The year end is a time when people often reflect on the year past and prepare for the next one.
In our personal lives, we reflect on and plan strategies relating to our health, wealth and family. In our business lives, we reflect on and plan strategies for our sales, costs and overall business direction. For writers, consultants and the like, we write predictions on the area we specialize in.
I’ve read a lot of these top 10 predictions in the past. I always think to myself: ‘gosh, how do these people make such predictions? I hate doing crystal ball exercises where one is taking a shot in the dark…I’m not sure if I could ever do one.’
So much for that.
Here are the predictions from last year. Borrowing from what Bernard mentioned in that post, it looks like most of the predicted trends were on point.
2017 is the year that Insurtech, at least the word Insurtech, became everyday nomenclature that we all have grown to love and adore.
While the hype increased, so too did the substance. We have seen an online-only insurer do an IPO (Zhong An), investment pour into Insurtech start-ups like it’s running out of style and more Insurtech conferences, blogs, podcasts and events than one can handle.
Will the train keep steamrolling? Or will the hype subside? My 10 predictions this year are based on some self-selected categories that I think impact all areas of Insurance and Insurtech. I have also included links at the end of this article to other 2018 predictions which I think are great reads.
Prediction #1 – Defining Customer Engagement
There are many Insurtech solutions which have helped to enhance the traditional touch points of the customer value chain; prospecting, quoting, purchasing policies, servicing policies, claims.
The introduction of wearables, sensors and telematics have opened up a host of ways to engage and personalize the customer experience.
Most notably and importantly, this has helped with pricing and preventative care. These new solutions allow carriers and customers to have more real time pricing, which can be beneficial for both sides. For preventative care, the opportunities are only now being explored.
In addition to this, I’ve heard and read a lot that customers want more ‘engagement’ from their carriers. Receiving notifications from your carrier on how to live better lives, in an effort to not have as many claims, could be great. But how much is too much?
I think this hypothesis will be tested this year. Engagement will still be key. The most important customer engagement point for Insurance is the point of claim. If this cannot be improved, then policyholders are going to tell carriers to ‘cool it’ with the other engagement.
Prediction #2 – Insurtech Buzzwords
2018 will be underpinned by these two buzzwords this year – API and Ecosystem. I think these two buzzwords/themes make so much practical sense for our industry.
On the API side, we have seen this trend from start-ups like Qover and Lemonade, both solutions which have an open API to enable traditionally non-insurance platforms to offer insurance.
As I will mention below in Prediction #9, what has made Zhong An so successful is the power of it’s partnerships. From a distribution perspective, it just makes sense.
How about from an operational perspective? One of the scariest word that can be uttered when it comes to an innovation implementation is ‘INTEGRATION’.
Because integration of a solution with another solution take time. The more that Insurance carriers can have API-enabled policy admin systems and start-ups can build API-enabled value chain solutions, the easier it will be to do implementation with a carrier and let them start seeing benefits quickly.
On the ecosystem side, we at Daily Fintech have recently covered some of the remarkable Insurance ecosystems that have been built in China with Ping An.
Insurance ecosystems excite me the most. Anything that can bring the insurer, insured and provider together, for treatment and transactions. Further enhancing the ecosystem proposition is the ability of preventative care through the use of wearables, telematics, smart sensors and IoT.
Insurance ecosystems will be one of, if not the biggest contributors to an improved customer experience moving forward for our industry.
Prediction #3 – Specific Technology
The two biggest technologies I see having an impact on the insurance industry, in 2018 and beyond, are blockchain and AI.
Again, both just make sense.
Blockchain has so many use cases for Insurance. The most practical one for me is a smart contract. Looking at the ecosystem, if all parties can view the same information from a contract, in real time, the whole claims process will be simplified. This would be for almost all lines of insurance.
AI the same. Again, looking from a practicality standpoint, I see two – chatbots and data analytics.
For chatbots, this will bring a better customer experience to both customers and distributors alike. I have been studying different use cases on chatbots since my article a few weeks ago on Insurance agent enablement. I can see chatbots helping in:
- General customer service questions/help – this will free up time from call centres and agents/brokers to focus on more meaty issues
- General questions from agents/brokers – folks that work in call centers – how many times do agents/brokers call you just to confirm how a certain product works? Chatbots can help with that
- Direct to Consumer (D2C) sales
- And more
I’m not the only one who is bullish on AI and chatbots. Just ask Softbank and Lemonade.
For data analytics, someone needs to sift through all that data that an insurer has (including the new sets provided by wearables, sensors, telematics and other third party sources). Someone will need to identify from that data when there is appropriate time for a) cross-sell, b) preventative care, c) wellness tips, d) positive reinforcement for good behavior, e) identify fraudulent claims, etc…
That ‘someone’ will be AI.
I see these two technologies as being the most commonly used by carriers in 2018 and beyond.
Prediction #4 – Lines of Business/Risk Covers
3 areas to look at in this prediction are:
- Traditional lines of business/risk cover – i.e. Life, Health, Home, Auto, Commercial, etc
- New lines of business/risk cover – i.e. Cyber, Gig Economy, Sharing Economy, etc
- New business models
When it comes to D2C for the traditional lines of business, a lot of the new Insurtech entrants/start-ups have been in the personal auto and home lines, with some in the term life and health. I see more entrants in the life and health business, possibly in the annuity space too.
For new lines of business, I see an increasing focus in the ones I mentioned above (cyber, gig/sharing economy), as well as some new risk covers/business models coming out. I think there will also be an increased focus on more time and usage based insurances as well, with Slice leading the way by ‘removing the annual policy’. Insurance for bitcoin may also be a thing.
