In this special feature, IE takes a look at some the latest trends in insurtech. A new global democracy of data is empowering SMEs and brokers, offering them the chance to build something bespoke in days, not weeks. Bigger insurers and tech companies are forming strategic alliances that aim to utilise the economies of scale, and the underwriting capacity that scale offers.
Then, we have the on-demand mindset becoming the default setting after Covid-19. Fact is, annual policies with fixed T&Cs and charges for every bit of policy admin really aren’t going to cut it anymore. That means legacy thinking is on the way to the insurance museum, just as legacy systems were binned off about 3-5 years ago. Add on a layer of ESG regulations, plus new opportunities like crypto currency, e-scooters, co-living Contents cover, shared vehicle use etc and you have an interesting future in prospect.
One recent trend that is bound to accelerate is big insurance players partnering up with medium sized SaaS (Software as a Service) specialists like Pegasystems, Duck Creek, Guidewire Software, OutSystems and many others. This sets up a large scale eco-system of knowledge and resources which can be accessed by insurers and managing general agents, in order to better manage the transformation of remaining legacy systems, and newer insurance brands, into something more flexible, bespoke and at heart, customer driven.
The great benefit for any partner company in the data chain is that they can choose to dip into each stream of information, as and when they need it. Could be actuarial risk tables for potential earthquake catastrophe loss in Japan, or Mercedes owner accident claims data from the EU. The point is that through this partnership, each element can be accessed on-demand by the global insurer. In short, this process short-cuts so much of the old local agents office knowledge and specialised insight. What SaaS offers for big insurers is the power to take a new idea and scale it up rapidly, by tapping into the data resources and expertise that their insurtech partners provide. In a few years we could be looking at systems where big insurers are able to crunch a great deal of everyday data, in real time, to price PAYG risk more accurately. That opens the door for so many flexible, on-demand new products.
SETTLING CLAIMS QUICKLY & SUSTAINABLY WILL BECOME PART OF YOUR ESG REPORTING
Claims still offers the greatest scope for developing any insurtech product that shaves precious time off the admin process. When an insurer is handling, say 500, `fender-bender’ claims per month, software that can hack a few minutes off the time from FNOL (first notification of loss) to claims settlement could save perhaps US$ 10 to US$ 25 per claim. Each SaaS tech advance may seem like a micro-step forwards, but in cash terms, it can impact the bottom line in a very positive way over a financial year.
There will always be ‘black swan’ events however, and for large insurers the question of meeting obligations to an increasingly vocal, and politically powerful, activist lobby, means they have to take on the bigger risks, since no smaller insurer can, as ESG and solvency rules will almost certainly tighten by 2025. The refining of data to find the risk gold dust will become ever more important, as the moral expectation of how much ‘good’ a global insurer is truly doing becomes part of the annual company report.
SO insurtechs who offer out-of-the-bos solutions on claims that provide a tracked and verified supplier chain, including carbon use, recycling, refurbishment instead of new replacement where possible etc. will find a stream of customers. Big insurance brands can only manage their reputations successfully in future if the pinch-point of claims becomes build back better.
That’s activists and politicians saying it, not Insurance Edge.
EMPOWERING START-UPS AND LEVELLING UP
IE chatted with Craig Olivier at Genasys Technologies, who explained how Arma Karma wanted a new insurance brand website that delivered PAYG cover, plus a social good element;
“Arma Karma wanted a Netflix style subscription for their Contents cover offer. You pick 5 items, get a quote and start a monthly policy, cancel anytime, DIY admin and so on. Plus we built in a charity donation feature, so policyholders feel good about the brand, as a percentage from every insurance policy goes to a nominated charity. You can basically build a site like that in a matter of days now, all the tools are there, it’s just plug ‘n’ play as regards connecting the data.”
John Garrard, CEO at Wrapper Insure wanted a purely digital insurance brand – no call centres, no office, just online cover that’s flexible and customisable by the user.
“We worked with Ignite and Percayso-Inform to build something that just worked, 24/7, low maintenance with the right balance of features. Customers today expect efficiency, convenience and control, which Wrapper will provide through its easy-to-use online system. Combining genuine expertise with a forward-looking approach to technology fills a significant gap in personal lines e-trading.”
