INSURTECH – You will never insure – or be insured – the same again!
In the startup world, #insurtech is currently one of the most dynamic and exciting sectors: more than $2,6bn were invested in the industry last year, three times the amount invested the year prior. Corporate insurers such as Axa, Allianz, AIG or Aviva are creating in-house funds to identify the most promising innovation in the field. The landscape is fast evolving, with the shared economy practices turning the industry upside down: thus, unicorns like Blablacar or Airbnb push traditional actors to develop new insurance models that go beyond transportation and housing, and draw from IoT, big data, or gamification to transform the insurance industry overall.
An entire book would not be enough to capture all insurtech innovations, so let’s focus on three transforming trends in the industry and their impact on traditional insurers.
Don’t speak about insurtech, speak about insurtechS!
Traditional insurance used to be applied to a few sectors, with a few bundle products, but times have changed! The industry is now facing several levels of segmentations:
- first, a segmentation in model, with an increased separation between product ownership and product consumption as a result of the shared economy. You no longer use a car that is yours but one you have borrowed to someone – so who should pays the insurance?;
- second, a segmentation in application, with insurtech going beyond the traditional insurance products applied to transportation or housing, to now comprise new wearables or peer-to-peer practices;
- third, a segmentation in #technology, with insurtech start-ups choosing specific verticals such as data analytics, claim acceleration tools or customer engagement to support more traditional insurance activities.
These segmentations mean traditional insurance actors are faced with new challenges to respond to new consumptions habits, as well as new business opportunities, for instance responding to specific needs.
Mastering personalised insurance
Not only have consumers changed their habits, but they are also increasingly asking for personalized services: less and less people are willing to pay bundles, and would rather get personalized coverage. Whilst before, insurers relied on market trends to develop new insurance products, they now need to be more lean and creative in their packages.
Failure to satisfy increasingly demanding and selective consumers would result in losing clients, but traditional actors have in fact been very good at embracing insurance curation: they are making the most of new health tracking devices to provide premiums to fit customers, or offering discounted auto insurance for customers using telematics devices to track safe driving. All-in-one policies are also starting to emerge, thanks to highly personalised digital risk assessment.
For corporate insurers, insurtech is a way to climb the food chain
The emphasis put by traditional insurers on insurtech is easily justified: from data analytics and lifestyle apps allowing client service personalisation, to hardware supporting preventive action rather than corrective ones (to detect fire for instance), the added-value of insurtech is immense. Information security systems or digital processing are further revolutionizing customer service, making insurance/client relations more seamless.
Insurtech ultimately gives incumbents the opportunity to get directly exposed to the client rather than go through intermediary brokers, making coverage more affordable for consumers and more profitable for the providers. As such, corporate actors and insurtech startups should not see each other as competitors, but rather as complementary actors. In fact, no insurtech today is directly challenging an insurance company like Monzo or Starling Bank do with traditional #banks, and for insurtech, the path to customer acquisition is more so than not likely to go past corporate insurers.
Increased synergies between insurtech and corporate insurers are likely to be beneficial to both parties. Other than the traditional challenges related to regulation and barrier to entry, the main test for insurtech and insurance companies will come from the consumers’ reaction: if the personalisation of services can be beneficial operationally, it also comes at high cost, that of privacy. Traditional insurers and insurtech companies will therefore have to work together to guarantee that their customers’ data is collected and managed in a secure and safe way. And for that cybersecurity startups may have some answers.
is CEO at Early Metrics