“We are going to see a shift in what gets insured and how much premium is generated as risks get reduced by technological advances such as driverless vehicles and by the increase of risks from other factors such a climate change…”
FST Media: What are your business and digital priorities for the next 6 months?
Forward: Technology and digital platforms have always been a priority for QBE in Australia and New Zealand. For example, we were the first to market with an online broker portal with broad product support, and we were first in market around a motor vehicle telematics-based underwriting product called Insurance Box. The telematics monitors driver behaviour, and adjusts the premium accordingly.
This year, we’ll be continuing to invest in digital offerings for our direct business, such as motor and home insurance, Compulsory Third Party and through our banking partners.
A key attribute of these priorities are to improve customer service for both insurance sales and especially for the facilitation of insurance claims. We’ll also be refreshing our online broker portal.
FST Media: What technology or innovation is proving to be the biggest game changer across the insurance industry?
Forward: I think that driverless vehicles are the biggest single game changer going on right now. We have been on a continuous move to reduce the reliance on driver skills and reactions for a couple of decades and this is now significantly accelerating. Technologies such as anti-lock braking and stability control are in nearly all vehicles, are managed by computers and are already reducing accidents and the severity of accidents. These are nothing compared to the more complete computer-managed vehicle technologies being deployed. We are already seeing these high-end driverless technologies in places such as the Pilbara mining pit trucks used by Rio Tinto. The technology is no longer an experiment.
Now it’s a really good thing that we are going to enjoy a significant reduction in vehicle accidents and personal injuries from accidents. It’s a fantastic improvement on both a personal and a social scale.
However, a commercial consequence for the insurance industry from that reduction of risk will be a reduction in the premium pool. In Australia, more than 50% of all general insurance is motor-vehicle related. Although we’ll likely see a shift from insuring individuals, to manufacturers.
FST Media: What are the key challenges with growth the insurance industries in both Australia and New Zealand face?
Forward: We are going to see a shift in what gets insured and how much premium is generated as risks get reduced by technological advances such as driverless vehicles; and conversely by the increase of risks from other factors such a climate change.
Even where there are growth opportunities, we need to be mindful that growth has got to be profitable. We are an unusual industry in that most of our revenue gets paid back out to our customers in the form of claims. That’s why we exist; that’s the social purpose of insurance. But if claims exceed premiums, or even if they are just below premiums, the industry is either not profitable, or not able to provide a return on the substantial amounts of capital that we need to run our businesses.
So even where there are growth opportunities around emerging risks we need to be able to appropriately price to those risks. And that’s a complex problem for things such as climate change because by definition we’ve never seen such a thing before.
FST Media: How will fintech investment drive new ways for the insurance sector to develop?
Forward: Instrumentation of things (aka the “internet of things”) is a significant contributor to the fintech investment going on right now. We have seen this in vehicle telematics and it’s extending far beyond. So we have the possibility of defining and insuring risks in real-time, and adjusting it as well.
One of the consequences is that we are seeing start-ups insuring things that were difficult or impossible to insure previously, and doing it much more rapidly than we’ve seen before.
Similarly we are seeing many of these technological advances driving improved claims experience.
FST Media: What are the main Cybersecurity risks facing the insurance industry at the moment?
Forward: Broadly the cybersecurity risks that the industry faces are similar to those in every other industry. We are in financial services, but we don’t attract the kinds of attention from hackers that, for example, banking does. So we don’t underestimate the problem, but neither should any business.
FST Media: What can be done to stem the negative impacts of falling interest rates on the insurance industry?
Forward: Falling interest rates are a significant problem on the earnings of insurance companies because the returns on our reserves (the money we hold against current and future claims) is significantly reduced. That fall reduces the earnings we can generate from our business, and the return we can give to our shareholders. On the upside, we may have reached or be very near the end of the low-interest rate cycle, given the recent tightening by the US Federal Reserve and the fiscal policies of the new US Administration.
FST Media: How is QBE responding to the challenges of digital disruption?
Forward: We are investing in our platforms and our capabilities. Our success around telematics gives us significant insight on the opportunities that exist. We’re investing in digital marketing and improving our digital platforms and have already made significant in roads through social media, which will only continue to grow. Many/all of these changes will also improve the claims experience. As a global provider we have the advantage of being able to learn from our colleagues across the globe and adapt for the Australian and New Zealand market.
FST Media: How do you encourage a culture of innovation in your team?
Forward: We’ve been very successful in crowd-sourcing innovation from both the technology team and the broader QBE business. We run an annual online innovation forum open to all employees, and we are investing in many of the ideas that come out of that. We also ran our first “hackathon” in 2016 as a complementary activity.
We have established a global Innovation Lab, based in North America situated in our main technology centre adjacent to the University of Wisconsin-Madison campus, and we are rotating our graduates through the centre.
FST Media: What is the next big thing for QBE and how will you measure its success?
Forward: QBE has been transforming itself for some years on the back of a decade or more of Australian and global acquisitions. We’ve grown from a purely Australian-domestic insurance company to the largest Australian general insurer with the bulk of our revenue coming from other markets/overseas.
We’re continuing to focus on the global nature of our business, including finding synergies between the divisions. So we’re looking for common platforms and common processes. And clearly technology has a key role in that process.
How will we measure success? Ultimately, in how our customers respond – sales and renewals are the obvious measures, but so is their feedback. It isn’t just about getting the transaction, it’s about delivering on the promise through service and the claims experience. We also measure success through our people, through employee engagement and being an employer of choice. Of course, we’re a listed company, so we have an obligation to deliver profit to our shareholders. We strive to be the insurer with the strongest partnerships, so fostering relationships with all our stakeholders and our business partners is also a critical measure of success for us at QBE.
FST Media: What is the best career advice you have received?
Forward: Understand the business you’re in. Technology is a professional skill set, but you have to apply it to the industry you are in. Unless your company happens to be a technology company, technology is not the point of what you do, it’s a means to an end.