Insurtech presupposes introducing new technologies and business models to traditional insurance processes
Where money and bureaucracy collide, there’s always a place for technological disruption. The insurance industry isn’t an exception. Traditional schemes are based on perennial practices, but surely they can be made much more effective, simpler, and quicker. That’s a challenge for insurtech.
As you may have already guessed, the term itself derives from the two words: insurance + technology. Therefore, insurtech presupposes introducing new technologies and business models to traditional insurance processes.
Numerous startups all over the world have been struggling to disrupt the sector’s old-fashioned ways. However, they are having much harder times than their fintech analogs. There are a few crucial factors that withhold the full insurtech potential:
- complexity and non-transparent policies of the insurance system are hard to understand from an outside perspective, especially with so little public data available. Not many insiders wish to cooperate, though.
- The sector is strictly regulated, forcing startups to work with existing industry partners. In addition, different national regulations complicate scalability for ambitious startups.
- Insurance is one of the most traditional and conservative businesses. The players cherish their reputations and give newcomers a hard time, preferring stability over allusive clients’ comfort.
- The number of investors willing to trust in insurtech disruptive potential is smaller than in finance. Due to the abovementioned obstacles, such investments are considered high risk.
Startups who made it
Nevertheless, there are a number of quite successful enterprises willing to take the risk and change the insurance landscape forever.
- Bima. This Swedish startup has developed a mobile-delivered insurance model in which customers can pay for insurance via deduction of prepaid airtime credit. This allows the company to operate on a global scale engaging the previously underserved social categories who live on less than $10 per day. The majority of their customers are accessing insurance for the first time. The corporate goal is to promote financial inclusion in emerging economies and make health care affordable to low-income families.
- Cyberwrite. Headquartered in the US and Israel, this company provides scalable solutions for advanced cyber underwriting processes and systemic risk management to small and medium businesses worldwide. Their public digital platform collects industry and geography trends and combines these insights with customer specific data, including past incidents, attack-surface, and digital exposure, to compile a thorough and robust report. This report helps both experts and customers to understand how the risk of any given organization is compared to similar industry peers.
- Neos. The young British team developed more than an insurance business. With their 24/7 assistance and a smart home protection technology, which includes cameras, motion sensors and smoke detectors, the company does everything to prevent a home insurance claim whenever possible. The IoT system alerts homeowners of a break-in, leak or fire, and contacts the 24-hour monitoring team so that the problem can be solved quickly and efficiently.
- Lemonade. The NY company implements AI and chatbots for customer support, which eliminates the need to employ brokers, thus, saving on business costs. The “Giveback” program is a social initiative started by Lemonade to benefit communities. Any unclaimed premiums or underwriting profits are donated to a social cause specified by the clients. The list of non-profits who receive costs from Lemonade includes such entities as Water, Citymeals-on-wheels, New Story, Robin Hood Foundation, Women in Need (WIN), ACLU, American Red Cross and more.
- Policybazaar. This Indian company has made something many customers have dreamt about for a long time – a joint convenient transparent platform for insurance sales where all the policies on the market can be compared. Thanks to their simple solutions, they have 10 million clients whom they sell 400,000 of insurance policies monthly (including 25% of all national life cover policies and 50% of all term life policies).
- This hundred-year-old company is definitely not a startup, but it shows other old-timers how to embrace progress instead of fighting it. AIA Hong Kong launched a blockchain-enabled platform allowing life insurers and their bank distributors to share policy data and digital documents in real-time, streamlining the onboard process and reconciling commissions automatically through smart contracts.
The rapid pace of digital acceleration is bound to continue in the insurance industry in the near future. Technology is changing the nature of risk and is enabling new products, services, and channels. Some regions welcome it more eagerly while others remain cautious. Insurtech growth also largely depends on national regulations and policies.
However, telematic user-based insurance models which rely on sensor-based technology, increased automation and AI such as “Pay As You Drive” and “Pay How You Drive” are now attracting focus from several insurers even in traditionally conservative markets such as Japan and Russia. That means we are up for global insurtech disruption.
Currently, the US is the biggest region in terms of investment in insurtech projects and their mass adoption. However, sector growth is already slowing down. Other continents, on the contrary, exhibit a strong insurtech increase. Thus, during 2017, the number of insurtech deals in Europe grew 118%, while the value of deals was $679 million.
Experts predict that the disruption by InsurTech may be more profound in emerging Asia than in the rest of the world. Emerging markets’ share of global InsurTech deals is on the rise, with China and India accounting for 13% and 10%, respectively, in the second quarter of 2018. Israel accounted for 6% and South Africa for 4% of the deals.
In Latin America, insurtech adoption varies across the region. A notable success in Brazil is Bidu, the pioneering startup that sells online insurance to final consumers. It has built a strong market position by combining savvy use of technology with offline consultations. Adoption is somewhat slower in Mexico, however, yet market players expect it to increase soon.
In Africa, insurtech remains a key driver of premium growth. Here, the mobile channel may become a critical gateway for insurers to raise awareness, educate customers, distribute products, and provide services. For instance, WhatsApp Insure in Nigeria has provided a great way to distribute insurance online, using a platform that citizens already understand and trust. Mobile money also helps to increase Ghana’s insurance penetration rate, particularly in rural areas.
This spring, major discussion panels were held across the globe to discuss the hottest industry trends – Global InsurTech Summit hosted by AltAssets and FinTech Global in London; Insurtech Brasil, the main annual insurtech event in Latin America.