INSURTECH

TRENDS

SUBITTED BY-
MEENAL JAIN
(19IN623)
 INSURTECH TRENDS

WHAT IS INSURTECH?
Insurtech refers to the use of technology innovations designed to squeeze out savings and efficiency from
the current insurance industry model. Insurtech is a combination of the words “insurance” and
“technology,” inspired by the term fintech.
The belief driving insurtech companies and investments by venture capitalists in the space is that the
insurance industry is ripe for innovation and disruption. Insurtech is exploring avenues that large insurance
firms have less incentive to exploit, such as offering ultra-customized policies, social insurance, and using
new streams of data from Internet-enabled devices to dynamically price premiums according to observed
behavior.

INSURTECH TRENDS:
 Human intellectual capital
 Personalization & data
 Digitization
 AI
 Blockchain
As with every other industry, insurance is becoming more technologically advanced (and some may say,
disrupted) by the day. Though the transformation is much too slow.
There are several reasons for this, but one that may or may not surprise you is that insurers are struggling
to attract and retain top-talent despite insurance being a multi-trillion dollar, high-growth industry.
In the last three years, insurtech funding has increased by 60% in the US (from US$1.46 billion to $2.44
billion according to CB Insights), while it’s more than tripled in Asia (from $140 million to $506 million).
This may seem impressive, but it’s also necessary.
Insurance infrastructures are established in developed economies, which is a double-edged
sword. Companies are struggling to modernize complicated legacy systems and develop new ways of
working (with a strong focus on the customer) without sacrificing the old approaches that got them where
they are today.
In this area, new players and companies in developing economies are at an advantage – they are able to
develop digital-first infrastructures that incorporate the latest technologies from the outset, without
concerning themselves with making old, analog ways of working function in a new world. It’s up to
established insurance heavy-hitters to ensure they don’t get left behind.
So it’s no wonder that a vital area for improvement has emerged – advancing human intellectual capital.
In the US, only 2% of university alumni plan to work in insurance. Young prodigies are choosing
consulting, finance, or technology companies instead. This means that many insurers lack the skilled staff
required to follow, apply, and develop new insurance innovations.
Human intellectual capital.
It’s one thing to be aware of the innovations shaping the future of your industry, but implementing them is
quite another. And without talented, skilled staff, you have little hope. This is the barrier faced by many
insurers, which is why human intellectual capital needs to be a key focus if they don’t want to be left behind.
Why is human intellectual capital particularly a pain point for insurers? Employing and retaining talented,
technically skilled staff is difficult and costly for any company, let alone one in an industry that’s come to
be considered ‘uncool’ – which, let’s face it, insurance has.
Younger candidates, in particular, are showing little desire to venture into insurance over other, more
‘exciting’ industries, such as those in the tech space.
Additionally, retaining experienced staff is a key concern. Especially when it comes to achieving the levels
of customer satisfaction that insurers are striving for. After all, happy, experienced employees lead to
happy, loyal consumers, and in turn, brighter long-term prospects for businesses.
Which is where insurtech might provide added value. Insurtech partnerships could enable insurance
companies to position themselves as dynamic, connected, and potentially disruptive – helping them rise
above their old and stuffy image.
What’s more, the prospect of being part of the adoption, enhancement, and development of innovative
technologies may assist with employee attraction and retention. Employees are more satisfied when they
have opportunities to upskill and learn at their own pace. And the innovation that’s closely associated with
insurtech is all about constant learning and growth.
 INNOVATIVE STARTUPS IN THE INSURANCE INDUSTRY

Personalization & data.

Insurers are starting to put the customer at the heart of everything they do. By activating and collecting the
right data – from IoTs such as connected cars, activity trackers, and even toothbrushes! – they’re able
to better understand consumer needs and offer customized advice, coverage, and tailored pricing. This shift
indicates insurers are now viewing consumers as individuals, rather than customer segments.
Usage-based insurance policies, for instance, tap into customer data in order to charge users according to
their specific needs and behaviors, putting the consumer in charge of their own fees.
Such personalization and clever data-usage benefit both customers and insurers. Along with improving user
satisfaction, tailored products enable companies to enjoy more accurate risk assessment, and stable margins.
And while asking users to share their location with your business might sound invasive, a study by Morgan
Stanley and BCG suggests that customers are ready to share it (in return for the aforementioned benefits)
as long as companies are transparent about how it will be used.
For insurers catering to the growing markets in Asia, Africa, and the Indian subcontinent, tailored offerings
based on data collected from wearables and telematics will be key. Over 60% of citizens in these areas
struggle with a lack of income security. So insurers that ease the pressure by offering break periods and
enabling customers to postpone paying until they’re able to may prove to be more attractive in these areas.
Our social initiative team ran a program in Rwanda to help microinsurance firms find ways to serve people
who don’t qualify for traditional insurance plans. Read more about it here.
Examples of insurers using IoTs
BEAM
Beam uses IoT technology to offer dental insurance. Customers receive a ‘smart’ toothbrush that tracks
how well customers take care of their teeth and provides personalized insurance plans based on this teeth-
brushing data. In doing so, the firm claims they can offer rates up to 25% cheaper than competitors – a deal
customers are sinking their teeth into.
JOHN HANCOCK
Wearables and telematics monitor customer behavior throughout the day, with many consumers already
using brands like Fitbit to monitor their activity, exercise, food, weight, and sleep habits. Understandably,
insurers are scrambling to get a piece of the pie. North American life insurer John Hancock replaced its
traditional offering with interactive life insurance altogether.

