Expert predicts ‘perfect storm’ of disruption in the insurance sector

Dr Michael Naylor says any insurer that is not a big data house is "a legacy company".

A new book examining the disruptive technologies that will transform the insurance industry predicts constant, real-time changes to risk premiums and the disappearance of the car insurance industry by 2030. Dr Michael Naylor, a senior lecturer in insurance at the Massey Business School, has undertaken a meta-analysis of how a range of technologies will change the industry in the coming decade. His report, ‘A Perfect Storm in Insurance: How to Survive the Looming Waves of Disruptive Technology’ aims to help insurers prepare for a very different future.

“Insurers need to change their view of their business as a provider of insurance products to being a data company with real-time links to customers, specialising in personal services,” Dr Naylor says. “Any organisation that is not a big data house now, or is unable to become one soon, is already a legacy company.”

Dr Naylor’s vision of the future also has many implications for consumers.

“In the future, all insured objects will give constant, real-time feedback to the insurer’s data centre – and that includes people. Wearable technology can provide minute-by-minute blood pressure readings and tell if your blood chemistry indicates an illness,” he says.

“Through the connection of objects to the internet it will be possibe for insurers to know how healthy the food in your fridge is or how often you exercise. Imagine how accurately they can then predict your health risk for insurance purposes.

“You have to agree to share this information, of course, but if you do and you are healthy, you should see your insurance premiums plummet. But if you don’t agree to it, you’ll be classed as high-risk and your premiums will be very expensive.”

Dr Michael Naylor.

Car insurance industry – gone by 2030

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

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

Dr Naylor believes 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 per cent by 2030.”

He says that while many might view his report as speculation, there are plenty of examples of innovative insurers overseas who are using technology to change their business models.

British insurer Drive Like A Girl monitors the drivers it insures via 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, Dr Naylor says.

“Then there’s American firm Social Intel, which provides data to underwriters by using software to analyse people’s social media posts, rather than more traditional metrics.

“New Zealand insurers are probably a few years behind those in the United States 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.”

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