How Technology Impacts the Insurance Sector - Raymond Kairouz

1. X. International Istanbul Insurance Conference 2018 –
HowTechnology Impacts the Insurance Sector

2.  I- Introduction:
 I-1) Introduction to Chedid Re
 II-2) Introduction aboutTechnology in the Insurance Sector
 II- GlobalTrends ofTechnology in the Industry :
 II-1) Blockchain and Insurance
 II-2)Artificial Intelligence and Insurance
 II-3) Internet ofThings IOT
 II-4) Insurance Distribution Channels
 II-5)AI v/s Human
 III- Pros and Cons ofTechnology
 IV- Regulation inTechnology
 V- Conclusion
Structure

3. • A Company of Chedid Capital
• Founded 20 years ago
• Is today considered the top reinsurance Broker in the MENA region.
• We are registered and licensed Lloyds brokers.
• Over 30 binders and facilities across all lines, some of which are exclusive to us in the region.
• Chedid Re is headquartered in Lebanon, the Regional office in Dubai and has offices in London, Cyprus,
Casablanca and Riyadh, from these offices.
• We cover almost 45 countries in the Middle-East,Africa and part of Europe and we proudly serve around 400
insurance companies across those regions.
• Chedid Re has built its reputation over the years on few main pillars: perfect synergy of customer centricity,
solid management expertise, powerful partnerships and innovative products.
I-1) Introduction: about Chedid Re

4. • The whole Group is fueled by the drive to continuously implement the highest standards of technology to better
service our clients and reinforce the cooperation with our insurers and reinsurers.
• Chedid Re engages technology though the following fundamental standards across all branches:
1. Advanced Customer Relation Management(CRM) platform – Realtime Data
2. Digital Quality Control Matrix
3. Decentralized Intranet platform
4. Cutting-edge Performance Enhancing Software
5. OnlineTraining and Work Library platforms
6. Claims Data Software (GAP)
7. Remote Emergency Response (RER)
8. Security assessments is conducted periodically through a high advanced sandboxing technology
I-1) Introduction: Chedid Re andTechnology

5. Insurtech

6. • “Insurtech” refers to the use of technology innovations designed to improve efficiency and accuracy for both insurers
and insureds.
• The belief driving insurtech companies is that the insurance industry is ripe for innovation and disruption.
• Insurtech is expected to lower and streamline the operational costs of the industry
• Which in turn will benefit the insured with lower premiums and wider coverage.
• Over $5 billion invested into insurance tech start-ups globally, and more than 10 times that in insurance tech spend.
• Some megafunding rounds – such as the ones from Zhong An ($930 million),Zenefits ($500 million), or Oscar ($400
million) – have made headlines.The launch of US-based Lemonade andTrov as well.
I-2) Introduction:Technology in the Insurance Sector

7. I- 2) Introduction:Technology in the Insurance Sector;
some numbers
Outside the US the distribution is much more dispersed.The number two investment destination, the UK.

8. I-2) Introduction:Technology in the Insurance Sector;
some numbers

9. I-2) Introduction:Technology in the Insurance Sector;
some numbers
• Talent is a key issue for insurers, with 87% having
trouble in hiring and, even more so, retaining people
with the right skillset to innovate.
• Insurers can attract talent by acquiring from startups,
partnering with innovators, and fostering internal
talent.
• Further concern regards new data privacy rules, such
as the General Data Protection Regulation (GDPR),
and the possible conflict with innovative digital
strategies.

10. I-2) Introduction:Technology in the Insurance Sector;
some numbers
The top ten InsurTech deals in 2017 raised $974m, half of the year’s total funding

11. I-2) Introduction:Technology in the Insurance Sector;
some numbers
Over $1.2bn was raised in the top 10 InsurTech deals in H1 2018

12. I-2) Introduction:Technology in the Insurance Sector;
some numbers
InsurTech funding on track for a record-breaking 2018 with $1.7bn in capital raised in the first half

14. II-1) Blockchain and Insurance

15. II-1) Blockchain and Insurance

16. II-1) Blockchain and Insurance
 Blockchain is a protocol for the exchange of values/data over the internet which does not require an intermediary; to
establish an ever-lengthening chain of blocks of data.
 Blockchain Applications in Insurance will improve:
 Customer Experience and Reduction of OperatingCosts
 Data Entry
 IdentityVerification
 Premium Computation
 RiskAssessment
 Frauds Prevention
 Property & casualty (P&C) insurance: .
 Health insurance: Through the blockchain, medical records can be cryptographically secured and shared
between health providers, increasing interoperability in the health insurance ecosystem.
 Reinsurance: By securing reinsurance contracts on the blockchain through smart contracts, the blockchain can
simplify the flow of information and payments between insurers and reinsurers.
 A study shows that through blockchain 15% to 25% of reinsurance expense ratios which are typically 5%-10% of
premiums could be removed (PwC, 2016)

