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Technology Changes Coming Faster than Ever for Insurers

Robert Regis Hyle | October 28, 2015

As Guidewire Software prepares for the start of Connections, its 11th annual user conference that begins on Nov. 2, Brian Desmond, chief marketing officer, for the technology solutions provider, discussed the importance of the user conference and some of the issues faced by the insurance industry and companies like Guidewire.

“It makes us humble to have so many of our staff meet so many of our customers and see the impact of what we do has in their lives and the lives of their customers,” says Desmond. “We also leverage the event to listen to our customers to get their perspective on the pressures and opportunities they face, and where they would like to see the products go in the future from a business and technology standpoint.”

Changes in Technology

Desmond believes new technology and the pace of technology innovation is already impacting the insurance industry at a faster rate than ever before. He remembers when he joined Guidewire nine years ago and the dominant conversation at that time was build vs. buy.” Today, that discussion is no longer a question; packaged software has proven itself.

“The sheer number of trends, including new technology, is becoming real and its pace is far faster than ever before,” says Desmond. “Our prediction is that the acceleration of this trend will quicken in the years ahead.”

Desmond points to the use of drones and the Internet of Things as examples, but there is a myriad of possibilities for insurance companies across the entire life cycle, including underwriting and rating, and the service functions of insurance such as claims and billing.

Opportunities for Guidewire

Guidewire's mission is to help its customers adapt and succeed at a time of rapid industry change and to ensure every customer is successful in their journey, explains Desmond.

“The key phrase is ‘adapt and succeed.’ Our point of view is insurers need to continually adapt and succeed in their business and that it is not just one transformation; rather it's a long-lasting journey where we continually question what is working today and what will work in the future,” says Desmond.

It is also a credo Guidewire lives by. Desmond points out the company views it as their responsibility to provide a platform for P&C insurers and improve that platform in the years and decades ahead. Guidewire maintains a technology platform needs to consist of three elements: core processing, data and analytics, and digital engagements. These elements have to work together in a unified and connected way rather than in a silo.

Trends to Watch

The trends Guidewire sees happening are not earth-shattering, but Desmond believes they provide some clarity. He predicts personal auto, the biggest book of business in the industry, will decline significantly in the years ahead. The key factors in this change are driving is becoming safer, which leads to lower frequency and severity of accidents, and people will be driving less in the future.

He points to the evolution of Uber, which began in 2009 and today earns more than $500 million just in San Francisco alone, which Desmond explains is more than three times what all the taxi companies in that city make per year. Another example is Google and its self-driving cars, which reportedly have been driven autonomously or semi-autonomous over 1.7 million miles.

“Google is learning a ton about accidents that typically are not reported to the police and the cause of these accidents,” says Desmond. “Over the last several years they report 21 percent of fatalities and 50 percent of injuries involve accidents in intersections. The data comes from the U.S. Department of Transportation.”

The autonomous cars have been programmed to watch out for specific perils and so the cars pause briefly when a light changes before proceeding into the intersection.

“It's great for society, but for conventional car insurance it is a sign that the consequences for insurers are changing. If this is a big part of your book of business you should diversify your portfolio,” says Desmond.

Insurers need to look to get into areas of new risks such as identity risk and cybercrime, which are in early stages of adoption in the U.S. market, according to Desmond. The consequence for Guidewire, he adds, is to make sure its technology platform allows insurers to get to market quickly with new products or regional expansion.

The second trend, points out Desmond, is the increasing wave of digital engagement and the expectations consumers have. According to the Pew Research Center, as of April, 2015 64 percent of American adults owned smartphones. That's up from 35 percent in 2011. Pew also reports that 10 percent of that group of Americans with smartphones has no other form of Internet access in their homes.

“This is a generation that is going to demand the ability to buy insurance and be served by companies in a digital way,” he says. “Failure to provide a consumer-friendly experience will cause a major erosion of sales and allow customer-centric companies to meet that need and provide insurance across the entire life cycle of consumer needs and expectations. It is incumbent on Guidewire to have a platform that allows companies to digitally interact with customers and employees.”

 


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