In recent years, we have seen how value propositions and innovative ideas are going hand in hand with new technologies, characterized by connectivity, the democratization of access to solutions that were previously too complex, and the boom in the data environment.
The insurance sector has joined this new technological wave characterized by new exponential technologies, which are creating changes in the demand side, where the behavior of customers has changed and they now require other solutions. On the supply side, competitiveness has grown in this regard, so insurance companies will have to face new business models.
The global insurance market is experiencing a technological shift. Digital-first business models are the product of traditional insurance companies and insurtech companies collaborating more than ever, testing new business models and revenue streams fueled by new technology. Most importantly, emerging technology trends can reduce operational costs by preventing fraud and automating services, thereby freeing up insurance agents to acquire and maintain business.
What is Insurtech?
The Insurtech sector includes those companies in the insurance sector that take advantage of the latest technologies and are committed to innovation and the development of new products and services with the goal of reducing costs, both for clients and for the insurance companies themselves. It also seeks to improve operational efficiency and enhance the customer experience.
“Insurtech” is the term being used to describe the new technologies with the potential to bring innovation to the insurance sector and impact the regulatory practices of insurance markets. This report catalogues these technologies and examines how InsurTech is being funded and how insurers are engaging with the start-ups entering the market.
How does insurtech work?
The technology that insurtech startups use can really vary. But they all have one goal to rival big, established companies and grow their market share by solving problems for customers. Compared to other industries and products, the slow, cumbersome processes of the traditional insurance models leave many customers dissatisfied. Today, people want to be able to buy their travel insurance with a tap of the finger, not work through stacks of forms. Insurtech startups recognize this and want to do something about it.
Traditional insurance models work by sorting customers into groups by their risk category. These groups are pretty broad, which means that some people in the group will end up paying more for their policy than they should. By contrast, insurtech startups are trying to use real data, instead of statistical models, to create smaller, tailored risk categories. This makes it easier for them to offer a more competitive pricing strategy.
Cheaper insurance is great for customers, but there are other benefits to insurtech when it’s done well. These include products and platforms that are faster, more intuitive, and tailored to the individual.
Here are some other ways insurtech companies are changing things up:
- Using data from wearables and social platforms to create more tailored policies
- Pivoting away from hard copy documents and instead using online forms and digital signatures to keep the process easy and accessible
- Bringing together disparate policies and products onto one, easy-to-use platform like mobile apps
- Harnessing AI to take on tasks that were formally done by an insurance broker
The Rise Of Insurtech
Insurtech can help traditional insurers to modernize. A broad umbrella term, insurtech is the use of innovative technology to bring insurance shoppers savings and efficiency while disrupting the current model used by most carriers. Often, insurtech companies tackle complex data so that people are not rated based on the basic level of data carriers use to group people based on risk.
Not only do insurtech companies sometimes offer better pricing models, but they also use artificial intelligence to customize packages and complete the coverage process without the need for a broker. As I’ve written about before, many insurtech startups are already working with traditional insurers as dedicated partners, not rivals.
Why is insurtech important?
Even though the insurance industry is a tightly regulated, complex business with many legal obligations exciting changes are starting to happen.
First, there’s the potential to make pricing more competitive. Other people’s risk categories shouldn’t impact the amount you pay for insurance. Insurtech makes it possible for your insurance to be tailored to your own health, finances, lifestyle, and personal priorities.
There’s also the potential to process and settle claims more quickly, improve the industry’s infrastructure, and introduce scenario-based policies. Wouldn’t it be great to borrow a friend’s car for an afternoon and get insurance coverage with just a swipe of a finger?
As other areas of our lives are improved by the technological revolution banking, healthcare, communications why should insurance be left behind? Some people may find insurance boring, but it’s an important way to protect your financial future so the more accessible it is, the better.
Life insurance is a contract between an insurer and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime.
For the contract to be enforceable, the life insurance application must accurately disclose the insured’s past and current health conditions and high-risk activities.
Health insurance is a contract that requires an insurer to pay some or all of a person’s healthcare costs in exchange for a premium. More specifically, health insurance typically pays for medical, surgical, prescription drug, and sometimes dental expenses incurred by the insured. Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly.
It is often included in employer benefit packages as a means of enticing quality employees, with premiums partially covered by the employer but often also deducted from employee paychecks. The cost of health insurance premiums is deductible to the payer, and the benefits received are tax-free, with certain exceptions for S corporation employees.
