What does the future hold for insurance?

Richard Laycock 8 August 2017

Panelists on stage

Takeaways from the TAS Insurance Industry Report.

Last week, TAS, a leading provider of technology services, launched its inaugural TAS Insurance Industry Report 2017. The report was a deep dive into the future of insurance and presented industry data gathered from 50 interviews with business leaders.

finder.com.au was lucky enough to catch up with TAS CEO Shane Baker at the TAS Insurance Industry Report launch and panel to discuss the findings of the report.

Disruption of the car insurance space

The car insurance space in Australia, and indeed the rest of the world, looks set to undergo a monumental shift brought on by the proliferation of driverless technology.

Now, you might rightly think that these changes will have something to do with the lessening of accidents on the road, since autonomous cars will be in constant communication. While driverless technology will no doubt result in a massive reduction of accident risk, the big question it raises is, who owns this risk?

The way that car insurance currently works is that the owner/driver of the car is the person owning the risk, which is why people buy insurance. But, if you're no longer in control of the car, will you still have to buy car insurance or will that be the responsibility of the manufacturer?

"Unfortunately, it's not answered yet," Baker said. "There's a view we're getting back that a number of global insurance companies are on the front foot talking to the manufacturers about how they can embed insurance into the sale of the product."

This insurance won't be the same as the add-on insurance products currently sold by car dealers, but rather it will be baked into the cost of the car by the manufacturers themselves.

"It's still very much undetermined. We're talking five or more years before it's going to have a real impact on the market. But we are hearing that there are insurance companies that are already talking to these manufacturers and looking to take a position if that's the way the market goes," said Baker.

While this is all just speculation, the insurance industry expects the sector to be disrupted big time.

Big insurance companies are making big premiums off vehicle insurance. It's a main line of business for them and that's certainly going to be disrupted.

Left to right: Brenton Charnley, Shane Bake, Vanessa Dobson, Sally Loane, and Andrew Stabback

Pictured left to right: Brenton Charnley, Shane Bake, Vanessa Dobson, Sally Loane and Andrew Stabback

Health insurance in the age of wearables

Health insurance is another space that looks set to change, with wearable technologies becoming more prevalent.

A recent survey from finder.com.au found that Australian consumers would be more than happy to hand over their personal data if it meant that they'd be paying less for insurance. According to the research, a total of 68% of Australians (70% of men and 65% of women) would hand over their medical history if it meant cheaper insurance premiums.

Some health funds have noticed this trend and have been quick to capitalise. In August 2017, AIA and GMHBA launched their joint life and health insurance product myOwn, which rewards members who maintain a healthy lifestyle with discounted premiums.

Qantas Assure (backed by nib) offers its members a similar benefit, except with Qantas Frequent Flyer Points instead of discounted premiums.

"Wearable technology and the Internet of Things (IoT) is going to impact everything. Certainly the insurance sector and health is a big one," Baker said.

Giving insurers access to your health data, be it through your fitness tracker or predictive testing such as DNA tests, will most likely have an effect on your premiums.

"If you're going to invest in technology and better health, you wouldn't expect to pay the same premiums you do today," he said.

However, it's not all good news. New health technologies could be a double-edged sword. Improvements in health care are tipped to increase our life expectancy, but people living longer could mean extra stress for our healthcare systems.

"We'll have a longer lifespan. We'll be pushing an extra 10 or 20 years over the next 50 years or so. Does that create more burden? Does that create more impact on the medical industry and therefore the insurance industry?" Baker posited.

All of this throws into question the very foundations of the Australian health insurance industry, that is, the community rating.

It's hard to imagine how an industry can survive with a one size fits all. There is no incentive for people to invest in the technologies or invest in better health.

"The feedback from the insurance sector is... consumers saying, 'I want to consume services and products in a way that suits me. If I want to live a particular lifestyle, one that has a lower impact on the insurance company, invest in technologies that better improve [my health] and go every year to get a DNA or blood swab to see what my health looks like, then absolutely I expect to see a reduction in my premiums.'"

What does the future hold for travel insurance?

Much like the health insurance sector, there seems to be a growing want for personalised or bespoke travel insurance policies.

Baker said that insurance companies that allow consumers to actually insure just what they want to insure, with the aid of smart technology, will carve themselves out a growing segment of the market.

"Rather than saying, 'You're going over to Bali for a week, that's going to cost you $1,000 and this is what you get', you can start switching it around and say, 'Yes I'm going over to Bali for a week but the only things I want to worry about are that I don't want to lose my surfboard and my camera is expensive'."

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