17. • One of the important implications of blockchain are smart contracts:
A contract is a paper agreement between two or more parties that is enforceable by law; a smart contract is an
agreement between two or more parties that lives on a blockchain and is enforceable by code.
• A contract which is capable of executing or enforcing itself.Automatically executed when a condition is met.
• These would enable people to trade using the internet, without the need for a large centralized authority.
• The limitations are that these contracts are currently not known to react to unanticipated events.
• They often run on blockchains or distributed ledger technology (DLT). Eg Bitcoin
II-1) Blockchain and Insurance

18. II-1) Blockchain and Insurance
How Smart Contracts Work

19.  Example of Blockchain in Insurance:
Blockchain Insurance Industry Initiative (B3i): a group established in 2016 between a vast array of insurers and reinsurers to discover
the potential of integrating blockchain in the insurance industry; with a primary goal of improving the efficiency of the insurance and
reinsurance industry by speeding up processes, enhancing security, and cutting costs down.
II-1) Blockchain and Insurance

20. II-2)Artificial Intelligence and Insurance

21.  Algorithms used in Machine Learning (ML) are classified into three different types:
a- Supervised: the algorithm is given examples to learn from, examples of the inputs and outputs are given
to the system for it to learn how the right outputs should be, and then the algorithm produces the desired
output based on our inputs.
b- Unsupervised: the algorithm is left to independently discover specific patterns based on bulky input we
feed the system, classify them and produce a beneficial output
II-2)Artificial Intelligence and Insurance

22. • How are we going to accept robots in our lives? Being able to communicate with them will initiate new relationships and
understandings known to us.
• Voice command is the key to an app-less world.
• Natural Language Processing: machines are taught to analyze natural language or human dialect.
Its application in the insurance industry would be in the following forms:
A. Clients chatbots: discussion-like interfaces where the customer would ask questions and the machine would
automatically answer.This would help insurance companies enhance their customer service and reduce
expenditures.
B. Claim processing
II-2)Artificial Intelligence and Insurance

23. II-2)Artificial Intelligence and Insurance
4 Ways AI Will ChangeThe Insurance Industry:
1. Claims: The average cycle time is 10-15 days. With AI-powered insurance claims, this average cycle time is
reduced to 2-3 days.
Reduced cycle time isn't the only benefit to automating insurance claims. Fraudulent claims cost the
insurance industry more than $40 billion a year.
2. Marketing: With the integration of AI, insurance companies have an opportunity to use information
collected from machine learning to develop marketing campaigns. Marketing campaigns based on human
emotion that create a more meaningful message.
Eg: USAA usesWatson for its virtual assistant. Her name is Eva. Customers will ask Eva questions about their
policies. Based on these questions customers ask Eva, Eva will follow-up with automated email campaigns
that offer personalized suggestions

24. II-2)Artificial Intelligence and Insurance
3. Underwriting: Insurance companies are developing their own AI tools to analyze risk.This will impact the
amount of insurance, and the type of insurance people buy.
Eg: FitSense is an example of an AI platform that collects customers health data from multiple devices.
Meaning, FitSense's machine learning agent will comb through your LinkedIn profile, Facebook posts,
tweets, etc. to provide data that assesses your risk.
4. Data: Gaining customer data isn’t a new AI trend for insurance companies, it’s expansion. It takes
consumer insights to make their experiences better.
This data gathered by AI may even improve customer behavior and experience.
Every day nine people are killed and more than 1,000 injured in crashes that are reported to involve a
distracted driver.This statistic above is why State Farm created “Distracted Driving Detection challenge”.

