The exponential growth of available data and the expansion of Internet access globally have spurred the advent of the digital economy. Digitised data and technology-enabled business models can lead to improvements—as well as disruptions—along the sector’s value chains. The Geneva Association is developing an additional research field to explore the effects of digitisation on the insurance industry, policyholders and society at large.
The digital economy is also driving changes in the competitive landscape of the industry: new technology start-up firms (or InsurTech) are entering the industry to deliver some of the services typically provided by traditional insurers and intermediaries, and established technology giants are eyeing opportunities in the sector. Insurers have realised the importance of these developments, and are determined to investigate how to seize their benefits and be prepared for the challenges they pose.
The strategic intent of the programme is to raise awareness amongst industry stakeholders about the changing competitive landscape and the risks and opportunities for the industry. After all, insurers have been using data for centuries to make risk assessments and underwriting decisions. However, the implications of the digital economy could disrupt the competitive landscape, making it necessary to ensure there is a level playing field for all market participants.
SETTING-UP OF WORKING GROUP
In order to steer the research activities on digitisation topics, a working group has been established, with topical experts from seven members’ companies. The proposed working plan includes research on (i) the implications of competition from online platforms and their relevance to insurance, (ii) the effect of algorithms and artificial intelligence on consumers and competition, and (iii) outsourcing and cloud computing and their consequences for insurance.
Big Data and Insurance: Implications for Innovation, Competition and Privacy
On March 2017, The Geneva Association published its first research report on the topic of digitisation. The paper Big Data and Insurance: Implications for Innovation, Competition and Privacy focuses on the usage of data analytics in insurance. It aims to contribute to an informed and fact-based debate by identifying and discussing key trade-offs involved with the application of big data in insurance. The paper discusses the implications of a wide range of data usage and develops potential future scenarios to highlight likely consequences of different policy choices.
The report, which was developed in collaboration with the universities of Zurich and St. Gallen, argues that the availability of vast amounts of new data, generated by the individual’s online behavior as well as through the Internet of Things (IoT), will allow insurers to play a much stronger role in predicting and preventing risks. This development is expected to generate large economic and societal benefits by reducing risks, diminishing informational asymmetries, lowering the cost of insurance and allowing for new insurance solutions for risks that were up to now considered uninsurable.
At the same time, however, these developments raise a number of concerns regarding privacy and data protection, individualisation of insurance at the detriment of risk pooling, and the implications for competition. Assessing these trade-offs requires intricate value judgements by consumers, insurers and policymakers/regulators. There is no “one-fits-all” solution to these issues, but rather new uses of data should be evaluated on a case-by-case basis.
Based on a detailed analysis of the respective benefits and concerns of new digital business models, the report develops five potential future scenarios for the sector to highlight the likely consequences of policy interventions regarding privacy and access to data.
18th Asia CEO Insurance Summit
Deputy Secretary General Antoine Baronnet presented the main results of the study Big Data in Insurance at the 18th Asia CEO Insurance Summit in Singapore on 27-28 February 2018. The potential future scenarios for the insurance industry, based on different policy choices regarding privacy and access to data, attracted particular interest from conference participants.
Antoine Baronnet, Deputy Secretary General and Head of Insight, at the 18th Asia CEO Insurance Summit