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Talent is the key to build successful ecosystems | The Fintech Times

Virtually everyone agrees that ecosystems will play an important role in the future of insurance. So, what are the success factors to make this happen? Reza Khorshidi, Chief Scientist at AIG globally, says the key is talent. DIA Munich (17-18 October) is the must-see event for insurtech and innovation in insurance. At the recent Spring edition we welcomed 1,200 insurance executives and insurtech leaders representing 50 countries and all 6 continents; of which 60% was C-level and C-1. Check the DIA-Website for tickets and more information: http://www.digitalinsuranceagenda.com/ Reza, what does your role as Chief Scientist at AIG involve? Reza: I am leading a team that is primarily focused around development of AI-first products: apps and software services that are design-led and employ machine learning to inform and assist their users. When it comes to ecosystems, I believe that AI will play a key role. Every business is becoming a software business (or at least heavily influenced by software), and it is hard to imagine software without AI these days. As Jensen Huang, NVIDIA’s CEO says: “Software is eating the world, but AI is going to eat software.” Many different definitions are being used. How would you define ‘platforms and ecosystems’? Reza: “I think fundamentally, ecosystems are a realization of the concept ‘sectors without borders’. The reason this became a possibility is due to the advances and the adoption of digital technologies in various industries, including insurance. As a result, companies start to integrate various offerings under one umbrella account and start to kill some of the frictions and redundancies that customers experience when they switch across related services. In the process, they are able to gather more data, which in turn allows them to create a network effect. Think of Nest for smart homes. It tells you that your neighbor is consuming less energy than you, so maybe you should do better. The network effect part is definitely an interesting aspect.” So, the adoption of new advanced digital technologies is one of the drivers behind the ‘platform and ecosystems’ trend. Could you mention other key drivers that make this something different than just a hype? Reza: “One of the main drivers could be developments in adjacent industries that brought them closer to insurance. Like, if you think about Tesla, it is selling units on an average price of nearly $100,000, with a roughly 25% margin. They produce cars, they sell cars, they are actually driving the whole experience of owning a car. So why not offer an additional package that covers the rest? What is the cost of insurance for a car? $1,000? $2,000 per year? It is quite an easy business for them to say: “You know what? Every Tesla car is fully insured from now on.” The customers don’t need to go to comparethemarket.com or something.” Which would take away frictions for customers when they have to purchase car insurance for their new car … Reza: “Yes. This also taps into another trend that could be a main driver for ecosystems: ever-increasing customer expectations, particularly in the consumer side of insurance. These expectations are set by the other services that consumers are interacting with, for instance, using Amazon: same-day delivery, including fresh items and everything. The convenience is at a very desired level. Then, when they go to get insurance, there is often issues around inconvenience, delays in the process, lack of transparency, and so on. None of these things are new to us in the industry; many insurers are trying to improve it. But, generally speaking, that’s one of the drivers.” People are primarily interested in a car, not in car insurance. They are interested in a nice place to live, not necessarily in a mortgage or home insurance. In the Tesla example insurance could become invisible. So, how should insurers become part of that context? What specific platforms or ecosystems will play an important role in the future of insurance? Reza: “Mobility and housing are the ecosystems that insurance business models seem logical to expand into. However, the reality of the competition – take the Tesla example – makes all of them a huge challenge. Personally, I really like the health ecosystem. I think we are yet to see a good ecosystem that is combining the best of finance and medical science, while making people’s life, insurance and care experience better. Most of the scientific and ecosystem building blocks are available; maybe a move by the likes of Apple, Amazon and Google in this space will eventually take us there, but insurers can start now to have an even playing field.” So, on the one hand, building ecosystems is about moving upstream where the real question is, new ways to get access, where you can create new ways of engagement, new ways to understand customers, and transform these into new propositions. And on the other hand, it is about moving downstream. Reza: “Sometimes you need to get closer to the customer; sometimes towards the servicing at the point of claim, and so on. Cyber is a good example. It’s an emerging risk, the landscape is moving really fast, there is not enough aggregated market data. And on top of that, the risk of a catastrophic event is extremely high. In that sort of situation, the traditional insurance offering might not work perfectly. That’s why, for example, we’ve announced a partnership with DarkTrace, an AI cyber defense company. Such alliances would enable us to move both up the value chain to prevention, using readiness diagnostics and preventive recommendations. But also down the value chain to post-breach response and support in case of attacks.” One of the insurtechs that we featured at DIA Amsterdam was Black from Estonia. Black enables agents, brokers and MGAs to launch their own insurance products, fast. Virtually everyone agrees the cost levels of the insurance value chain are far too high. While operational excellence can bring relief, the key for dramatic change is in innovating the underlying business model – and...

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Talent is the key to build successful ecosystems | The Fintech Times

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