Homeowners insurance is made up of coverages that may help pay to repair or replace your home and belongings if they are damaged by certain perils, such as fire or theft. It may also help cover costs if you accidentally damage another person’s property or if a visitor is injured at your home.
Homeowner’s insurance pays for losses and damage to your property if something unexpected happens, like a fire or burglary. When you have a mortgage, your lender wants to make sure your property is protected by insurance. That’s why lenders generally require proof that you have homeowner’s insurance.
Insurance intermediation and distribution models
Insurance intermediation has traditionally used either the agent/broker or bancassurance model. While this remains the main intermediation channel for most developed insurance markets, many InsurTech start-ups are taking on this model and proposing new distribution models for insurance.
These new modes of distribution are in particular interesting for less developed insurance markets, where insurance penetration is low and the conventional intermediation model of agent/brokers may not be efficient or effective.
SIGAL UNIQA Insurance Group
Since 2007, SIGAL is part of one of the largest financial groups in Austria, UNIQA Insurance Group which is the biggest shareholder by owning around 87% of shares. UNIQA GROUP is one of the leading companies of insurance market in Austria and in Central and Eastern Europe. Over 20,000 employees serve to 10 million customers in 18 states, by which 15 Central and Eastern Europe countries.
The Austrian giant of insurances, with a history of over 200 years of experience in the insurance market owns 33 billion euros in assets and over 7 billion euros in premiums each year.
By 21% of the market, UNIQA is the second biggest company in Austria. In 2016, UNIQA Group launched its challenging programme of last decades titled “UNIQA 2.0”, which consisted of an 500 million of euros investment to enhance the company’s processes and products to be re-oriented according to the customer’s needs and expectations by compassing its activities and operations to digital transformation of the company.
As it has the slogan, “Big and safe”, INSIG has as its mission security for the consumer, for its clients. With its range of non-life insurance products, with dedication and correctness, INSIG offers the best protection for consumers, thus making its reputation and its common name at the top of the insurance industry. INSIG will continue to work to advance our identity, always staying on the right service, to create a consolidated image in the insurance market, on the foundations of a sustainable, business-oriented and customer-oriented business. Their products, adapting to the needs of the customer and the experience of their staff, make INSIG always have a product offer, always be the financial guarantee of those who trust us, with new and fast requirements.
Company INSIG sh.a. founded in 1991, as an Insurance Institute, is the company that is at the center of a company that cares about them, correctness and trust. With a high, correct and dedicated staff, INSIG has a clear vision of the importance of providing customers, providing services, package products and, above all, the trust it offers them. As one of the most trusted combinations in the field of insurance, INSIG recognizes an increase in the market, which shows that, their trust is growing, as well as our service to them.
Being a leader in the field of insurance, based on European standards, oriented by increased performance, in accordance with the requirements of stakeholders, based on the philosophy of values, professionalism, legal basis, reflection on customer requirements and focus on ai.
Eurosig’s mission is provide products, services and activities to customers, through the perfection of service, quality, professionalism, ethics, operating as a financial company, in order to optimize customer requirements, increase financial capital, increase the value of shares, providing clients for support at all times, for full and fair compensation for potential damages;
to provide services according to European standards, consolidating its position and guaranteeing name and reputation to regional partners, European and beyond;
receive feedback from customers with modern forms and methods and their reflection, to improve the service.
Ensuring consistency of results, but also higher growth in the market, increasing the performance of products, services provided and customer confidence that we are the best.
Eurosig has a name in the insurance industry and is an added value in this industry. 17 years of experience in the field of insurance has not only consolidated these values, but has made them sustainable and that directly affect the value of society.
Eurosig’s philosophy of customer orientation is an approach that carries value for now and the planning period. We have established long-term trust relationships with employees, customers, stakeholders by responding to their requests with promptness and professionalism. At Eurosig, teamwork is promoted, diversity is encouraged, efforts are valued and work is result-oriented.
The added value of Eurosig over the years is the social responsibility, thanks to the prominent role and altruistic values of the President of the Eurosig Group, Mr. Kadri Morinaj.
The performance of the company in relation to the industry and its history in the market, growth, expansion and consolidation in the insurance market in Albania and the region, constitute a value that will positively affect the performance of Eurosig in the future.
Eurosig’s nationwide reach, professional and integrity human resources, high governance skills of supervisory and managerial teams are a guarantee of future success and facing the challenges of the future.
