Three market opportunities in Insurance Asset Management

The asset management side of insurance business is a sleeping beauty that hasn’t awoken to the Fintech drumming. Apart from the regulatory driven involvement due to Solvency II ( covered here) I have not seen any laser focus from Fintechs in the asset management part of insurance businesses. Naturally, low hanging fruit, screaming inefficiencies are picked and addressed first.

The opportunities on the Asset management side of Insurance businesses

I see three main areas that insurance companies can monetize and create adjacent revenue streams to their main business which is clearly suffering. One is the area, of Data; the second is the area of third-party Asset management; the third is breaking the silo between these two (explained below).

Data

United Health has been selling data (aggregating claims data) to drug companies, which in turn use for market research on how their products are used, how effective they are, and how well they are competing with rival drugs. As a result of this “aside” type of business, United health created a standalone businesses offering support, called Optum in 2011, which operates multiple businesses (Optumbank for loans, OptumHealth managing care centers, OptumInsight offering data analytics etc). OptumInsight uses analytics and predictive scieneces to make empower its clients to form accurate financial and clinical projections. It is a $5 billion in annual revenue business, based on reusing the aggregate information contained in the vast number of claim forms United Health processes

optimum-insight

Source here

Other major insurers are investing and growing data analytics divisions within their businesses (e..g Aetna, Cigna, and Anthem).

To find opportunity at the edge is more effective because it generates new revenue from assets – customers, products or enterprise activities – that are already in place.

from the Harvard Business Review article To Get More Value from Your Data, Sell It

One Fintech that is focused in offering analytics (not the data) is Apertiva based in the US and offering a software to turn medical intellectual property – data – to computable content that can be monetized.

Third-party Asset management

Large insurance companies are creating new funds that are then offering them through the traditional distribution channels to investors. Insurance companies obtain regulatory approval to become investment managers and create funds, that earn fees for them, a capital-lite type of activity. Allianz, Generali and Standard Life, are a few of such players. And the smaller ones (see graph below) are starting to grow through acquisition of independent asset management businesses or human talent.

Allianz Global Investors is leading the way with the largest third-party AUM and its recent acquisition of Rogge Global Partners (RGP), a UK-based global fixed income specialist.

aum-insureres

Aviva Investors hired in 2014 renowned investor Euan Munro from Standard Life (Standard Life Global Absolute Return Strategy fund, one of the most successful multi-asset funds in the world), to give a push to the third-party asset management business. Aviva launched the Aviva Investors Multi-Strategy (Aims) fund range.

A bridge between data and asset management in the insurance space

Who is building an effective communication channel between the Data (already in house) from the claims side and the asset management side of the insurance business?

Why not use such Data to develop actionable investment insights that can be used both in the due diligence process when picking external asset managers and in the investment committee that run the third-party asset management business?

Anybody building a MVP that can:

  • Take the raw data, create a graph database to gain insights and produce predictive analytics
  • Use the processed data as an input in the selection processes of external asset managers
  • Use the processed data to create superior third-party investment funds.

In this last category, I want to see a world class fund from Aetna or some such that is a health sector fund, not a general multi-strategy fund. Why aren’t any of the insurers the investment advisor to any top healthcare & Biotech sector ETFs; or better why aren’t they launching any active ETFs or PTFs in the sector.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network.  Efi Pylarinou is a Digital Wealth Management thought leader.

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