25. II-3) Internet ofThings IoT

26. II-3) Internet ofThings IoT
• A decade ago there were about 500 million devices connected to the Internet.Today, there are 10 to 20
billion. In five years, there could be 40 to 50 billion.
• Nowadays Connecting regular internet-isolated objects to the internet is easier and cheaper
• This allows the devices to:
• Generate data from their surroundings
• Transmit the data autonomously to users

27. II-3) Internet ofThings IoT
• This will affect the Insurance Industry on the following levels:
A. Pricing:As sensors are becoming smaller in size and cheaper, they will soon be placed in various devices;
helping reducing information costs by almost 60%
B. Distribution
C. Underwriting
D. Claims management

28. II-3) Internet ofThings IoT

29. II-3) Internet ofThings IoT
4 real-life examples of IoT in insurance:
• Progressive Snapshot: Progressive, the US car insurer, is using its usage-based-insurance (UBI)
telematics program to monitor how its car insurance customers drive.To date, the company has
made over 1.7 trillion driver observations and says that its prices are based on “how you actually
drive, rather than just on traditional factors like where you live and what kind of car you have.”
• Liberty Mutual: partnered with Google’s Nest to implement connected smoke alarms in the home,
enabling customers to reduce the risk of a fire, and in turn reduce their home insurance premiums.
• Erie Insurance: using drones for property inspections in the event of a damage claim.
• Beam Digital: provides a smart toothbrush to every customer and monitors their oral health, as well
as using this information to support a dental insurance plan.

30. III- Pros and Cons ofTechnology
• Advantages ofTechnology in the Insurance Sector:
1. Generating new business: online or digital marketing processes can aid insurance providers to reach out directly
to the vast magnitude of online buyers. It is much easier to target new buyer audiences online rather than
reaching out to them physically.
2. Reducing customer acquisition cost.
3. Reduced operational overheads: Process automation can go a long way in reducing workforce and employee
cost by substituting humans for technology enabled processes and devices.
4. Making policy underwriting easier and quicker: policies are clearly explained on portals and interested visitors
can communicate directly with the agents using online chats tools and video conferencing facilities.
5. Target ideal customers to enhance brand value: As per market research the cost of branding activities in the U.S.
rose to 5.5 percent in 2015 to reach more than $560 billion. It gives an idea how much important branding is.The
biggest advantage is you can target prime customers very effectively using marketing insights facilities and
analytics tools.

31. III- Pros and Cons ofTechnology
• Advantages ofTechnology in the Insurance Sector:
6. Achieve higher ROI:Technology helps to drastically reduce working capital and offer a tremendous opportunity
for insurance companies to churn out higher profit margins.
7. Lower Insurance rates.
8. Fraud Prevention: through Digital Signature Technology and Data analytics.
9. Lower underwriting cost:The number of internet-connected devices and sensors is projected to reach 50 billion
by 2020, which will have a significant impact on the availability of real-time information that insurers can use for
better pricing/underwriting.
10. Billing efficiency: automated systems can inform and remind customers of approaching due dates for
premiums.
11. Specialized insurance: Machine learning is vitally important here. It has the capability to learn and analyze
billions of patterns and identify suitable underwriting clauses as well as identify specific customized plans for
the customers based on the data provided.

32. III- Pros and Cons ofTechnology
• Downfalls of relying solely onTechnology:
1. One thing that robotics cannot provide v/s humans interaction in long-term relations which nourish trust and
understanding between a policyholder and financial advisor/broker/agent.
2. The underlying algorithm are not transparent, and biases could be built in, both unintentionally and intentionally,
leading to inappropriate advice.
3. Implementation Costs Upfront: the goal of new technologies is to make business more efficient. In the end, the
efficiency should be cost-effective; however their initial implementation requires time and money. Additional
employee training in required sometimes which could lead to a decline in customer service.
4. Security Risks: cyberspace has become a great model for illegal activity including hacking, hijacking and stealing
company or client data
5. Employee Concerns: innovative technology may reduce the dependence on a workforce, the flip side is that
employees lose jobs in the process.
6. Increasing Regulations: Protecting Data and using it ethically are the top priority of regulators.The Insurance Industry
is more sensitive as others as it collects confidential information from clients.

33. IV- Regulation inTechnology
• Regulatory changes are required to be clearly written out, adapted to technology, implemented and
monitored regularly in order to ensure strict compliance.
• This is ultimately the biggest challenge facing insurtech companies today such as customer privacy laws as
well as others which they will have to deal with on a national and international level.

34. IV- Regulation inTechnology
What is Regtech:
• It is the technology that brings together of 3 key elements:
1. Regulation
2. Data
3. People
• This is implemented in order to enable firms to achieve a culture of compliance promptly in the absence
of heavy human manual capital.
• It is becoming more and more crucial as levels of regulation rise and focus on data and reporting
increases, allowing cost saving while preventing non compliance and fines.
• We can expect this disruption to make regulation highly data acquisitive and to involve the use of real-
time information, and the incorporation of algorithms and analytics.
• JP Morgan has executed COIN which reviews contracts to ensure regulatory compliance and reduced
360,000 hours of human effort in to less than 1 minute reviewing the same contracts.

35. IV- Conclusion

36. Thank you