Digitization.
Insurance companies are adopting digital strategies. Not just for savings and efficiency, but for increased
customer satisfaction with a whopping 61% of customers confirming they prefer to check their applications
online.
Of course, transitioning from paper trails to online-only isn’t easy. According to McKinsey, nine out of 10
insurance companies say they’re struggling to develop the technology infrastructure they need, blaming
legacy software and the sheer magnitude of their IT systems.
What’s more, internal processes across the industry are unnecessarily complicated, and many companies
are duplicating their efforts, with TechCrunch suggesting that insurance brokers are becoming obsolete in
this mobile-first world. This means that some 1 million jobs in the US alone could be automated, which
would cut costs by up to 40%.
But digitization (tacking digital processes onto existing ways of working) is not always enough.
Digitalization (involving a complete transformation of existing business models) is also required.
So, how are companies doing it? To overcome the complex-legacy-system problem and enable new
offerings, companies are adopting API or microservices architecture. But keeping the customer at the center
of these developments is key.
Some companies have struck the right balance using robotic process automation (RPA) – software that
supports human staff by performing complicated back-end tasks for them in the blink of an eye. Not only
is RPA benefitting customer interactions, it’s also boosting their data-harvesting capabilities.

Examples of digitization in insurance

ATIDOT
Atidot enables insurers to go digital by wading through mounds of information for them. This predictive
analytics platform uses machine learning, AI, and big data to give insurers greater insights.
ZHONG AN
Founded in 2013, Zhong An is China’s online-only insurance company. Since its inception, the insurer has
acquired 460 million users and written more than 5.8 billion policies – all digitally.

AI.
AI and machine learning have the potential to impact every aspect of the way insurance businesses are
run, making almost every process more efficient.
Specialized functions such as fraud prevention, anti-money laundering, underwriting, and pricing are set to
be overhauled using this transversal tech. Meanwhile, the data collection opportunities AI provides will
help companies achieve automation (robo-advisors are incoming) and enhanced personalization.
Of course, AI isn’t mature yet, and a human touch is still needed to help it do its work. But companies that
fail to adopt AI now may find themselves left behind by the time autonomous versions appear.
Examples of AI in insurance
CARPE DATA
This company gathers and refines emerging and alternative data sources using AI. With the information
they collect, Cape Data can help clients enhance every area in the insurance lifecycle.
SHIFT TECHNOLOGY
Shift Technology offers AI-based anti-claims-fraud detection software. The company developed their
automation solutions specifically for the insurance industry and the unique challenges insurers face.

Blockchain.
Blockchain enables the creation of a digital ledger that can’t be altered. Using this technology, insurers can
reduce the admin costs that come with reviewing claims and checking payments made by third parties –
blockchain ensures all of this information is shared, fraud-protected, and easy to verify.
According to PWC, block chain could particularly benefit reinsurers – reducing the steps involved in the
process and leading to potential savings of USD $5-10 billion worldwide. For example, reinsurers in
healthcare could cut costs and save time using smart blockchain contracts to quickly verify consumer data
and insurance history, reducing the back and forth that’s commonly involved.
Additionally, blockchain can be distributed widely without the risk of duplication, enabling increased
transparency and improved workflow governance.
Examples of blockchain in insurance
TEAMBRELLA
Teambrella is a peer-to-peer insurance platform that enables its users to cover each other and vote on
premiums and reimbursements. They use blockchain to handle payments securely and ease the burden and
worry exchanging money between peers may cause.
LEMONADE
This innovative insurance startup offers homeowners and renters insurance powered by AI, blockchain, and
behavioral economics. Lemonade also donates excess profits from premiums to worthy causes, but we
digress.