In January 2011, I wrote a post on this blog highlighting three glimpses of the future of insurance. The three issues I called out were:
- Underwriting without questions, as illustrated by the Aviva/Deloitte pilot project featured in the WSJ in November 2010
- Agents optional, based on general trends, with the specific example of the NAIC basically throwing agents under the bus
- Maximum profitability, as illustrated by the industry’s acceptance of the minimum Medical Loss Ratio provision of PPACA
I asked insurers to:
Consider a future in which:
- Underwriting requirements come from third-parties, not your own efforts
- Intermediaries are only one channel among many
- Your total loss numbers are constant from year to year at a mandated level
Is that a future in which your organization could survive?
I believe the first two, which seem far out now, will be commonplace by the end of the decade. I will be happy to buy the drinks at the 2020 IASA show if I am wrong.
The third is much more contingent on political winds. But if health insurers capitulate on this point, P&C and life insurers need to clearly differentiate themselves from health insurers in terms of public perception or face the risk of operating with the same constraints[emphasis added].
As we’ve pointed out in recent posts, agents are already just one channel among many, even in previously unthinkable lines of business like small commercial. I also recently came across an example of underwriting without questions, MetLife’s Xcelerate system, as reported in IIReporter.
Perhaps most concerning for insurers, however, is a recent example that indicates the third item — government-mandated maximum profitability — is not too far off. The ban by Florida and several other states on “price optimization” is an indication that political pressures may bring a PPACA model to P&C.
However insurers choose to try to address these changes, they cannot ignore them much longer. The industry is changing rapidly, and insurers must ensure that they can adapt their business models and the technology capabilities that support their business models.