The future of insurance

In one episode of Netflix's dystopian science fiction television series Black Mirror, an investigator from an insurance company carries around a little contraption that allows her to tap into people's memories. This highly useful device, when connected to a person's temples, gives the investigator a video replay of a person's memories of any given time and place. This makes it easy for the investigator to probe an accident that her company's client - the insured - has been involved in, so she can ensure he has a strong case for a claim against the company that owns the self-driving vehicle that knocked him down. Don't worry, that's not a spoiler. What it is, is a sign that insurance technology has become sexy enough to have made its Netflix debut, and is poised to spread its influence in real lives as well.

No, memory-tapping machines have not yet been invented and perhaps never will be, but insurance experts say the industry will be revolutionised by data analytics, robotics and artificial intelligence. And just as in Black Mirror, this technological revolution is not without its darker implications.

Speak to insurance firms about the future of the industry and the one thing they are united on is the fact that data analytics underlies all their business strategies.

Data ultimately enables insurers to better price risk and build more compelling, customised products for their customers.

"We have always used data to price products, since the birth of insurance," says Great Eastern's managing director for strategy and planning Ryan Cheong. "What we are thinking about now is how to empower the customer, through the data he shares with the insurer, to build a better proposition for him to help him manage his risks."

For example, if a customer regularly shares his latest medical data with the insurer, and the insurer sees that he has developed high blood pressure, the firm could prompt him to join a health programme. "This is in our interest because then the customer will live a longer, healthier life and risk is reduced," Mr Cheong notes.

Some insurers have already begun using data to nudge customer behaviour. Among the first movers in this space is AIA Singapore, which launched its wellness programme, AIA Vitality, in 2003. Under the programme, customers' insurance premiums are lowered based on health improvements.

Customers sync their wearable fitness trackers to the AIA Vitality app, or use their smartphone's in-built health tracker to update the insurer on their activity levels.

Their health improvements are measured by their AIA Vitality Status, which is a system where a customer can attain bronze, silver, gold or platinum status by accumulating points from doing healthy activities.

"We are already seeing results in terms of activity levels and health status of AIA Vitality corporate members within just 18 months since we launched AIA Vitality for corporates," notes chief operation officer Melita Teo.

"Within 36 months, we expect to begin observing the impact of employees' improved health on claims experience, informing our premium decisions accordingly."

Singapore Life has a similar programme. This new kid on the block, which became a fully-licensed direct life insurer last year, rewards its most active customers with a discount on their premiums.

Chief executive Walter de Oude notes that what is important about this strategy is that it incentivises people based on future behaviour and does not punish them for past behaviour or pre-existing conditions.

This, he says, is a crucial point as increasingly, people are questioning how their personal data is being used by corporations.

And maybe sharing with your insurer how often and how long you jog each week is harmless enough - but what else are you comfortable sharing? How about your genetic data?

Placing a premium on good genes

This is an emerging area of concern in the industry, as genetics testing has become more accessible.

Genetics testing allows people to find out, for example, whether they are at increased risk for diseases and genetic conditions such as cancer or Alzheimer's.

There is growing unease among some that insurers will eventually use such predictive tests to discriminate against certain individuals.

Mr de Oude, however, is confident that this will not happen, at least not on a large scale.

"In reality, the way insurance companies work is on the basis of the law of large numbers. You want to insure as many people as you possibly can, without differentiating too much," he says.

"If we start to cherry-pick customers, excluding the people who don't meet your criteria, then eventually we won't have insurance at all."

Other insurers were also quick to declare their unease with the ethical conundrum this throws up.

GE's Mr Cheong says: "Technically you could do it. But is it morally and ethically right? The answer is a clear no."

DNA testing

One insurer that has begun dipping its toes into the murky waters of genetics is Prudential Singapore, which last year partnered DNA testing firm Prenetics to offer a service called myDNA.

Prudential customers can mail in a saliva sample to Prenetics, which will then analyse over 40 of the customer's DNA markers related to how his body responds to the food he eats and exercise he performs.

