Mathew Rutter and Stephen Turner take a look at what InsurTech really means for insurers.
InsurTech ranges from conventional cover where technology is the product, through to cyber cover and the application of technology to all aspects of the underwriting and claims processes.
For example, robotics and autonomous vehicles require the industry to rethink traditional first and third party covers. Here, traditional cover such as property or product liability will see new ways in which liability can arise. There are different contexts for familiar arguments about whether there is "damage" and when looking at the boundaries between traditional classes of cover.
Traditional risks such as product liability face new challenges with increased use of interconnected products -- no longer just for gadgets but traditional products such as fridges and boilers -- and artificial intelligence. These include looking at how interconnected products are juxtaposed and how liability will be determined if one of several products or services fails.
When analysing legal liability, consider the scenario where a robotic product learns through its environment: is the manufacturer or user responsible for a malfunction causing loss? Robotics and AI raise fundamental liability issues about where manufacturer liability stops and user responsibility begins, and whether users of robotics, like car drivers now, need their own liability insurance or whether for now at least, this remains a product liability risk. Where an interconnected product is the weak link in a home or business's cybersecurity, is this a manufacturer or user issue? If the focus is on manufacturers, a failure to identify so-called "silent" cyber liabilities may expose insurers and their boards, a risk the Prudential Regulation Authority has already identified.
New entrants supported by InsurTech will not carry many of the existing high fixed costs and legacy systems of the established players. The risk for insurers who do not develop innovative products of their own is that they struggle to differentiate themselves among a kaleidoscope of other providers.
AI and interconnectivity also present opportunities for insurers. Drones are commonly used to investigate hazardous or difficult to access loss locations. Loss scenario simulations and training can be enhanced by AI. Interconnected products can mitigate risk and present new challenges. For example, smart medical devices can deliver more targeted care and monitoring, avoiding surgery, repeat x-rays and so on.
Products which can report faults direct to their manufacturers quickly and be fixed remotely before causing potentially dangerous failures also offer scope for loss prevention -- provided manufacturers and insurers understand how to control new risks, such as cyber-attacks on connected devices.
When loss prevention isn't possible, better data also has the potential to speed up the claims process and reduce fraud risks, while also making it a smoother experience for the policyholder. Taking a holistic approach to InsurTech means insurers and their key customers take advantage of the benefits while keeping their eyes open to changing risks. InsurTech is one of the key themes highlighted in this year's DAC Beachcroft's annual Insurance Market Conditions & Trends report 2017/18.
Mathew Rutter is insurance advisory partner, and Stephen Turner, a legal director, in the global insurance team, at law firm DAC Beachcroft.
A -- AI
B -- boundaries
C -- cover
D -- drones
E -- environment
F -- failure
G -- gadgets
H -- home
I -- InsurTech
J -- juxtaposed
K -- kaleidoscope
L -- liability
M -- manufacturer n
N -- new
O -- opportunities
P -- Prudential
Q -- quickly
R -- robotics
S -- smart
T -- technology
U -- underwriting
V -- vehicles
W -- weak
X -- x-rays
Y -- year
X -- haZardous