The insurance industry will be profoundly disrupted by technological change, Vincent J. Dowling Jr., Managing Partner of Dowling & Partners Securities LLC, told attendees at MMC's Young Professionals' Global Forum in London.
"In your careers, personal and commercial auto (insurance) business will be gone" as we currently know it, Mr. Dowling told delegates. The U.S. personal auto market, he noted, was worth USD 207 billion in net premiums last year.
He also stated that lines of business such as small commercial lines will be profoundly changed by disruptive technologies.
"I have been following the property/casualty (P&C) industry for 35 years. And I would argue that there has been more change in the past five years than the previous 30 - and we are just at an inflection point of that change," Mr. Dowling said.
Previously, he said, insurance industry participants would not have competed against a client or supplier. But the influx of new capital into the industry now means it is something of an "O.K. Corral," where parties see they can make more money by cutting others out of the chain - for example, by setting up broker facilities or sidecars.
Some third-party capital providers now are competing directly for insurance business, he noted - and they oftentimes have a lower cost of capital and expense base than P&C insurers.
The loss and expense ratios of the U.S. P&C industry, compared with the profit made on every dollar, "is not sustainable" and industry is at "significant risk of dislocation," Mr. Dowling explained.
Many small business owners want to be able to buy all their insurance coverage from one company, he noted. And the insurance industry massively lags others in terms of online customer service.
In a 2013 study by Morgan Stanley Research, insurance ranked fourteenth in terms of online customer experience, ahead only of the real estate and telecommunications and cable industries.
Meanwhile, a 2017 Accenture Report found that 45 percent of U.S. Gen Ys would consider buying insurance via an online service provider such as Google or Amazon.
A glance at the ages of many of the CEOs of P&C companies shows that many are in their 40s or 50s, and this new generation of leaders is already doing things differently because they realize they cannot "run out the clock," Mr. Dowling added.
Changes such as Travelers - previously "the ultimate agency business" - going direct is an example of this trend, he said.
Technology enables new business models to emerge, he added. For example, after Hurricane Andrew in 1992, the microcomputer enabled a swathe of companies to set up in Bermuda.
And we are at the forefront today of another change thanks to technology, he said. The Cloud, big data and the brain power available today mean that "if you can get the distribution - and that is key" you can succeed in this marketplace, Mr. Dowling contended.
And while several large traditional P&C market players are getting into small commercial lines, there is also "a whole bunch of new online competitors who want to sell insurance."
For example, payroll companies could provide workers compensation coverage, and credit score companies could offer insurance, he noted.
The Fintech industry - including insurance - will only grow, Mr. Dowling said, and most customers do not wish to have a separate insurance relationship.
"He who controls the customer wins."
Vincent J. Dowling Jr., Managing Partner of Dowling & Partners Securities LLC, addressing attendees at MMC's Young Professionals' Global Forum.