It then produces a report on what kind of diet and exercise regime would best suit the customer, based on his genes.

But far from using these tests to pre-screen potential customers, Prudential sees this as an education programme to help existing customers lead healthier lives.

Prudential's chief customer officer Angela Hunter stresses that for starters, the insurer does not even receive the DNA data of its customers from Prenetics.

"Data and the ability to analyse it is very important in terms of having more information about the customers to provide them with more tailored information and solutions that suit them, and to help us engage our customers more meaningfully throughout their life journey," she says.

"We see medical tech - myDNA, the use of personal tracking devices, that sort of thing, as being ways to proactively help customers manage their own risks in terms of health and wellness."

The company has been talking to startups about ways they can gamify and reward customers who meet certain health or activity goals, she adds.

But she notes that what remains to be seen is whether customers themselves might someday want to have a premium pricing model based on their medical data.

For example, customers with a clean bill of health might demand lower premiums, just as safer drivers pay less in auto insurance premiums.

While the effort to place a wall between genetics testing and the insurer is ethically sound, genetics testing that is unseen by the insurer could also give rise to adverse results for the industry.

Someone who has taken a test and discovered he has an increased risk of cancer might then buy cancer or critical-illness cover that awards him a lump sum upon diagnosis - without ever disclosing the results of his genetic test to the insurer.

Done on a large enough scale, this asymmetry of information would spell much higher risk for insurers. As it is, premiums for private medical plans have in general been rising over the past several years due to steadily escalating medical costs and claims.

Cutting out the paperwork

Dealing with insurance, whether applying for a policy or making a claim, can be a really onerous process, as anyone who has ever experienced it knows.

Now technology can remove a lot of the pain, insurers say.

Already, for example, SingLife's new customers need not fill out a tonne of paperwork or even undergo a medical check-up before signing up for one of the firm's term life policies. All it takes is 20 minutes to fill out an online questionnaire.

"For the medical assessment, usually for a term life insurance policy you'd have to see a doctor, pee in a cup, and so on," says Mr de Oude.

"But we use a very smart technology that allows us to say, for up to S$2 million of term life insurance cover, we are able to cover you without the need to go to a doctor, just by accurately answering some intelligent questions."

For example, if you answer "yes" to the question of whether you've had issues with blood pressure or cholestrol, the form will follow up with questions such as whether you're on medication and when you last visited the doctor.

"And we know that if you have high blood pressure and you've been to the doctor, the doctor will give you medication and advice on how to look after yourself in your condition, and even if wesend you to a doctor again for another test you're probably not going to get a different answer," Mr de Oude says.

"So we're more than happy to take the customer's declaration as evidence. With the right levels of questions and using the right kind of technology, we can make the whole experience a lot easier."

Prudential, meanwhile, has been working on cutting down the time required to process claims.

Using artificial intelligence and machine learning, the company says it is confident that within this year, it will be able to process in three seconds a claim that now takes three months.

Now insurers are looking further ahead to see how else they can use technology to make the customer experience even more painless, or better yet, reach out to new customers.

"There's a lot that needs to be done in that space," notes Prudential's chief information and technology officer Arvind Mathur.

"Nobody thinks about insurance by default, unless an agent explains to them why they should care about it. I think we need to help people figure out for themselves what they need, then be able to easily connect with an adviser who can help them - because some of this is complicated."

An ideal situation, he adds, is for someone who's thinking about insurance needs to be able to go to a website where they can fill in some details about their life, needs and goals and be matched with the right adviser who can then offer them a customised solution.

"We want to use technology to customise a solution for the customer based on their exact situation - whether they have a family or not, whether they have a home loan, how much they earn - all those things affect the way people think about risk," he says.

For startup Fitsense, which works with insurers to use customer data to better personalise their policies, customisation should also be about allowing insurance customers to make adjustments to their policies as and when they need to.