POWER IS NOTHING WITHOUT DISTRIBUTION
The opportunity has been around for some years for any broker with a bright idea, who wants to solve a particular insurance problem.
But one UK company, SchemeServe has taken the next step and tried to solve the capacity issue for brokers too, because offering a new product often requires some underwriting back-up to make the concept a realistic proposition. So SchemeServe launched its Network at BIBA this year, which allows brokers to share white label schemes and connect with big names who can provide capacity as well;
The Network is supported by seven leading insurers, who have partnered with SchemeServe to create an exclusive panel, providing ready access to new scheme capacity. The insurers signed up to the partnership include AXA, Pen Underwriting, Ecclesiastical, Hiscox, Blink Intermediary Solutions (part of Iris Insurance Brokers), Gresham and ARAG. The new insurer panel, called SchemeServe Partners, connects MGAs looking for capacity for their schemes to insurers with matching appetite.
FIXING PROBLEMS, BUILDING NETWORKS
Insurtech in 2021 is often about solving problems. Take LexisNexis approach to solving the FCA regulations on consumer loyalty and price-walking, plus the annoying admin of passing Proof of NCD from one insurer to another in the Motor sector;
James Burton, senior director of product management at LexisNexis Risk Solutions, U.K. & Ireland, commented: “NCD proof became a major challenge for some brokers. They are also under growing pressure from their insurance partners to conduct basic verification checks and risk assessment at the point of quote, and this is set to heighten as a consequence of the FCA’s pricing remedies. The result is our new product, Broker Intelligence.”
The clever thing that LexisNexis and others are doing is connecting data streams to solve sticking points in the insurance process.
It could be using AI analysis of customer phone photos to understand more about the damage, repair costs and salvage value during the FNOL process. Or perhaps it means joining up data from smart home sensors, Leakbot gadgets and Ring doorbells to analyse a home insurance claim. Health brands are now asing policyholders to give consent to Smartwatch or Fitbit data, so that lifestyle activities and sleep patterns give Life insurers a deeper understanding of their client’s overall health.
Then there insurtech add-ons, features like rewards.
Stubben Edge specialise in adding consumer rewards bolt-ons for brands, so that a company like Chips Away can offer customers a three call-out windscreen repair insurance policy, based on a monthly, affordable premium. Plus the customer gets rewards like vouchers on dining out or visitor attractions as a thank you for staying loyal.
Insurance is a generally dull product, so anything that can be easily added on that makes it seem more fun, or a more useful fit around someone’s lifestyle can only be a good thing. The way to tailor those rewards packages is via data; GDPR compliant, personalised data that actually translates into useful insights, helping to structure the quote and the renewal at the same time.
THE FUTURE – SOME RANDOM PREDICTIONS
Electric vehicles are gradually going to replace petrol/diesel and that means insurtech solutions that provide truly on-demand, per journey cover, plus features like shared ownership, will become necessary in the near future. It won’t be an overnight switch to Jonny Cabs and HAL9000 voice assistants.
About 60% of Commercial and retail space is going to become housing by 2030, much of it social housing and co-living projects inside major UK towns and cities. Huge offshore wind farms, new tidal energy and solar panel covered buildings will offer opportunities for insurers and brokers alike. Those green utopias in the sky need sustainable energy.
Insurtechs, like brokers, will eventually form their wagons in circles via partnerships, or be swallowed up by large players who have an inside track with regulators in the EU, USA, SE Asia and so on.
The technology that underpins much of the PAYG cover, whether it’s crop insurance in Bangladesh or e-scooter ridesharing in Camden, will essentially run on the same Cloud based, AWS systems. History shows that consolidation of platforms, of nuts & bolts tech services is inevitable, even though innovation can always break through, or be built on top. Examples? Microsoft Windows, Bosch ECU chips in car engines or Elon Musk’s Starlink.
The tools to build, develop and market new insurance products are already here. But the delivery systems are still being connected – cars are a good example of this, not quite self-driving, almost talking to each other.
Exciting times ahead.