2018, a view through my looking glass!

As has become a tradition, as well as great fun (but also really tough!) - this is the time of the year to reflect on the year that has whisked past quicker than expected and a look ahead to what 2018 will bring, no doubt faster than a blink of an eye! Here are some of my personal perspectives, reflections and my thoughts for the year ahead!

Its been an amazing year, I've completed my first full year at Deloitte which has been just brilliant, worked with some great clients, solved some really crunchy questions, engaged with some really inspiring startups (and some less so me-too's), contributed to the InsurTech book and felt like we have mostly made some solid progress, slower in some places than I had hoped, faster in others - but in the round pretty good and lots of fun along the way.

I'm going to briefly review last year with a simple score - otherwise this would be a really really long post - to view my predictions from last year in full see here. While I think they are all still valid, heres my score.

So, for 2017 here goes!

1. Speed. This without doubt has been a constant theme for 2017, whether you are augmenting, transforming, digitising or otherwise. Marks 1.
2. AI, Cognitive & Machine Learning. Theres been lots of talk, buzz, hype but not enough execution in my view. Everyone has an algorithm!. Marks 1.
3. Line of Business Focus Shift. Whilst Personal Lines has still dominated, there have been some strong moves into SME, Health and surprisingly to me Life Insurance. Marks 1.
4. Believers. As Erik Abrahamsson, CEO & Founder of Digital Fineprint said, 'If 2016 was the year when ‘some’ insurers started innovating, 2017 will be remembered as the year when ‘all’ insurers jumped on the bandwagon' ... I 97% agree, there are a few that are still in a spin, but lots at different levels of maturity and scale. Aviva for Example have some great things to say from their garage. hear more from them directly with their recent Podcast Takeover.
5. Scale & Profitability. I think many have struggled here. We even lost a few startups along the way. Many could look a the startup space and still say there is no threat, they haven't topped 100,000/1m customers (excluding China of course!) Marks 0.
6. Orchestration. Not enough people talking about or doing things here yet. See 2018 predictions below on why I think this is important still. Marks 0.
7. External Disruptors. These are progressing at pace and driving us to move (no pun intended) See 2018 predictions below - here we are a lagging factor, not leading - we have no choice if we wish to survive. Marks 1. (although not sure I can take credit for this).
8. Micro Insurance. Talked about, but not enough evolution. I think the disruptors above and new business models, eg the Gig Economy will really open up this space. Marks 0
9. Blockchain & DLT. There has been continued solid progress here with some great market initiatives (e.g. AXA gets Fizzy for Travel Insurance) and collaborations (e.g. XL Catlin, MS Amlin, EY, Microsoft & Maersk for Marine Insurance), the birth of B3I and more - however much more to come. Marks 1
10. Business as Usual. This is/was more about people and culture. More diverse thought needed here along with brave souls to push the boundaries and challenge the pace. We have a few stand out folks, but still lots of incremental push. This is probably the hardest of all. Marks 0.

Score: 6/10

Looking ahead, 2018 for me will see lots of firsts as well as further evolution of the great work already underway. I see some of the following themes evolving:

1. Our first Driverless Journey - Autonomous Vehicles and Connected Cars. I'm super excited by this (if you hadn't guessed from my twitter feed) and the work the industry is doing here in general. I think it will have one of the most profound impacts to Insurance propositions as we know them today, along with the seismic shift in risk. In fact, its way beyond the car and a genuine change in the future of mobility. Have a look here for more on the Deloitte broader perspective. By the end of 2018, through the DRIVEN Consortium we will have travelled from Oxford to London and back (DRIVEN is a consortium of British companies, led by Oxbotica, and enabled by the UK Government). I also expect most Insurers to have a strategy/approach/opinion for Driverless Cars/Fleets. It's already reached mainstream media, possibly for the wrong reasons (real risk of being hacked) but equally received enough Government focus and funding to keep the UK at the forefront of the global change. For the insurance part, XL Catlin are on taking the lead here. Excited to see this one evolve!
2. API 's / Insurance as Service - I touched on this last year (#6 Orchestration above), but scored myself - 0). Moving into 2018 and with both the arrival of PSD2 for banking, and the recent launch of the Lemonade API - I think the marks the start of Insurance as a Platform. For years we have taken the best parts of the value chain and pieced them together. Now with an Insurance API or Underwriting API, we can plug together a very unique offering very quickly indeed!. I predict many will follow here and the winners will be those that can orchestrate them best. Need a claims capability, bolt in the API, same for Underwriting etc. Need a loss adjuster service, leverage the crowd and new business models . Robin Smith and the team at WeGoLook are doing exactly this. Of course when I say 'we' - I mean anyone who wants to offer an insurance element. In fact, Quentin Colmant, Co-founder of Qover shared his experience when I caught up with him in Vegas this year. Listen here. If others follow, then this simply means that Insurers must become the most efficient manufacturers and potentially lose touch with the customer. To do this, we need to decide what we want to be in the value chain and where we can truly differentiate.
3. The deathly fear of Amazon and other GAFA/BAT companies entering the market. I'm not sure this deserves its own point, I maintain that they have always been part of this market as providers of data, access and much more. Much was written about Facebooks acquisition of a payments services licence in Dublin many years ago. This whole fear has been reborn due to Amazon advertising for Insurance professionals in the UK - and headlines following - 'Amazon is coming for the insurance market, should we be worried'. Answer, YES if the only thing we choose to do is sit and watch the rear view mirror, but NO if we are passionate about serving our customers and doing the right things by them, whilst at the same time showing the transparency and speed to execute many of the newcomers are already demonstrating e.g. Lemonade and their continuous updates. It feels very much with us, not to us. Theres a good post here from Robin Kiera here on this very topic with lots of subsequent debate. To be fair, Aviva also posted some great insights on the 96% of claims they paid in 2016 - a clear and positive move to show that we as an industry are not taking peoples money and trying to avoid all claims, contrary to perception. Bottom line, focus on what you are excellent at - in Amazon's case - distribution, supply chain and interaction. Partner where needed to get regulation and capital (which is exactly what the InsurTechs are doing with reinsurers).
4. Re-bundling / Orchestration / Insurance + - For the last few years it has felt like 'theres an app for that' across many industries, not just insurance/financial services. What this has lead to is an unbundling of many services and a plethora of services/apps etc that has now reached peak pain in the toosh!. Whatever gripe lead to the - 'I'm going to get that elsewhere' is now surpassed by stuff being strewn all over the place. In a race for attention - this is the worst possible scenario and I see many folks now re-bundling or orchestrating a complete suite of capabilities for clients and customers. Given the rise of the API, PSD2 or however we are going to join the dots, coupled with a stunning, easy to use UI/UX - I feel hugely passionate this is one area that external disruptors could win in if we don't take action now. A good example of this is what Matt at the team at NEOS are up to. For me this falls into the Business Services area, or Insurance +. It satisfies more than just the insurance need, but gets some connected home kit, monitoring kit, preventative maintenance and more, the same way Vitality are doing for health. Ultimately making this relationship more than just insurance. This for me is the shift from Product to Customer Centric, something we have talked about for quite a while and are now starting to see with bundled policies or ways to cover multiple or all risks. Whether its Brolly, Pouch or Getsafe - many have entered this space from one direction or another.
5. Voice has been much talked about with the arrival of the smart assistants (Google Home, Amazon Echo, Cortana etc). Many insurers have jumped on the bandwagon (Aviva, Neos, Liberty etc) and released skills for these, see here from Coverager for a good summary. A great addition, but I don't believe will be a game changer at all. I've not yet seen business case/ROI request for thousands/millions of call defections through the use of these in the same way we did for email/self service. In reality most of these just added more interaction than deflected calls. Nice to have for 2018 - 2020, but certainly not essential. As with all of these, I often talk about 'customers need to be ready' and whilst the Echo Dot was the most popular item on Amazon this Holiday Season, I don't believe customers are yet ready to get or service their insurance this way. Thats not to say we shouldn't keep developing the use cases as these increase with voice assistants moving to the workplace and car for example over the next 12 months. This is natural evolution for me. I could say the same about Selfies to do quotes . Good fun, but not necessarily an industry game changer.
6. Regulation. Like it or not, regulation will play a material role for most carriers in 2018 with GDPR in May 2018 and IFRS17 requirements really taking hold as just a start. These are not nice to have investments and if you are deeply engrained within complex estate with decades of history, M&A's, systems etc - these are not cheap either!. This will no doubt siphon innovation/change/digital funding away from making a difference. Key here will be spending to leap frog and leverage investments in regulation to differentiate at the same time and not just tick the compliance box. Whilst on regulation, we should also credit the FCA here in the UK for their continued approach to helping startups - now on their 3rd cohort.
7. InsurTech Investment - In 2017, InsurTech startups continued to secure considerable funding. Plenty of examples out there but two or three spring to mind including - a record £180m for Gryphon, disrupting the Protection Insurance space (Following by the acquisition of the Guardian name in December), Allianz investing $96.6m for BIMA, with Softbank leading a Series C $120m for Lemonade. For the latter, the PR machine seems to continuously flow, with no doubt a huge amount of hard work by the teams. Whilst a big investment for InsurTech, the very next day Softbank put a further $4bn into Didi, the Chinese ride sharing equivalent for Uber & Lyft - valuing the company at $56bn. Our fascination with the East will continue in 2018 as the sheer scale of things appears daunting to most. One of my favourite stories was a bank that signed up c800,000 customers in just four days. A huge success by any account, but when you dig into the numbers, you realise its less than 1% of the companies existing base. So for me, important to compare % figures than absolute numbers. Of course, not wanting to take away from what they are doing as the pace and technology they are using should not be underestimated - keep a watchful eye here! In 2018, money will continue to find InsurTech's to back, however I suspect it will slow down and be more focussed as early investors look to seek value from their initial investments. There are plenty of new folks out there now identifying new areas to focus on within Insurance with quite sizeable war chests. Of the 3 investments above, the one to watch for me is Allianz/BIMA. BIMA is a joint Swedish/UK Startup that helps people in developing economies buy affordable insurance through their mobile phones. Surely a huge opportunity, both following the same model we saw for M-Pesa and unlocking the huge potential for developing countries. Something the IIF published on recently here that I also contributed to. I also want to see more transformation plays such as Laka - congrats to Tobi, Jens and the team for trying something very new and their recent announcement with Zurich. I know a lot of hard work has gone into this.
8. New Business models. I'll finish this year, as I did last - People. The change in how we engage, employ and chose to work - namely the rise of freelancers, the gig economy and much more means we will need new products and services to support them. I find this whole area fascinating as people chose to live and work differently. This will no doubt drive the increase in micro-insurance and new products that we call on as we need - Ive talked about 'frictionless insurance in a land of utility' for a while which is exactly aimed at this. A recent report cited that workers were missing out on £22,000 of pension contributions. In 2018 many will look to start to solve this.