"Traditionally, an insurer would offer four, five products that need to fit everyone and these products assume everyone is going through the usual life stages - you work, get married, buy a house, have a child. That, of course, doesn't really capture how people live anymore," says chief executive Jan-Philipp Kruip.

"To me insurance needs to be much better at detecting changes in people's lives and make it easier for consumers to adjust the coverage they have."

For SingLife, too, customisation is the way of the future - one in which an insurance company provides solutions not just to help customers manage their risk, but a comprehensive financial portfolio.

"We know we have some of the best technology available in our industry and we can build on that to improve and grow our ecosystem. The vision is to be a preferred financial services company in Singapore and ultimately beyond," says Mr de Oude.

"Imagine a world where, if you made a withdrawal from your financial services account, it can automatically adjust your investment portfolio and rebalance your assets using an algorithm suited to your own risk profile which is designed based on your goals, objectives, risk and spending."

But even as insurers move towards this futureof providing a comprehensive suite of services, from health management to investment advisory, it has to tread a fine balance between helpful and creepy, notes GE's Mr Cheong.

This is especially the case if an insurer chooses to partner another firm to provide a separate but related service. For example, an insurer might choose to partner with a travel agency such that when someone books a flight, the insurer is immediately alerted and can then contact that person about booking travel insurance.

"You may start off thinking this is good for the customer but he may start to find it creepy. The key thing is whether you are solving a pain point for the customer," Mr Cheong says.

"If the customer is prepared to share data with you in return for a better experience, or so you can help solve a problem, that works. But if I take your data and give it to someone else, and that company starts creeping into your life, I think that's invasive and I don't think it's the right thing to do."

Prudential office overhaul: From fixed desks to no desks

THINK of an insurance firm. If you are visualising rows and rows of beige office furniture, white walls and a few potted plants, you are probably not far off the mark - in most cases.

Prudential Singapore's new office, at Marina One, upends all expectations about what an insurance firm should look like, with its neon wall art, sleep pods, Lego activity room and in-house cafe - baristas included.

It is so far from the norm that the design agency it approached to fit out the space initially had trouble grasping just how creative they were being asked to be.

"The first thing I told them was that it should not look anything like an insurance company, but they kept coming back with the traditional vanilla designs. It took me several round of revisions for me to really drive home the message to them - we're trying to go crazy here!" recalls Gaurab Banerji, the man who was hired just to oversee this office transformation.

Indeed, his title is "head of digital and office transformation" - a job that, prior to his recruitment in March 2017, had never existed at Prudential.

Mr Banerji's hiring - and the colourful, cosy, crazy startup look and feel of the office he helped transform - is an indication that things are no longer business as usual in the insurance industry.

Technological disruption has hit finance in a big way, even in the previously impenetrable insurance sector, where barriers to entry were traditionally very high.

These days Silicon Valley startups such as Trov, Sure, Cover and Lemonade are stealing bites from the pie. The incumbents are fighting back - not just by going digital in their operations and investing heavily in things like artificial intelligence, data analytics and robotics - but also on the cultural front.

Because as Mr Banerji makes clear, the transformation he was hired to spearhead was much more than cosmetic.

"We wanted to create a space where people would bump into each other and have conversations, discover what other teams are doing," he says. "So we moved into an activity-based environment where the majority of people do not have fixed desks."

The company knew the shift to hot-desking and having almost no enclosed spaces would be "a bit of a shock to a lot of people" and ran a change management programme while renovations were ongoing, he adds.

"There were pockets of resistance which we had to work on, people were very afraid of hot-desking. A lot of managers were worried at first about how they would locate their team members in an office without fixed desks," he says.

"But we emphasised that our transformation journey was about trust, empowerment, accountability, collaboration and innovation. So we had to tell these managers, 'You need to let go. Trust your people.' "

So far, it seems to have worked. Internal surveys show most staff are happy with their new working environment, with a "large percentage" reporting they feel more productive and have engaged in more collaboration since the move, he adds.