Insurtech - technology is the future
The press continues to be dominated by commentary on technological innovation in all sectors, and insurance is no exception. We are all familiar with "fintech", a label identifying the use of new technology like mobile phone banking to create and improve financial services, be it for a consumer or a business. But what about the insurance equivalent? What is “insurtech", and what does it mean for those working in the insurance industry in the near future?
Technological advancement is one of the clear options for insurers seeking to create growth in a competitive market. At its heart, insurtech represents the innovative use of technology to address issues such as consumer preferences and changing or emerging risks.
The market has been flooded by insurtech start-ups in recent years, seeking to address different stages of the insurance customer journey, harness customer data, and build more competitively priced policies or new insurance products.
Long standing insurance companies are increasingly interested in developing these technological advances, sometimes choosing to provide financial backing to a start up behind the scenes and in more recent times, partnering with those companies to build particular products.
There have been countless reported innovations. In some instances, technology has provided new ways to place traditional risks, such as allowing customers access to an online portal connected to a variety of insurers, or a diagnostic tool to evaluate what cover their business needs. In other cases, insurers have seen a gap in the market place, and created new products. We have highlighted two exciting examples of insurtech that have very recently been in the press, one of which sees a collaboration between a start-up and a large insurance company.
- Insurtech company Insure a Thing has rebranded for 2018 and partnered with Zurich. The Insurance Business Post reported earlier this month that the company, now known as Laka, had created a bike insurance product that relies on a pooled payment system. Rather than monthly payments, we understand that monthly claims will be settled as part of a group risk pool plus a fee. The product was co-built and financially backed by Zurich, and tested by the FCA’s Regulatory sandbox.
- Another already successful insurtech company is Urban Jungle, a fully regulated company that has just completed its second round of funding. Urban Jungle is an insurance broker placing house insurance with a pool of well-known insurance companies via a smart phone app, targeted in particular at young professionals. The company has just secured £1 million from a group of Angel investors. The lead investor is former Prudential UK Chief Executive Rob Devey. Insurance Business UK reported that the use of machine learning to improve risk scoring and a smartphone-first design are among Urban Jungle’s examples of putting modern technologies in place to change the insurance business.
KPMG have predicted that we will see continued venture capital investment in start-ups, from funds backed by insurers into 2018, with more international countries also seeking to develop their insurtech businesses, including Bermuda and India. We have seen increasing interest in technological advancement from the big players in the insurance industry, and we predict that will continue to rise.
There are also those that say the real future of insurtech is in reshaping the entire insurance industry.
The insurtech era will only begin in earnest when entrepreneurs fundamentally reshape “insurance” itself. These companies will win big while those that dress up old solutions with a new app and charming user-interface will not fare so well”. In his view, 2018 is the year that insurtech will come of age, and that will pave the way for “a total reconsideration of how consumers interact with their insurance, and their insurers.
Toby Coppel, Partner and Co-Founder of Mosaic Ventures (in City AM on 8 January 2018)
Whilst we are set to see further exciting and novel approaches to insurance involving the use of technology, it will always be the case that different customers, seeking different insurance products, will have different requirements, and more interactive automated processes of placing insurance cover will not necessarily be appropriate for all risks. Those established insurance companies, and those start-ups seeking to become registered with the FCA, will also have to ensure that new products and processes comply with stringent regulatory requirements.
Watch this space.