The Impact of Disruptive Technology

Naylor explains and explores the impact of the looming waves of disruptive technology on the insurance sector. The chapter starts by arguing that the combination of disruptive drivers explored in an earlier chapter means that change is likely to be disruptive than incremental. It explains how these changes will mean a shift in cost of production toward high fixed cost and low marginal cost. The chapter points out that incumbent insurers are struggling to understand the scale of the transformation required. The chapter then draws in data and analysis from a diverse range of sources and explores how the production cost change and other changes will impact of the change on areas like legacy IT systems, customer relationships, and disintermediation. The chapter then explores the implications of the creation of big data via telematics and its analysis by AI systems for various aspects of the insurance value chain. The chapter has a strong focus on how the automation of administrative processing can be combined with insights gathered from big data and used to individualize policies and provide superior customer service. The chapter explores the inherent changes required from a big data-based process. The chapter then argues that the changing cost structure combined with the increase in customer engagement implies that insurance has to move toward real-time continuous interaction, which it calls dynamic insurance. The main conclusion is that a transformation is required in how the insurance sector views itself.