Ireland may be home to the European HQs of all of the digital giants but when it comes to innovation in insurance products and service delivery we tend to lag behind our international peers. "Ireland is behind the curve when it comes to innovation in insurance," says Naoise Harnett, a partner with law firm Pinsent Masons. "Asia is the leading geography in terms of insurance innovation. The UK is also a leading jurisdiction followed by a few European markets such as Germany."
He says there are a number of reasons why Ireland is lagging behind in terms of insurance innovation. “One of them is that a number of the international companies based in Ireland do not have the mandate or budget for large-scale innovation projects,” he explains. “Another reason is that the domestic insurance market is very small, so it is very difficult to scale an insuretech business in here.”
There are, however, a number of business lines offered in Ireland where innovation is visible, such as motor, home, life and health. “Most innovations in the Irish market are about strengthening existing products and services to strengthen customer relationships rather than the roll-out of new business models based on technological innovation,” says Harnett.
Richard O’Dwyer, managing director of Hiscox Ireland, agrees with this assessment. “Right now, I think in general insurance terms, Ireland is lagging behind many other countries,” he says. “There is a question of scale and diversity of business that means it will generally be more difficult in this country. When I look to other parts of our global businesses, the scale of the opportunities in the UK, Germany, France and USA give those businesses the opportunity to try new things and get a quick view on how this is performing. The key to innovation is failing fast and failing often and the size of the market here makes it difficult to try these things. The level of investment required up front makes this a challenge.”
Evolving risks
Hiscox has introduced some innovations, however. “Speaking from our own point of view the main innovations that we have been involved in is providing covers for evolving risks such as cyber,” says O’Dwyer. “This is both in a business and personal capacity. What our cyberproduct does, however, is more focused on a service-based risk management and mitigation solution rather than a traditional indemnity-based insurance policy. We have recognised that what our customers need in this space is a support function to support them with IT forensics, legal support, extortion demands as well as the PR damage that can arise from a data incident.”
EY Financial Services head of insurance James Maher believes scale is a key factor at work in this poor overall performance. “Insurance companies in Ireland are not at the leading edge of innovation,” he says. “The big international companies tend to locate the capital and regulatory aspects of their business in Ireland but carry out innovation elsewhere. The Irish market is dominated by international subsidiaries and they are destined to be permanent teenagers who will never be at the centre of the universe in the larger group. They sit at the end of the queue for investment in innovation.”
KPMG’s Brian Morrissey makes a similar point. “A challenge for the level of innovation happening in Ireland is that entities here may often be subsidiaries of larger insurance groups, and we have a smaller market size, so there are scalability issues for insurers to test and adopt higher-end technologies here. We expect to see much more innovation in our market, as new initiatives are tested in larger markets.”
Mindset
The 2019 PwC/Insurance Ireland CEO survey echoes these sentiments and suggests that the Irish insurance industry has more work to do to leverage digital and emerging technology, particularly artificial intelligence and robotics. "Adopting new technologies takes time and resources and needs a mindset ready for change," says PwC insurance partner Darren O'Neill. "The research also suggests a need for the industry to be more responsive to changing consumer purchasing habits as well to more fully leverage the benefits from automation. For example, four out of 10 (41 per cent) Irish insurance CEOs said they had no plans in terms of harnessing opportunities from humans and machines working together. "