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by Jeffery Williams, Senior Analyst, Forrester
Industry View from
The rapid advancement of digital technology is ushering in new ways to sell, buy, service and settle insurance. For some time, insurtechs, with their nimble, digital-first operating models, have challenged the status quo. In the early days, many believed insurtechs were disruptive to the industry, but the view has shifted. Insurtechs provide digital roadmaps to a sector that has been slow to invest in digital solutions, and they are digitising the customer life-cycle and enabling insurers to elevate customer experience. They are also bringing to market solutions that simplify business processes such as underwriting and claims. And insurers are paying attention.
According to Venture Scanner data, since 2009 around $31 billion has been invested in insurtechs, and 2019 is shaping up to be the strongest year for funding since 2014. There are nearly 1,600 insurtechs globally, with about 70 per cent based in the United States and Europe. Most insurtechs – about 20 per cent – are insurance marketplaces/comparison engines, such as Confused.com in the UK or CHECK24 in Germany. These start-ups connect buyers with sellers, but don’t often sell insurance or underwrite policies.
Considering where funds are being invested, 65 per cent of cumulative funding has accrued to digital property and casualty (P&C), life and health insurance companies. These digital-first insurers pride themselves on developing innovative ways in which consumers can buy and use insurance and initiate and settle claims, with mobile functionality and applications being key differentiators relative to the old guard. A great example is late-stage US-based Trōv, a P&C insurtech that allows customers to obtain on-demand coverage for simple assets such as cameras and bikes with a swipe on their smartphones. Another example, late stage US-based Lemonade, an insurtech that focuses on home and contents insurance, enables its customers to buy insurance and settle claims using their smartphones. Lemonade recently moved into Europe, so it’s one of the first insurtechs to scale globally.
But it’s not just about direct-to-consumer opportunities. About 15 per cent of insurtechs focus on insurance infrastructure and back-end insurance solutions. These insurtechs are bringing capabilities to market that enable insurers to underwrite and bind policies faster and expedite claims settlement. For example, seed-stage Israel-based Binah.ai has a solution that enables life insurers to get real-time health evaluation insights from customers via their mobile phones – insurers can ask fewer questions, thus expediting the policy application process. Early-stage Canada-based Chisel.ai has a commercial insurance capability that enables brokers and carriers to automate high-volume, routine underwriting and brokering tasks. And late-stage France-based Shift Technology has solutions that leverage artificial intelligence to help insurers detect fraud and pay claims faster.
Incumbents have not been blind to the rapid emergence of insurtechs – they understand the opportunity they present and their strategic objectives have adjusted to a new paradigm where insurtechs become a part of their ecosystems through various financial mechanisms. Insurers have established venture funds for direct investments (such as France-based AXA Venture Partners), they have created incubators/accelerators to invest in and mentor insurtechs that fit within their business ecosystems (such as US-based Metlife’s Metlife Digital Accelerator), and they are buying insurtechs outright to build capabilities quickly (such as Germany-based Allianz, which acquired Finanzen.de, a B2B insurance leads marketplace). In addition, the sector has consortiums in place to advance innovations, such as the Blockchain Insurance Industry Initiative (B3i).
Most insurtechs are in the early stages of development and Forrester thinks many won’t survive. Those that do will continue to bring to market digital capabilities that enable customers to engage with their insurers, when, where and how they prefer. For insurers, insurtechs will drive automation in their business processes that drive profitability and operating efficiency. With continued advancements in the capabilities of artificial intelligence, machine learning, data capture and analytics, insurance will become personalized, customisable and on-demand, and priced using real-time data. Insurtechs will, undoubtedly, play a major role in shaping this future.
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