The Chinese-led charge into insurance by Alibaba, Baidu and Tencent in 2017 has spurred other tech giants to consider providing digital solutions to online consumers, compelling incumbent insurers to adopt insurtech strategies.
According to a Moody’s Investors Service report released in September 2018, Google’s parent company Alphabet is among the non-financial ecosystems looking to leverage their existing user relationships by asking their customers, would they like insurance with that?
“In our central scenario the greatest risk to incumbents is that consumer-facing big tech firms end up controlling a large share of customer relationships globally, turning incumbents primarily into manufacturers,” the report says.
The Moody’s report suggests that insurtech partnerships could provide the means for insurers to be more responsive to an environment where, according to global management consultant Accenture, 80% of insurance customers are looking for personalised offers, messages, pricing and recommendations from their insurance providers.
The Accenture study found 77% of respondents from Europe, the United Kingdom and Ireland, the United States and Canada, Japan and Australia were willing to provide personal usage and behaviour data in return for lower premiums, quicker claims settlement or insurance coverage recommendations.
This finding is confirmed by another international survey by technology consultant Mindtree which reported that 74% said customised promotions are effective in encouraging them to buy new products or services.
The internet advantage
China has been a government-backed pioneer in microinsurance: cover tailored to a consumer’s preferred activities or relevant exposures. Alibaba, Baidu and Tencent’s Zhong An, which sells and handles claims totally online, uses an internet-based distribution model and channels big data and analytics to ensure accurate product pricing and risk control.
Search engine Baidu’s insurance joint venture Bai An aims to offer customised insurance products that cover ‘scenarios generated by everyday internet use’ and are based on data generated by its 660 million monthly users.
The game is on. Insurers need to apply technology platforms and data silos to provide personalised insurance solutions that include risk mitigation as a key component. This, according to insurance think tank the Geneva Association’s 2018 report, Big Data and Insurance: Implications for Innovation, Competition and Privacy, is the basis of a new business model where more efficient and effective mitigation balances economies of scale obtained through risk pooling.
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