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Matt Leonard in Chicago and Prashanth Gangu in New York are the leaders of the technology practice at Oliver Wyman. Business Insurance Reporter Matthew Lerner spoke to both recently to get their views on the intersection of technology with insurance. Edited excerpts follow.
Q: How is technology affecting the insurance sector?
Prashanth Gangu: As the world around us changes, from an insurance industry perspective it changes their clients’ businesses, right? So, insurance covers every business out there on the commercial side, and if there are changes there then the industry needs to adapt its products and how it serves them. At the same time, the same technology and behavioral and societal changes that we are seeing also provide new tools for the insurance industry to better serve their customers. From a structural perspective, as you develop new products in this new economy, is it still that same structure — a broker and an insurance company — or could it look different?
Matt Leonard: I think there’s an open question about who is going to be the one providing the service and how will that service look in the future. I think it would be naïve for us to forecast that all the giants of the industry will remain the same in the future.
Q: Are there any specific technologies or tools which are noteworthy?
ML: I think what we view as fundamental and promising and critical is the use of APIs, because you have data in one place, you’ve got models that are processing data in another place, you’ve got customers in another place, and different stakeholders in the value chain.
An API (application program interface) is basically a connection point to a set of rules for how different software should interact.
You can look at the industry and you can look at examples of where the industry has tried to get together and create some large utility or other platform that everyone complies with using the same standards and that becomes an untenable intractable problem to solve.
With the introduction of API it’s smaller connections for specific purposes, and you’re able to approximate a much larger system or create a much larger system without having to align everyone on the same technology or standards.
In our mind, that is the game changer, and I think that’s been proven out in other industries.
Q: What advice would you offer about approaching new technology(ies)?
PG: A good way to do it would be to set up a green field operation on the side to try out their transformative solutions as opposed to taking an existing business and start having people dramatically change what they do.
Insurance is a complex business. You have to change everything including products and operations and regulatory filings and organizational structures. Rather than try this on the main organization, it would be much better as a green field operation on the side.
Another option is how much can you do by yourself versus partnering with others? I think there’s a whole range of players who are coming and looking at the insurance industry as an opportunity of great innovation. Technology startups, investors, they’re all bringing their own trends. Partnering with them and partnering in an effective way with a long-term vision would be another option.
Q: Do the challenges go beyond the technical?
ML: The other is just the cultural change required to operate in the new environment. I think the insurance industry has rightly been a prudent industry; they take risk, but they’re also risk managers. The idea that you would continually try things knowing that many of them are going to fail is a challenging, very different mindset for many in the industry.
PG: I think it’s important for them to be willing and open to reach out and be OK with being the first in the line to try a different solution. And the insurers have to transform themselves, so I think their clients need to also give them the permission that they support them and partner with them in that transformation.