By Matthew Neill, originally posted on Insurance Insider.
The sun-kissed avenues of Northern California which house the technologists who have come to run the world are thousands of miles away from London.
And at first glance it appears that the cultures of its (re)insurance world is several multiples of that distance apart from the traditional strongholds of London, Europe and the US East Coast.
But with the rise of InsurTech in the last two years, Silicon Valley has become the epicentre of the biggest figurative earthquake to rock the industry for some time.
While other parts of financial services industry have been fundamentally changed by technology, (re)insurance has remained relatively unchanged, particularly in London.
Brokers still shuffle to and from Lloyd’s laden with stacks of papers, underwriters come to their box and approve policies with a stamp, and the pubs remain encouragingly full at lunchtime in spite of those who would see it otherwise.
But the winds of change have blown over the Atlantic now, and London is sitting up and taking notice.
The question is – what is going on in Silicon Valley that is going to make it to the other side of the pond?
From all my conversations with venture capitalists, start-ups and investors on the West Coast, one theme continued to rear its head: seriously technically savvy people with no prior experience of insurance are paying attention to the issues in the industry.
And they think they can do a better job than the incumbents.
There are many reasons why they claim to be able to do this: No legacy technology noose around their necks, the capability to change tack quickly and innovate as and when issues appear – offering the same product for a much lower expense level.
But the one thing that stood out above all was their ability to gather enormous clumps of data on specialist industries and, through technological alchemy, transform it into (re)insurance gold.
Take kWh Analytics as an example. Before entering the (re)insurance world, the start-up was a benchmarking tool for the global solar energy industry, aggregating data on the price and quality of solar panels all over the world for the use of investors.
Now it has shifted into insurance, using that data to not only underwrite more effectively, but to give its Lloyd’s backers access to a market they were previously unable to enter on the terms they want.
For the moment, these companies want partnership. They have no desire to take on the regulatory and capital requirements demanded of full balance sheet carriers.
But as these businesses begin to increase scale and gain momentum, there is a distinct possibility they will decide to strike out on their own.
Big data is no longer a buzzword – it is a daily reality that the industry must get to grips with.