A study of Google Trends will show you a huge spike in the mentions of ‘InsurTech’ since February 2016, and that’s because people and investors are beginning to take note of how state-of-the-art AI can enhance the insurance sphere and disrupt specific elements of the insurance value chain.
Indeed, according to PwC’s 2017 Global InsurTech Report, 45% of insurers are currently partnered with InsurTech players, whilst a staggering 94% have aligned their priorities closer to emerging trends and AI-led risk insights and customer engagement.
Whilst there is budding support from all camps to evolve the traditionally fairly inertial insurance industry, there is little to suggest that innovation will come from incumbent insurers. The insurance disruption space hasn’t seen nearly as much activity as fintech, but 2017 has seen the trinity of technological trends - machine learning, AI and Big Data - cross over and fuel the motor of change within InsurTech. But how fast is the industry moving and how worried should incumbent insurers be?
Spiros Margaris, a Venture Capitalist and frequent speaker at insurtech conferences, suggests incumbents have not yet missed the boat and competition is the way forward in the industry. Speaking to bobsguide, Spiros commented: “Insurers are well served to speed up the process of partnering or buying insurtech start-ups”. However, he’s less certain that incumbents will be able to innovate in-house. “The challenge for insurers is to merge two very different cultures and speed up implementations”.
Open marketplace (combination of marketplace and open architecture)
It is no surprise that the first emerging theme should come as a logical follow on of the clash of cultures. As we’ve been seeing in the fintech space, pace of innovation results in individual companies (even the best equipped) failing to enjoy a monopoly of in-house services. Instead, they’ll seek to specialise in specific products and dominate that area of the market, all the while connecting and repartnering where and when new customer demands and trends emerge. This is the most flexible space to allow for both cultures to flourish whilst also providing healthy and full supply to the customer.
Open Architecture (OA) has a similar flexibility to it and suits the incumbent vs. challenger environment down to the ground. OA means that incumbents allow challengers an open platform to develop services on top of their existing legacy databases and infrastructure. In its simplest terms, it is a win-win, symbiotic relationship between the contestants that does not stifle innovation or, conversely, stall competition.
Indeed, Sequel, by now a fairly established company in insurtech, has developed its business model around a web-based, modular approach. “In doing so, we are accommodating the growing trend towards companies wanting to have plug and play technology that they can access straight away, allowing them to adapt their processes incrementally, rather than undergoing a massive system change”. Sequel also views challenger tech not as competition, but a chance to learn something. “We are seeing incumbents adopting more of a partnership approach whereby insurers and brokers are actively researching start-up companies and embracing their innovative ideas, rather than seeing them as a threat.”
Customer experience: A digital makeover
Traditional insurance policies have two points of contact with customers, when they take out a policy, and when they make a claim. It seems obvious to keep pointing it out, but a satisfied customer is more likely to return to retake a policy within the same company. But how do you keep a customer and keep them happy in insurance? Largely, insurtechs focus on customer experience and how technology can improve satisfaction. As Sequel puts it: “Companies…must ensure they’re being proactive rather than reactive.”
As well as the goal of customer retention, the digitisation of customer experience keeps operational costs down and requires little manpower, whilst having digital and cloud based technology makes insurance services better able to cope with an increasingly demanding consumer base who want access to services anywhere and at any time.
“Until now, insurance companies have delivered a process-driven innovation. What we really need is a customer-driven innovation”, says SPIXII CEO, Renaud Million. And SPIXII have done just that. With the rise in popularity of the now household names of Apple Siri and Amazon Alexa, they have developed the SPIXII chatbot; a data-driven, machine learning AI at the customer’s disposal 24/7.
AI and machine learning
AI shows no sign of abating; it’s far more than a technological gimmick, providing real-time, invaluable customer behavioural insights for insurers. Alberto Pasqualotto, CTO, illustrated SPIXII’s three-step system: Understanding the customer, acquiring the data and, lastly, learning from customer interactions.
“More than machine learning”, Alberto explains, “we could speak of human learning - both the insurer and SPIXII learn more (and often unexpected) from the behaviours of the customers and apply changes and adjustments in order to increase KPIs”.
“In this way, the process will feed the machine itself with limited human intervention.”
It goes to show quite how insurtech can learn from the IoT industry, and apply customer insights analytics to front and back end benefits.
Spiros Margaris envisions that AI, machine learning, and bot technology is here to stay and that “insurers need to emphasise that [they] are used in a way to protect the privacy of their customers, and to enhance customer benefits”.
First came Ebay, followed by Uber and Airbnb. Now the sharing economy has even penetrated the insurance sphere.
The way insurance is being managed has also been up for debate in 2017 and, the marrying of customer-centricity and enhanced P2P technology, has given rise to a unique way of insuring oneself. Among other P2P insurtech start-ups - including Inspeer and Cycle Syndicate - Friendsurance can boast being one of the first to the party in 2010.
Friendsurance, the German start-up expanding to Australia, told bobsguide that they were frustrated by how unfair no-claims premiums were for repeating customers. “If there are zero or just a few claims, the members of the group receive a share return from the cashback pool in January of the following year. So far more than 80% of users have received a cashback. As a result, insurance customers always enjoy full coverage and never pay more than they would without Friendsurance”
The P2P insurance platform is something that is here to stay and can hopefully revolutionise the way customers and insurers alike think about policy building and premiums. Watch this space.
Blockchain (yes, insurtech too)
Blockchain is everywhere, there is simply no escaping. If, like many, blockchain still has a mystic aura about it, let our handy article dispel some of blockchain’s more ambiguous qualities. In brief, the technology’s potential relies on its unhackable system of ledgers and, in the context of insurance, the opportunities are endless and startups are taking note. Established in 2016, Lemonade is one such pioneer. Specialising in property and casualty insurance, this US based insurtech company uses an algorithm to automatically pay out claims as soon as certain conditions in their blockchain are met.
InsurETH has a similar model that pays out when it detects a flight delay. It auto generates an insurance claim, verifies it against its blockchain ledger, and pays its users if the claim is correct. Whilst both of these start-ups look to disrupt the speed of processing insurance claims, which is certainly an area worth disrupting, Everledger ambitiously utilise the impregnable qualities of blockchain technology to combat fraud in the diamond industry. The Everledger’s API can be used by insurers, diamond certifiers and law enforcement agencies to verify the status and profile of particular diamonds. Think, hacker-proof Facebook for diamonds.