The future of insurance is more than just digital

Our latest Guest Blog is written by Duncan Minty, an independent ethics consultant specialising in the insurance sector. In this short, informative piece, Duncan’s challenging us to really define what he calls ‘Equality of Fairness’ and to get specific about how Digital and Customer strategies work cohere. Or don’t. As he says, "hyper-personalisation isn’t in the future, it’s here and now so this is both an urgent and important debate for our sector.”

There’s a lot happening in insurance at the moment. New ways of designing and delivering cover and services are now everyday news. And while there’s a lot to be excited about, there’s a danger that our attention will just be on today’s moves and this week’s launches. In times of change, it’s important to keep an eye on the forest as well as the trees. In other words, to embrace change, but to think as well about where all that change might be taking the market.

Most of this change is being driven by digital and while most insurers have created carefully thought through strategies for how they’ll use data and analytics, not so many are thinking wider than that.

One exception is an APAC insurer who undertook detailed research several years ago into the future of insurance. It learnt that as the competitive advantage of digital diminishes, what will emerge as the new differentiator is trust. As a result, it reorganised its digital strategy around data ethics and customer relationships. For them, the point of digital is to build trust.

We know that insurers are looking at lots of touchpoints and using digital to address the niggles or more that customers have. Yet I doubt that this will have much impact on trust; it is more likely to just remove gripes. The bigger picture is where sustained trust in insurance is gained or lost.

When you stand back from this or that week’s new development, what emerges are profound changes to the sector. These changes come together in what is called ‘personalisation’. This involves using data and analytics to find the premium and cover that is just right for you personally, rather than you as a member of a wider pool of risks. Why pay, goes the argument, for the claims of your accident-prone neighbour? You’re not like that and so are surely a ‘better risk’, deserving of a better premium.

It’s nice but flawed, for claims will still happen, and instead of a premium smoothed over time and across groups, you’ll be expected to bear the inevitable ups and downs of your own risk experience. Is that what the public expects from insurance? It’s questionable.

The arguments behind personalisation are now being taken further. Surely, they say, if personalisation in insurance is fair in terms of the risk each policyholder presents now, then it should be just as fair to consider the risk each policyholder is likely to present in the future. Why should a lower risk policyholder carry the claims costs that a higher risk policyholder is predicted to present over the next 1, 3, 5 or even 10 years?

The more public side of this narrative talks about how useful this will be to help those policyholders reduce those predicted risks. And that sounds great, but must be set against the context of the market side of the narrative, which is about limiting or avoiding such risk.

This ‘hyper-personalisation’ trend is not a future thing. It’s happening now, for example in embedded insurance, a digital version of add-on insurance. And the scope of its application is going to widen, from property and liability markets, into life and health markets. Why do you think a leading insurer funded research into predicting mental health issues through selfie photos?

Why should 3 out of 4 of us pay a higher premium for the 1 out of 4 of us predicted to experience mental health issues during their lifetime? Because it will, at 1 in 4, be someone in your immediate or near family. This atomisation of insurance, taken into the future, raises some fundamental questions, not just in terms of ethics, but social justice as well. That is why academics talk about the future of insurance being political.

A key narrative associated with the future of insurance is fairness. It’s a narrative seen in relatively narrow terms by the market, which focuses on the ‘fairness of merit’ dimension. This is what underpins the logic of personalisation and hyper-personalisation.

Fairness is more complex than that however. The regulator now has expectations for insurers to bring in two further dimensions: the ‘fairness of need’ and the ‘fairness of access’. Yet even the regulator has been slow (and I fear rather myopic) on the fourth dimension: the fairness of time. In other words, what is fair for you today could be unfair for you tomorrow. Shouldn’t insurance smooth those experiences, rather than ride you up and down them? Grasping and resolving this ‘equality of fairness’ debate is crucial for the sector’s future, whether insurers or the regulator like it or not.

So how should an insurer engage with all this? The following five steps will get you started, so long as you remember that this is ‘not just about you’ the insurer. It is about your customers.

  1. Listen to the debate and learn its salient points. Be careful not to adopt a defensive mindset;
  2. Engage with a range of views, not just those of the market. Encourage challenge;
  3. Explore the implications for your firm, across all functions, not just underwriting;
  4. Judge this against ‘who you are’ as a company, not just now, but where you want to be;
  5. Encourage others to do the same and share ideas and experiences.

Does this feel too much too soon? I don’t think so, given that hyper-personalisation is now talked about as one of the big insurance trends in 2021.

In my own work, I am seeing a few firms exploring the relationship between their digital strategies on the one hand, and their customer strategies on the other, in the context of ‘who they are’ as a company. One of the questions this raises is that of ‘proximity versus intimacy’. Is your digital strategy based on using data and analytics to get closer and closer to the customer? Or is it based on using data and analytics to cause the customer to want to get closer and closer to you the insurer?

Do you see the difference between these two approaches? It can be summed up as consumer trust. That’s because the proximity approach exposes the firm to ethical questions about consent, autonomy, transparency and accountability. Those questions are absent with the intimacy approach because they have influenced the structure of the engagement.

To have a future, insurers need to have trustworthiness at the heart of their digital strategies. They need to unpack these things called data ethics and trust, and use the ingredients to shape what they want to achieve. Sounds complicated? Not really, for just like most other facets of business, you just need the right resources and expertise.

About the Author

Duncan Minty is an independent ethics consultant, specialising in the insurance sector. He’s worked with a range of insurers and brokers over the past 20 years, helping them turn a commitment to ethics into practical improvements. He is also a Chartered Insurance Practitioner, having worked in the UK insurance market for 18 years.

In recent years, he’s been engaging with academics around the world on the implications that data and analytics have for the future of insurance. He’ll be joining with them in an EU research workshop this November in Italy.

To explore these trends in a little more detail, these article are worth reading…

On personalisation –

On hyper-personalisation –

On the equality of fairness –


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