Technology could disrupt 80% of insurance jobs, academic predicts

Insurance has traditionally been a conservative industry but technology changes over the next decade will disrupt the global sector – and the car insurance industry could disappear altogether, a local academic predicts.

Dr Michael Naylor, a senior lecturer in Finance and Insurance at Massey University, has just published a book on the matter, called A perfect storm in insurance: How to survive the looming waves of disruptive technology.

He says technological advances could disrupt up to 80% of insurance job activities, and insurers need to change their business models from providing insurance products to being data companies with real-time links to customers.

“Any organisation that is not a big data house now, or is unable to become one soon, is already a legacy company.”

Key drivers of this change include the internet of things, cloud computing, big data, digital natives, artificial intelligence and hyperscaling, which involves huge IT networks based on a common AI system.

Dr Naylor says the car insurance industry will probably be the first sector to face major disruption.

“Once networked, autonomous cars are widely available. It’s been predicted that car crashes will reduce by 80-90%. This development is not as far away as you might think – Volvo, for example, has an aim of eliminating car crashes by 2020.”

He thinks car theft will largely become a thing of the past as voice and face recognition technology makes them nearly impossible to steal, leaving insurance only for damage caused by things bumping into the car or extreme weather events.

“The result is car insurance premiums will fall drastically, probably by as much as 90% by 2030.”

He says overseas insurers are starting to adapt. British insurer Drive Like A Girl monitors the drivers it insures using a telemetric device that sends real-time reports, including alerts of any crashes. The company is popular with young drivers who can prove they shouldn’t have to pay the high rates generally imposed on them.

Fintech newcomer Friendsurance arranges peer-to-peer personal risk insurance cover by creating groups of people with similar risks, usually through existing social connections, while US firm Social Intel provides data to underwriters using software to analyse people’s social media posts, rather than traditional metrics.

New Zealand lagging behind

“New Zealand insurers are probably a few years behind those in the US and Europe but they need to start grappling with these changes now. If they don’t, new disruptors will emerge to take their business from them,” Dr Naylor says.

“Most current insurers could struggle to cope with the changes, due to lagging legacy IT systems, poor reputations with customers, and an inability to be flexible fast enough to cope with new ‘born digital’ competitors. Customer expectations have changed faster than insurers have.

“The big transformation will probably come from the entry of tech-savvy external firms, firms which will do things completely different – the ‘ubers’. The majority of existing firms will probably go bankrupt due to their inability to transform themselves into a client-centered model while survivors will be so transformed that they may be unrecognisable.”