“The insurance industry is on the verge of a seismic, tech-driven shift. Those companies that adopt a mindset focused on creating opportunities from disruptive technologies, instead of viewing them as a threat to their current business, will emerge the winners in AI-based insurance.”
This viewpoint, along with many other insights, was shared earlier this year on McKinsey and Company’s website. In an article titled “Insurance 2030 – the impact of AI on the future of insurance”, the consulting company provides a forecast of how rapid advances in technologies in the next decade will lead to disruptive changes in the insurance industry. Although the content of the article follows a glass-half-full approach, its underlying message is clear: adopt or die.
Stephen van Niekerk, the executive head of Momentum Myriad, more or less shared this same sentiment at a media briefing held last month in Cape Town. Having launched LifeReturns, a “first-in-industry innovation” life insurance product, at the end of last year, the financial services group provided feedback on the lessons it had garnered in the past few months.
Van Niekerk says, when it comes to the conversation around AI, the focus is largely on how it is going to take away jobs. Instead, he says, the industry should be taking the complementary approach.
“Instead of what this is going to take away from me, we need to be asking, how am I going to use this in every aspect now to make me better at what I am doing?”
Embodying this ethos, LifeReturns incorporates the use of screening technology, called Photoplethysmography (PPG), to onboard clients via a smartphone. Similar to taking a “selfie” video, the technology analyses the light reflected from facial skin to measure health risk factors, such as blood pressure, heart rate, and oxygen and stress levels. To access the product, clients can either complete a 90-second mobile screening session, using their financial adviser’s phone, or they can ask for a link to the app to be sent to their smartphone.
By asking a few additional mandatory questions that cover Body Mass Index, estimated fitness level, and medical scheme membership, the screening technology can use the results to calculate and offer clients immediate discounts on premiums. The tool shows the client’s discount upfront, and an annual screening is all that is required to maintain this discount.
Of the 15 000 screenings done thus far, just under 10% of the clients (those who show no significant health risks) were given access to “FastTrack”, which meant policy approval in minutes, streamlining the underwriting process significantly.
Van Niekerk says the hope is for this percentage of FastTrack clients to grow as PPG technology becomes even more advanced, changing it from being approved as indicative (as is currently the case) to diagnostic – a possibility that may be only a few months away.
Recognising opportunities
Although the PPG tech has been around for a while, Momentum is the first to package it as an insurance application forming part of the underwriting process, something that was largely made possible by the advancement in smartphone cameras.
Recognising the possibilities that PPG holds for the insurance industry, Momentum teamed up with an Israeli company involved in this technology about three years ago. But Van Niekerk says, the seed for this product first took root during the Covid lockdown. He says, previously, if you wanted to attend an international conference, it meant flying overseas.
“But suddenly this world opened up where you could listen to talks in America. Obviously, insurers were trying to figure out what to do. I remember this one American saying, you know we live in 2019, and we still have to take blood from somebody to determine whether they can be insured. How long are we still going to be doing that? You have to bleed to get insurance cover.”
Besides making it simpler and quicker for clients to be onboarded, the product enables Momentum to offer life insurance cover at a discounted price based on each individual’s risk profile.
Van Niekerk explains that when it comes to making underwriting decisions – risks versus premiums – about 80% of their clients fall in a standard pool. The other 20% is made up of clients with loadings (15%) and exclusions (2.5%). Less than 2.5% falls in the defer, MDB (maximum death benefit), and decline buckets.
Van Niekerk says, at present, everyone in the standard pool pays the same premium, irrespective of whether one might be healthier, fitter, have better mental health, or be more health conscious than the others.
“For a start, you can make insurance more affordable with discounts. Secondly, you can individualise the process, because, at the moment, everybody goes through the same process. Whether you are healthy or older, you need to go to the nurse and bleed.”
Are clients ready for AI?
He says factoring into their decision to launch LifeReturns was the crucial question whether clients were ready for it. According to client feedback – and a consumer study done by one of Momentum’s reinsurance partners – South Africans are. And more so than their European counterparts, it seems.
The study found that in South Africa, 84% of people used online tools during their recent insurance purchase, and more than 80% were comfortable sharing data with insurers. Among 22 countries polled on whether they would say “yes” or “no” to feedback on data that can be good for their health, South Africa came in fourth, with 84.5% saying “yes”. The top three “yes” countries were Mexico (91.8%), Indonesia (89%), and India (88%). Making up the bottom three were China (53.9), Germany (51.5%), and France (48.5%).
Another interesting observation shared at the media briefing was that of the 15 000 screenings done, 95% had screened using the screening link without an adviser present. The blood pressure reading generated by the smartphone screening technology also proved to be more accurate than those done by nurses.
“Apart from the ‘white coat’ effect, we found that nurses tend to round off the results,” Van Niekerk says.
Utilising big data
Among AI-related trends shaping insurance, the McKinsey article lists the explosion of data from connected devices. Experts estimate there will be up to one trillion connected devices by 2025. These devices will include an increase in existing ones (such as cars, fitness trackers, home assistants, smartphones, and smartwatches) and ones, growing categories such as clothing, eyewear, home appliances, medical devices, and shoes.
“The resulting avalanche of new data created by these devices will allow carriers to understand their clients more deeply, resulting in new product categories, more personalised pricing, and increasingly real-time service delivery,” the article reads.
As part of the LifeReturns onboarding process, the app does a lifelines check (clients must move their face very close to the camera), which checks that a real, live person is being screened. This image and the ID number provided are cross-referenced with Home Affairs’ records and validated – Fica and verification is done on the spot. Clients are also asked to provide their consent for obtaining data from third-party data sources, enabling Momentum to verify clients’ answers to the mandatory questions.
Van Niekerk says big data and AI technology are going to fuel the industry.
“These big data sources live out there, and over time, as you connect them, you can change the insurance journey. We want to make insurance more affordable and more accessible to clients, and we want to add value to the insurance journey over time.”
However, he adds it doesn’t help to talk about big data when your adviser sits in front of you and pulls out a piece of paper. He says if the process is paper-driven, there is no place to connect the data.
“What you see here with mobile technology, if your client can start engaging with the tech at the beginning, and you have consent, allowing access to third-party data, then you can start making your life easier. It doesn’t help to say there is tech and then start with a piece of paper and there is still a nurse going out – it is a bit of an enabler.”
According to a Remark 2022/23 global consumer study, when it comes to insights for future underwriting strategies, the deciding factor of success will be who can most effectively take advantage of technology and data to empower their consumers.
“In other words, whoever is creating the best consumer experience without compromising risk management discipline will win the race,” says Van Niekerk.
But, he adds, in the end, it comes down to survival, not profit-making. Adopting AI will make the experience of purchasing insurance easier, faster, and more affordable.
“There are pressures on businesses. Everybody knows the economy is a tough one. Efficiency is there for survival, not for profits, and it is a necessity of the growth that we have. Our country grows at 1% to 2% a year, and everything grows by inflation. Everybody has to be paid by X plus 6% every year when everything that comes in only grows by 1%. There is only one answer for that – efficiency.”