One common theme here in many of these is the use of and need for AI. Throughout many of these, AI is their very centre of the existence and being, hence why I have not called it out specifically. My assumption is every level of disruption, be it evolutionary of truly transformational will continue to leverage this in some form or another. We could and have written whole pieces just on this alone.

Other highlights for me that show InsurTech's coming of age was InsureTech Connect in Vegas - the event that I challenged Jay and Caribou very early on would be seen as nothing more than a Jolly! Boy was I wrong (sorry guys), and the team surpassed last year and had to shut down registrations at 3,800 - yes, 3,800 insurance folks and startups all under one roof. Hear more from Caribou here when we caught up after the event.

I have thoroughly enjoyed co-hosting the InsurTech Insider (here on iTunes) Podcast with David, Sarah and the entire 11:FS team. We are 6 episodes in and will no double down on our effort to bring you the latest innovators, challengers and more from the world of Insurance. We have had some really lovely feedback and requests to come on the show. If you have something to share, please just let David or I know. Outside InsurTech, 11FS are sharing some great insights through FinTech Insider in general as well as their latest addition, Connection Interrupted with Sam Maule - both worth a listen, after the InsurTech Insider of course!

Of course there will be plenty of more Buzz Words in 2018 - I've already seen the Bionic Underwriter phrase at a recent conference in Bermuda which I actually really like. It sounds very much like a phrase I have picked up through our partnership with McLaren which is 'Humans in the Loop' - that is, while Technology will support/augment and assist - it will not of course fully replace us, we still need Humans in the Loop.

As I wrap this up - I read with interest this thread from Elon Musk. Someone that many of look to for inspiration and insight through Tesla, SpaceX and much more. This however hit a chord with me - We trust him to build new cars that can genuinely drive themselves, however his engagement and the subsequent thread is really interesting. How many have said the startup would fail without even giving it a chance! Food for thought.

Many others have shared their perspectives on 2017 and what's to come in 2018 too - heres a selection, worth a read for sure. If you like/agree challenge the above - join the debate below and share your views too!.

• Amanda Blanc, Group CEO, AXA UK - The big issues the insurance industry must tackle in 2018
• David Brear, CEO, 11:FS - Our 2018 Predictions
• Sam Evans, EOS Venture Partners - Insurance, Year in Review
• Sebastian Goeres - Deloitte, Predictions for Financial Services - 2018
• Roger Peverelli and Reggy de Feniks, DIA - Top 10 Insurtech Trends for 2018 that set the Digital Insurance Agenda
• Paul Caroll - Insurance Thought Leadership - Observations on insurance industry's innovation journey
• Jim Marous - The Top 10 Retail Banking Trends for 2018

Thanks all - as always, I look forward to continuing the discussion, debate, challenge and pushing each other in 2018. Heres to a great year ahead!

Nigel Walsh | @nigelwalsh

Previous year predictions & reviews can be found here: 2017, 2016