplying on an ongoing basis, and we don’t necessarily know what those sources will be. [Insurers will] become much more data-centric,” Wand said in the article. That is certainly true. One of the primary tenets of the captive insurance industry is that the data from the risk management feeds directly to the captive owner(s). Owning and understanding one’s data is paramount to the success of the captive and has provided the impetus for lowering risk profiles and thereby cost savings. New technologies, including AI, will give captive owners that much more power to contain risk and save money.
- Insurers will shift value to more proactive risk management services.
This is not a new trend in the captive insurance industry: this has been the KEY to its success for over 35 years. As the article rightly points out, in most insurer-insured relationships, there are few touch points between binding a policy and policy renewal besides a claim, should one occur. Here Wand points out the “new” approach that the traditional insurance industry must adopt in order to survive: create more touch points and find ways to add more value to that relationship in the form of risk management services. This enhances the customer experience and also reduces the likelihood of a claim. Fewer claims should ultimately mean more profits for the insurer and cheaper policies for the consumer.
“The shift will be a refocus back on the customer,” Wand said. Sound familiar?
Some of the strategies outlined are things the captive insurance industry needs to keep focused on as well. New insurance technologies include the use of aerial imagery to identify discoloration on roofs well in advance of a leak, so that a roofer can come assess and repair before anything goes wrong. Or the use of weather data to ascertain the strength of storms heading your way in order to send in specialists to help strengthen vulnerable spots on your property.
Essentially, the traditional insurance marketplace needs to adopt a more “captive” approach in the next decade. Maybe they will, maybe they won’t. Captive insurance will always be one step ahead of the traditional side – after all, the connection between the insureds and insurers can’t get any closer!
Come hear more about insurance trends at the fast approaching VCIA Annual Conference August 6 – 8th (with Captive Immersion August 5th). Laura Drabik, Group Vice President of Business Innovation for Guidewire Software will speak about disruption, technology and innovation in the insurance industry at our opening general session, and it is sure to be fascinating!
Thank you all very much, and I look forward to hearing from you!