If an industry is big money, it deserves big innovation. That’s why companies working in insurtech are some of the most exciting around.
The term ‘fintech’, while a decent attempt to bracket all innovation in an immense industry under one, tell-all heading, is a bit too broad. For that reason, other sub-terms such as regtech, wealthtech and insurtech have emerged.
For the latter, given the breadth of established companies already around and the countless disrupters entering the field, the emergence of city-wide clusters is advertising just how close this is to exploding into the mainstream.
According to CBInsights, investment into this space in 2015 was an incredible $2.7bn in 2015, over 122 deals. By 2016, the number of deals soared to 173, with the total invested dropping to a (still eye-catching) $1.7bn globally.
This is big business, and it’s only going to get bigger as the market matures.
In Ireland, it’s already booming. Blink Innovation, for example, was established in Cork in October last year. By April, it was sold on for €1m, plus add-ons if and when it continues to perform under new owners, CPP Group, in the UK.
€1m is hardly industry-shaking but for six months’ work, it’s not too shabby, especially with the likes of Hublio, Ucompare and WeSavvy emerging as start-ups of note.
“Singapore has always been a hub for fintech in general,” said Hesus Inoma, founder of WeSavvy and one of the people trying to get an insurtech federation off the ground in Ireland.
“Singapore is creating a platform where insurtech has a direct line with its central bank. This means start-ups in this space, say, are in contact with the central bank, the regulator, all while they build their solutions.”
Synced-up industry and regulation, Inoma claims, means that companies, and their products and services, are more likely to be effective, with the market needs clarified through every stage of communication.
Waiting to explode
Should this come to Ireland, and Dublin in particular, Inoma believes the region will develop into a leading hub in this sphere.
“The insurtech industry is not mature yet,” he said. “It started picking up in Q4 last year. Investment is coming really strong. That is sustaining in 2017.”
But why? Why are companies pouring money into this realm? According to Inoma, it’s primarily because the savings are obvious and substantial.
“One in four dollars is spent by the insurance industry on services,” he said. “In the entire industry, it’s around 60-70pc on operational costs. That’s massive sums, and we’re not even talking about the risk.
“Just from an operational point of view, companies can make gains through innovating, which is why so many things are changing on the front-end.
“For example, look at new products in insurance. These companies have access to data about all of us. Why shouldn’t I have a product tailored just to me?”
Me, me, me
That’s already happening.
Metromile, a US start-up, successfully raised $191.5m last year to develop its customer-focused value proposition for occasional drivers –not risk-focused, but customer-focused. It offers a low base rate and then charges a few cents per mile driven.
Last year in China, Shanghai-based Ping An Health Cloud raised $500m for its mobile healthcare app Ping An Haoyisheng.
In the UK, AllLife is launching a life insurance product for diabetics after teaming up with one of Warren Buffet’s operations. AllLife uses an algorithmic pricing platform for this product.
In India, PolicyBazaar and Coverfox have emerged at the bottom of what could turn into a soaring mountain of insurance business in an underinsured populace.
In short: discovering, investigating and buying insurance policies is about to become far simpler for the millennial generation and its future companions.
Most importantly for the customer, though, payments are to become more accessible.
“Every dollar your insurer pays you is a dollar less for their profits,” said Dan Ariely, Duke University professor and the chief behavioural officer at Lemonade, to Forbes last year.
“So when something bad happens to you, their interests are directly conflicted with yours. You’re fighting over the same coin.”
For customers, this fight is frustrating, arduous and old-fashioned; faxing documentation, copying paperwork and going through tasks hated by all.
Today’s entertainment world is driven by data – banking, retail, health and all industries in between, too.
It’s high time that insurance companies embraced this future, especially now that a few very well-established firms have gone all-out to appeal to future customers and reduce costs, all in one, Apple-branded move.
For example, aiming to revolutionise its customers’ experience, health insurance company Aetna is taking a more digital route to the adage ‘an Apple a day keeps the doctor away’.
Pinning its business model on mass adoption of Apple Watches, Aetna’s plan – revealed last September – is to better understand both its workers and customers, thus presumably managing its premiums more accurately in future.
According to a recent Accenture survey conducted among property and casualty insurers, over the last three years, 71pc of respondents experienced an average increase of 10pc in the number of fraudulent claims processed.
They are coming
Early-stage insurtech funding rose 56pc in 2016, in comparison to 2015, with Series A rounds reaching $508m.
This plethora of newly minted start-ups is ready to explode onto the scene.
The 2016 PwC Global Fintech Report revealed that 74pc of insurance companies believe some part of their business is at risk of disruption over the next five years.
Ease of use of product, superior customer service and 24/7 accessibility to insurance products were listed as the three areas primed for overhaul.
With the examples already on the market, it’s fair to say that this has already begun.