Are dual pricing and the Tim Berners Lee’s initiative to regain consumer ownership, a ‘nudge and a wink’ or a ‘shove’ that Insurers must not ignore?
Financial services (and consumers) have benefited from two types of government intervention in recent years; the introduction of the workplace pension heralded as a triumph of nudge economics and Open Banking, the regulatory change requiring banks to open their core platforms to over-the-top service providers. Much of their impact has so far escaped the general insurance marketplace, yet the signs are this is about to change.
The politicians and the FCA have made their position on insurance dual pricing abundantly clear, some equate this to a ‘CMA9 Open Banking’ moment for insurance, with a clear steer from government; unless change happens there will be regulatory consequences. Notwithstanding the super complaint lodged by the Citizens Advice Bureau and the evidence nearly all insurer profitability is driven by buyer inertia and the customers who for one reason or another don’t shop around at renewal time. This is comparable with the inactivity that spurred regulator intervention in the energy and retail banking markets.
Insurer dependence on new business and market share is a problem and changing behaviour isn’t easy – although one or two have now said that they will act. IFRS 17 ironically may also help, as insurers are required to analyse and report on portfolio profitability in far more illuminating ways.
The other – perhaps longer term – initiative is the creation of Inrupt timBL’s new Fintech business start-up; charged with advancing implementation of the SOLID principles.
SOLID embodies Tim Berner’s Lee’s theory around how the use of data across the internet should be placed in the access control and ownership of originators. To empower individuals and limit when, where and which users are permitted access for defined purposes and to specific time-slices of data – a completely distributed database of human activity. Naturally this flies in the face of the status quo and what we see today where users capture all and every piece of data - pool it for analysis and commercial exploitation. Is there a need for a new verb – ‘to lake it’?
If this ‘nudge’ becomes a shove, and Covid-19 may well prove the tipping point, it will require a completely different type of engagement between Insurers and consumers – supported by new and emerging trust technology. Relationships between parties will become more transparent, we may see the whole model of Insurance move from today’s annual predictive incident compensation to a more engaged risk mitigation and avoidance relationship.
Government response to Covid-19, the clamour for digital enablers to speed and control the rollback of lockdown and the efforts Apple and Google are making to facilitate contact tracing, are going to change how we think about health data and community. It will also change our expectations of how insurers, collect, store, secure and manage our personal data.
The technology foundations for this are now being laid with the UK’s investment in 5G connectivity and the continuing technology investment being made by UK households. The issue in this scenario is whether insurers will be trusted by consumers or whether other brands will take this ground, relegating insurers to manufacturing status – emerging players in Open Banking provide an indication of how it will play out.
Rather than continue with the current – for many unsustainable – model, is now time for real innovation? Let me know what you think.