The InsurTech Spectrum – the 7 colours of digital innovation


rainbow_5997cBy Rick Huckstep

It is almost a year since I published my first post on Daily Fintech. The subject was simply ‘where’s the Insurance Tech in Fintech?’

I had just been to a Fintech innovations awards dinner in the heart of London, the spiritual home of insurance. Of the nominated Fintech’s, only one was an insurance business. This was Bought By Many, who, rather ironically as the only insurer there, they went on to win the award for Fintech Innovation of the Year!

One year on and InsurTech is now established in a class of it own; no longer a sub category of Fintech.

In 2015, $2.65bn of VC money was invested in InsurTech. We now have InsurTech focused accelerators with the excellent Startupbootcamp in London, the Global Insurance Accelerator in Des Moines, USA (about to start it’s second cohort), and Mundi Lab announcing its startups for their insurance program in Madrid.

Insurance startups around the globe are bringing digital innovation and new business models to insurance. And about time too!

Since that first post a year ago, I have interviewed more than 50 InsurTech startups and for most of them, I have written their story. From this research into the background, purpose and intent of the startup, common themes have appeared.

From Distribution to Data, the spectrum of InsurTech

Red – Distribution

Distribution is all about making insurance easier to buy, consume, understand and relevant. They put the customer first and build their insurance proposition from the customer out (unlike incumbents who organize their business around internal capabilities).

These startups are all about the customer and their propositions are characterized by convenience, on-demand, personalization and transparency (and of course, digital).

Examples include;

  • Bought by Many
  • Knip
  • Cuvva
  • Insquik
  • PolicyGenius
  • Moneymeets

Orange – Enterprise

Here we see a new breed of enterprise class software providers. These are Software as a Service platforms running on the cloud. They have consumption based pricing models that replace the traditional $million up front licence fee and multi-year implementation.

In the main, these InsurTech’s have taken hold of the SMB space but it is a matter of time before they prove themselves as genuine enterprise solutions for tier 1 insurers.

Examples include:

  • Vlocity
  • Zenefits
  • Insly
  • Surely
  • Riskmatch

Yellow – Mutual

New peer 2 peer business models return insurance to its roots of mutualisation and community. The model relies on the notion that social grouping and affinity will change behavior and address moral hazard (thereby reducing claims payouts and premiums).

The question of scalability still hangs over P2P insurance but if it succeeds as a business model, it could form the foundation of a new breed of insurer. Just as kids call to their parents in their hour of need, customers will call to the insurer in theirs.

Examples include:

  • Friendsurance
  • Guevara
  • TongJuBao
  • Lemonde
  • Uvamo
  • Gaggel

Green – Consensus

Blockchain technology will fundamentally change the way the insurance industry works (as well as banking and society as a whole IMHO).

The promise is huge although as yet, unproven. From smart contracts to identity authentication, from fraud prevention to claims management, blockchain technology will provide the underlying technology foundations for a trustless consensus that is transparent to all parties.

Examples include;

  • Everledger
  • Tradle
  • SmartContract
  • Dynamis
  • Blockverify

Blue – Engagement

For me, this is the most significant of the characteristics from InsurTech in personal lines. Here the product becomes integrated in the customer’s lifestyle. It becomes sticky and overrides the annual buying exercise where price is the key buying criteria. Digital natives are responding well to lifestyle apps that sit on top of the underlying insurance product.

Examples include;

  • Vitality
  • Trov
  • Oscar

Indigo – Experience

The true value of insurance is only realized when the customer makes a claim. New tech solutions that improve the customer journey through the claims process will not only improve the customer experience, they will also reduce the cost of claims and claims payouts.

Examples include;

  • 360Globalnet
  • RightIndem
  • Tractable
  • Roundcube

Violet – Data

This is all about new sources of data to rate and underwrite risk. This is about using data science, machine learning, artificial intelligence and high performance computing to process data in completely new ways.

Whilst Distribution is vital to change the way customers interact with insurers, it is the data players that hold the key to fundamental change in the way insurance is manufactured.

Examples include;

  • Quantemplate
  • Analyze Re
  • Meteo Protect
  • The Floow
  • Fitsense
  • Influmetrics
  • RiskGenius

What’s missing?0005027_prismfoil-rainbow-unicorn

So far, we have not seen a new entrant creating a completely new business model for an insurance carrier, but we will, the promise has already been made!

Meanwhile, incumbent insurers have a sense of protection behind two major barriers to entry for new players – capital adequacy and regulation.

IMHO, this will show itself as a false sense of security over time.

The UK’s FCA is leading the way in embracing innovation with Project innovate and the creation of the regulatory sandbox. Cynics might say it will never work; time will tell, but I don’t think so. Regulators around the world watch the FCA and will follow their lead.

As for capital adequacy, this is a huge obstacle, but not so huge that it cannot be overcome. Capital has shifted and the traditional sources are being replaced. It is entirely feasible that new sources of capital will fund new insurance business models built on new tech. Interesting times!

Au Revoir!

This is my last InsurTech post for the Daily Fintech.

It has been my pleasure to work with Bernard and Efi to produce fresh and relevant content every week for the past year. I will be forever grateful to Bernard for inviting me to write for Daily Fintech.

This is a great team with tremendous insight and experience in the world of Fintech.

Finally, I would like to thank the people who have read my posts on Daily Fintech, and especially all those who have left comments, whether they be good, bad and indifferent!

Daily Fintech Advisers provide strategic consulting to organizations with business and investment interests in Fintech.

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