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InsurTech – are you confident?

InsurTech has gone from the new kid on the IT block to becoming well enough established to attract the attention of risk teams.  But how do we assess the delivery and BAU risks? 

Each InsurTech project can be very different and aimed at a wide variety of end users. You may not have a previous example of a similar project to use as a guide in assessing the risks. Or you may need to employ a wider range of risk disciplines than you have done historically.

The IFoA’s Risk Management in a Digital World Working Party addresses these issues in its latest report: Improving the success of InsurTech opportunities.

What is InsurTech?

InsurTech is a term that can be applied to a wide variety of developments which embrace and leverage the opportunities presented to the insurance sector by technological advancements and the increased availability of data.  

Many InsurTech start-up ventures focus on providing services using digital technology. Services include; enhancing customers’ experience of insurance services by making purchasing a policy or making a claim easier,  boosting operational efficiency for insurance companies or using data that insurers already have to better model risk and customer behaviour.

As a result of the potential opportunities, many insurance companies have been investing in InsurTech, either through in-house developments such as Legal & General’s SmartQuote which uses big data enabling customers to obtain a quote for home insurance in 90 seconds or via investment in InsurTech start-ups such as Aviva have done with Aviva Ventures.

InsurTech projects - are you confident?

On one level an InsurTech development is just like another project to be risk-assessed. But are senior managers and risk professionals confident to do so? 

A survey of insurance and risk management professionals conducted by the working party showed that respondents had a high level of awareness of new technologies and innovations, but many said that they would feel uncomfortable explaining them to a colleague.

While 80% of the respondents thought that InsurTech would have a significant impact on the industry, only 16% thought that they or their colleagues had the right skills to assess the accompanying risks.

Get involved early

InsurTech developments are subject to similar risks to other projects, but some risks such as IT, Cyber and Data Privacy often play a more prominent role in the risk assessment. It is essential that the Risk team get involved early in the project so that they can work with the project team, ensuring that they are asking the right questions at the right time to get the optimal project outcome. Engaging the Risk team with the project too late runs the risk of raising issues that should have been dealt with earlier in the project timeline and is unlikely to endear you to the project team!

Understanding InsurTech opportunities

Given that 65% of the survey respondents felt that they lacked right skills to assess the risks of InsurTech , the IFoA Working Party has created a guide, Improving the success of InsurTech opportunities, which considers how risk management activities can help with the implementation of InsurTech solutions. The report includes a checklist of the full range of risks associated with InsurTech developments and, for each stage of the lifecycle of an InsurTech project, a list of questions that the risk team should be asking.  Not all the questions will be relevant for every project, but the aim is to give Risk Managers a good “starter for ten” when giving guidance to an InsurTech project or advice to risk committees/boards.

It is exciting to be involved in these innovative developments and the guide should give risk managers the confidence to provide robust support to InsurTech projects. Download your copy of Improving the success of InsurTech opportunities.