September 2016 - “Disruption” is an ambiguous threat hanging over insurers. It is a catch-all term that generally means outside competitors and/or technologies upending traditional entrenched companies. The media labels any emergent technology a potential disrupter, and it’s difficult for insurers to know which ones will actually impact their business.

This report defines and ranks thirteen categories of disruption with the potential to impact the insurance industry in the near term, from online direct sales to wearable devices to self-driving vehicles. It is designed to help insurer executives understand the potential impact of each disrupter on their business.

Key Points

Product and Risk Disrupters like telematics and microinsurance mean new and expanded offerings to the marketplace, but this does not necessarily replace existing lines. Insurers should make sure they think of their products in terms of what can be, not what was.

Cost Basis Disrupters like drones and big data streamline processes and lower costs; in some cases they will adjust the long-term loss profiles. Insurers should make sure they understand how competitors will use these cost advantages to underprice them.

Distribution Disrupters like online direct and blockchain change how insurers sell; many approaches will thrive in an omni-channel world. Insurers should make sure they observe how customers actually want to buy, and not just what their current distributors prefer.

CONTENTS
Introduction…3
Understanding Disruption…4
Online Direct…6
Comparative Raters/Online Brokerages…7
Internet of Things: Telematics…8
Internet of Things: Smart Home/Office…9
Internet of Things: Wearables…10
Usage-Based Insuranve/Pay-Per-X…11
Microinsurance/On-Demand Insurance…13
Cryptocurrency/Blockchain…14
Bundlers…15
P2P/Crowdsourcing…16
Drones…17
Big Data/Machine Learning…18
Self-Driving Vehicles…19
Concluding Thoughts…21
Next Steps and Related Research…21
About Novarica…22