I do not want the title of this week’s post to upset anyone who has been affected by any of the recent storms we have seen hitting the US or Caribbean Islands. My thoughts and prayers do go out to those and their families that were caught in these awful storms.
These storms have been in the headlines for weeks, not only for the devastation that they are causing to people’s homes and businesses, but also, how insurance will play into the process of rebuilding in these areas.
In parallel to reading the various articles about this, I have also been preparing to attend my first Insuretech Connect in a couple weeks time. As I have been reading through the various topics and speakers that will be available, along with other current news relating to Insurance and Insurtech, I wanted to list out some of the things I’ll be looking to learn about more and discuss with those of you attending Insuretech Connect.
(This is also some foreshadowing to some more detailed topics I will discuss in future posts!)
Catastrophes – reminding us just what is important about Insurance
Doing a quick Google news search of the terms ‘hurricanes insurance’, the other day, a variety of headlines came up, a sample of which included:
As an insurance professional, these articles bring to mind the 3 pillars of Insurance. These three pillars are critical in the Insurance value chain, and wherever you sit in that chain when it comes to Insurtech, you need to understand these 3 fundamental things (these pillars are applicable to all types of insurance, not just catastrophe insurance).
- Pricing – Was the policy I purchased priced properly to take care of the costs of the insurance company running their business and will they have enough
- Reserves – to pay my
- Claims – in a timely manner. Cue…
Smart contracts are the future of Insurance (and everything else)
AXA has launched a new travel insurance product last week which will utilize smart contracts based on the blockchain to payout claims. AXA is not the first to launch an Insurance policy with a smart contract, but it does represent a trend for both the Insurance and financial services industry as a whole to migrate to blockchain. The blockchain and it’s uses and benefits for the Insurance industry are a completely separate topic that I will write on in another post. This trend is so important because of the third pillar, claims.
In a conversation I had last week with someone influential in the Insurance industry, we agreed that the key inflection point for a customer in the Insurance value chain is at the point of claim. While many Insurtech startups and Insurance incumbents are focusing on the purchasing experience of Insurance for a customer, I don’t see enough focusing on the claims process. Claims have many areas to think about:
1) How do you respond to a policyholder the moment you know they have to make a claim? Making a claim means that you have just had a potentially devastating moment in your life (health procedure, car accident, death of a loved one, etc). What is the first reply an insurance company gives to a policyholder when they find out they make a claim? How do they demonstrate empathy with this customer, who may be dealing with tragedy?
With AXA’s product, a policyholder doesn’t even need to file a claim. That’s the best reply an insurance company could give me when needing to make a claim…’We realize that your flight was delayed and we’ve credited money into your account as part of the claim for the coverge you have bought. There is nothing else you need to do now…enjoy the rest of your travels.’ Brilliant!
2) How was the assessment of the claim done? Was it based on a predetermined set of rules that was clear and transparent or was a decision made by some claims adjustor without any reason?
3) How quickly will the claims get paid?
There are many solutions that are in the market now which address these questions in silo. Further, it is much easier to address these questions in more common, smaller-sized claims. As full stack Insurtech moves more into the life and health space, these questions will need to be more closely analyzed and carefully addressed.
The next topic does not relate to the recent news on Hurricanes, but was in the news last week and are very interesting when it comes to Insurtech, and is a common theme we have covered here in Daily Fintech before
Insurtech doesn’t need Insurance incumbents, right Reinsurance incumbents?
Last week, Metromile announced their partnership with JLT Re. Since I have been following Insurtech, I was amazed by the amount of work being done by Reinsurers in this space (particularly Munich Re and Swiss Re). I say I was amazed, because once I thought about it more, it made complete sense as to why they are. In the most basic of explanations, Insurers use Reinsurers to pass on some of the risk it takes on from the business it writes. However, if Insurtech, and the various benefits that can be brought to an Insurance incumbent in terms of more efficient and dynamic pricing, better claims ratios with less fraud and less expense overhead with use of digital (to name a few), will those same incumbents still need to pass on that risk to Reinsurance? Well, it seems to me that Reinsurance incumbents don’t want to know the answer to that question, and that’s why they are so keen to enter the Insurtech space with authority and dominance – to ensure their relevance in the future.
I look forward to seeing many of you at Insuretech Connect in a week and a half to discuss these topics and more!
Stephen Goldstein is an experienced Insurance executive and Insurtech dealmaker with a core focus on growing revenue, launching go to market initiatives and advising industry leaders.
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