Where are the drones in insurance?

Are wearables the closest thing to drones in the insurance sector?

Although the insurance industry is quite well-known for being heavily steeped in tradition, the life insurance subsector is notorious for being a consistent slowpoke in terms of innovation. Life insurers have somehow become content with the way things are, and their inflexible mindset has hindered great opportunities for growth.

Tom Scales, research director at Celent, says that for decades, life insurers have only been able to make different variations of their products, but have not introduced any groundbreaking ideas. They have transformed their products by adding more complexities, but have not produced a simple yet innovative offering.

Life insurance is ‘stuck’
According to Scales, the industry is caught in a “that’s the way we have always done it” vortex, and it is difficult to break out of this trap. “The closest thing to drones that we have is wearables and wellness programmes. In these programmes, customers are awarded both points and discounts for health living,” he says. Products in life insurance such as term and whole life were already available for decades, if not centuries.

“In the 1980s, there was a flurry of innovation, which resulted in the introduction of universal life policies, initially with a single interest-bearing fund. Product innovation since then has stagnated, resulting in variations of existing products,” says Scales.

As technology takes the reins of various insurance products, life insurers are finally seeing the need to overhaul their model and invest more of their resources in order to catch up. According to a report by Celent, almost 80% of life CIOs see a need for significant or moderate innovation, while only 50% of P&C or general CIOs see the same need.

Scales adds that in order for life insurers to become major players in the innovation game, they have to bring in fresh blood to the company and more importantly, rethink the place of agents in their operations.