Trends in the Insurance Market
Most insurers are bound by complex legacy environments and struggle both in terms of simplifying the whole insurance experience for customers and using technology to attain greater cost efficiency.
Standardizing products and services is another avenue to simplification. Rather than covering one type of fire in Belgium and another kind in the U.K., for example, insurers could have a standard tariff that covers fires as a general category. That may sound simple, but implementing the change involves incorporating new functionalities, hard-to-design applications, process efficiency, APIs and more.
Especially in the U.S. private equity investors are snapping up insurance companies to leverage insurance pools, consumer premiums and other fees as a steady stream of reliable assets. Having that permanent capital at their disposal reduces the pressure on private equity owners to raise money in the market.
But this increases the cost pressure on service providers. Private equity investors want to see a fairly quick return on their investment. And while that creates a different and more challenging playing field for providers, it also opens up new opportunities for longer-term relationships, as investors usually need operations support.
Providers Build Insurance-specific Digital Platforms
Insurers are also seeking new channels to better serve customers, and, of course, those will have to be built on digital platforms. A new business model is evolving in which a provider builds a platform for one type of insurance product, then takes it to other providers. Microsoft’s relationship with French insurer AXA and German financial services firm Allianz is a good example. AXA partnered with Microsoft to launch a digital health-care platform. Then Allianz and Microsoft teamed up to customize a platform across a variety of insurance specialties in a plug-and-play implementation.
Opportunities abound when it comes to big data and AI strategies. No insurer seems to have a clear idea of how to use its goldmine of big data. Today they are mostly optimizing what they already have while other industries, such as automotive, are outpacing insurers.
In the end, insurers face increasing pressure to transform their business from a focus on products to a focus on services while personalizing the customer experience. Technology has matured tremendously to move this goal forward. Learning what customers are doing, what they want to do, and where they see their risks can all be brought together with technology.
I. Artificial intelligence
Artificial intelligence (AI) in particular has caught the attention of the InsurTech scene this year. In a data-driven environment such as insurance, AI offers not only the opportunity to derive insight at greater speed and with greater accuracy but also to derive new insight too. And the possibilities for insurance stretch across the value chain, from the back office to the front. Of the Startupbootcamp applicants this year alone we saw AI solutions focussing on:
- Claims and benefit management
- Products and pricing
- Sales and distribution
- Underwriting and risk management
- And many single solutions with a range of applications across the value chain
And this is just InsurTechs that have AI as their main proposition. The vast majority of InsurTech start-ups in the ecosystem use AI to the point that it is essentially ubiquitous. For start-ups, it makes complete sense. It is often the most efficient means of completing a particular task.
Moving forward, “the growing maturity of AI (machine learning) and data ubiquity will facilitate the insurance industry’s evolution from a ‘protection’ model to a ‘preventative’ model” suggests Mark Falconer of LV=, “such a move doesn’t suppose that ‘insurance’ will no longer be required, however it does mean we will have to re-define what ‘insurable risk’ is, and in doing so it will surely make more ‘risks’ insurable”.
Last year’s Startupbootcamp analysis suggested robotics would also make a splash in the InsurTech sector and this prediction appears to be coming true – this year’s program received three times as many applications from firms using robotics applications. The emergence of robotic process automation (RPA) and intelligent process automation (IPA) is potentially exciting for a range of insurance use cases.
III. The Internet of Things
Elsewhere, the Internet of Things (IoT) continues to excite, though only 13% of applicants to the Startupbootcamp program this year relied on it to underpin their proposition. Given the applications in insurance of concepts such as connected health, the connected home and wearables, as well as the potential to change perceptions of insurance by moving away from an indemnity to protection focused model, IoT-based InsurTechs have a promising future and have attracted significant backing from investors.
Blockchain, by contrast, has yet to feature in significant numbers of InsurTech propositions. Only 3% of applicants to Startupbootcamp this year employ blockchain as their primary technology – half the proportion seen in 2016. This might be considered surprising but despite the hype surrounding distributed ledger technologies and the undoubted potential for their use in insurance, the industry is so far adopting a ‘wait and see’ approach. This is because, in the main, they are unsure where it can provide differentiated value. Blockchain is still a new technology to many and more time is needed for it to be fully understood and explored.
This is not to suggest, however, that blockchain does not have a bright future. The recent proof-of-concept (PoC) completed by PwC for Lloyd’s of London is one example of the application of distributed ledger technology– a more widespread breakthrough may simply be yet to come.