Reinventing insurance: The role of telcos

Consumer, Executive Briefing Service

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Telcos have several key assets that can help insurers to harness advanced technology and new data sources to become more proactive and create new value in an increasingly unstable and unpredictable world.

Telco data is transforming the insurance landscape

As with lending, insurance is essentially a data-driven industry. In theory, at least, the insurance provider with the best data should be able to gauge the risk of a claim (and its potential size) most accurately. That then allows them to price a policy accordingly. As telecoms networks are capturing a growing amount of data from many different sources, telcos are potentially well placed to either provide insurance or support those that do.

At the same time, the growing availability of data is giving insurance companies (and other players) the capability to advise clients on how to proactively avoid losses or damage that would otherwise lead to a claim. As it ultimately saves everyone money, time and energy, proactive risk management is a more compelling proposition than reactive insurance policies.

This report begins by exploring how five key drivers could enable insurers to get on the front foot, while opening up new opportunities for telcos. It then considers the key countervailing forces, before outlining the strategic options for telcos considering venturing deeper into the insurance market.

Key drivers for telco-insurer partnerships

Source: STL Partners

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The rise of proactive risk management

The global insurance industry is enormous and it continues to grow. It generates US$6.8 trillion in annual premiums, according to the latest figures (2022) from the Swiss Re Institute. In July 2023, the Institute forecast that global insurance (non-life and life) premiums would grow by 1.1% in 2023 and 1.7% in 2024 in real terms, after contracting by 1.1% in 2022. The vast majority of premiums are paid in developed markets – North America, western Europe and Japan. An extraordinary 44% of the global market is accounted for by the US (where health insurance is a massive industry), compared with just 10% in China and only 2% in India.

Despite the prospects for growth, the insurance sector’s profitability is under pressure, as inflation has increased costs markedly. The property sector, for example, is being hit both by the growing number of extreme weather events and the rising costs of both materials and construction labour.

At the same time, many people have a negative perception of the insurance industry, believing that service providers will do their utmost to avoid paying a claim (see graph below).

In the UK, trust in the insurance industry is low and declining

Source: YouGov surveys tracking how British consumers feel about the insurance sector

Industry experts rightly argue that insurers need to shift from reacting to events to providing much more proactive risk prevention. If they could help clients reduce the risks they are facing, then insurers would be creating more value than by simply redistributing money from clients who do not claim to those that do. Prevention is better than cure.

As they try to source as much relevant data as possible, both new insuretechs and long-standing insurers will need to work with players in other sectors, such as telcos, major internet players, manufacturers and even public sector organisations, such as environmental agencies and municipal bodies. For telecoms operators, a role in the insurance sector offers a potential means to diversify their revenue sources, at a time when growth in the core connectivity business is hard to come by.

Table of Contents

  • Executive Summary
  • Introduction
  • The rise of proactive risk management
  • In-depth digitisation
  • The Internet of Things expansion
    • Parametric insurance
    • Proactive protection
    • Pay-as-you-use
    • Automakers’ own-brand insurance
  • Connectivity enables automation
  • Harnessing artificial intelligence
  • Mobile money as a foundation
    • MTN – bundling insurance with airtime and remittances
    • Parametric insurance offerings in Africa
    • Developing a service suite in emerging markets
  • Barriers telcos are facing
    • Lack of trust
    • Uneven and unclear regulation
    • Access to historical data
  • Conclusions
  • Index

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David Pringle

David Pringle

David Pringle

Senior Associate Analyst

David Pringle is a Senior Associate Analyst at STL Partners, specialising within our Consumer Services research stream. He spent five years as the European tech and telecoms correspondent for the Wall Street Journal and provides editorial and analytical services to a range of organisations in the tech, media and telecoms industries, as well moderating panel discussions at industry conferences, webinars and on Mobile World Live TV. David has a BA in English and Politics from York University.