I also see the emergence of some new business models, like Laka, Insurepal and Getsafe. Laka just recently went live and is bicycle Insurance which collects premiums in arrears and up to a cap. Insurpal is Insurance using social proof, blockchain and cryptocurrency. Getsafe will be launching a multi-line single policy. They have just gone live, starting with liability Insurance.
Prediction #5 – Areas of the Value Chain (B2B2C)
A lot of the early Insurtech innovation for carriers has been related to Distribution, Product, Marketing/Customer Engagement and Claims. I still see these areas being focused on (especially claims for Life and Health), with an added focus on cyber security and fraud related initiatives.
Prediction #6 – Geography
The US, UK and Germany have been the main areas of Insurtech over the last couple of years. Asia, primarily with China (driven by Zhong An and Ping An) have helped Asia become the Insurtech innovation leader.
On the geographical front, I still see the US, UK, Germany and China ‘doing their thing’ when it comes to Insurtech.
I see Zhong An and Ping An expanding into other parts of Asia (the world?) as can seen here for Zhong An and here for Ping An. Looks like this is a 2018 and beyond trend for some of the financial heavyweights in China. Ant Financial just signed an Memorandum of Understanding (MOU) with Standard Chartered too.
I also see an explosion of growth in some of the emerging markets, namely Africa, the Middle East, and Latin America. The new technologies that are being created will help to benefit the emerging markets by giving them low-cost access to insurance that they may not have had before. These are big populations with massive protection gaps. Insurtech innovation is ripe for the picking in these areas.
As I was working on this article earlier this week, I came across this piece of news, in which Allianz invested $96.6 million in mobile insurance startup BIMA.
Prediction #7 Investments
According to the Q3 quarterly briefing from Willis Towers Watson/CB Insights, through Q3 2017, total investments in Insurtech were about $1.5bn. There has been a lot of activity in Q4 and I would expect the total for 2017 to be somewhere between $2-2.5bn.
I think investment will remain high, but will come from some different sources.
I see more start-ups trying to raise money via ICO (depending on regulation).
I also see more insurers taking an active role in investing. Many Insurers have set up their own investment arms over the past few years. Now that they’ve been able to do more homework and research in this space, I see them investing and possibly acquiring more heavily in start-ups. It may ultimately make more sense for the ones with bigger balance sheets to take on a start-up within their business rather than having an annual recurring/per user expense.
Additionally, I think there is an interesting dynamic of an Insurer working with a VC-backed start-up. Typically the pay-back periods for these VCs range from anywhere between 3-5 years. However, Insurance carriers have an annual target to hit, which adds pressure to show a return on innovation quick. I’m not sure if start-ups fully understand this dynamic and/or if it has started to play out yet. This is another reason I see Insurers taking a more active role on investing; then they can ensure the start-up is fully focused on them, not paying back their investors.
Prediction #8 Regulation
Regulators have been taking a more active role in understanding Insurtech. 2018 will be the year that they start honing it in. I see there being more regulation in general that relates to customer data protection. The increased use of wearables, sensors and telematics will call for it. To the same token, I see more regulators coming out with rules on how the increased data can be used for pricing purposes.
Prediction #9.1 – Perhaps call it a wishlist item. The US will get its first regulatory sandbox. I’m not sure where it would be, but I would say that top candidates would be New York, Connecticut, Massachusetts, Iowa and California. Looks like this conversation is moving in the right direction.
Prediction #9 – Big Tech
This has been a hot topic lately within the Insurance community, specifically with rumors as it relates to Amazon.
In China, we already see big tech with Tencent and Ant Financial (Alibaba) being major shareholders in Zhong An and Tencent also setting up an insurance platform with WeSure.
Looking at the west, specifically when it comes to GAFA, I think Amazon (and perhaps Apple) makes the most sense. Why is Zhong An so successful? Aside from their tech capabilities, it is their partnerships that make them thrive. Their insurance is plugged into any one of their partners (API), making the process seamless and a no-brainer for customers.
Trend 2 from the Digital Insurance Agenda’s 2018 predictions, is ‘Invisible Insurance’. I like what they say in this section. ‘You purchase a product and there is already an insurance embedded in that.’
I was speaking with a friend about this recently. He has a few blue chip US Insurance stocks that he said have not been performing as well as he’d like. I told him to look out east to Zhong An. He asked what makes them unique. My reply to him was ‘for one, they embed insurance for just about everything that is bought through Alibaba’s platform. He stopped me there and said ‘that’s a business model I understand, what’s the symbol?’
Amazon is the only one of GAFA that already has a very established product purchase process with its customers. They know about their buying behaviors and can offer Insurance for new risks based on the things they offer through their site. It would be easy for them to have an online store with stand-alone Insurance products as well.
Apple would be the next runner up. They also have an established purchasing process via its app and itunes store. With all of its investment in wearables and knowledge of how to embed its own line of Apple products in one’s life (i.e. ecosystem), Apple could be a threat in the Insurance space.
Google has information on it’s customers, but has a bad Insurance experience with Google Compare. Facebook has a lot of information on its users and knows a thing or two about ecosystems too. However, I don’t see them offering Insurance (though I do see Facebook messenger and Facebook Marketplace as some potential enablers for the Insurance value chain).
Prediction #10 Macroeconomic
When I look at the investments, focus and excitement in Insurtech, part of me feels that it also goes along with the overall gains we have seen in the global economy. We often talk about the amounts of money that have gone into Insurtech start-ups, but look at the spend of conferences, research, consultants, events and the like too. There is a lot of money pouring into this subject.
However, will that change if the markets take a turn for the worse?
As Brexit hasn’t completed yet, neither have its global effects. In the US, effects of the recent repeal of net neutrality and the new tax plan are also unknown. Tensions could not be higher between North Korea and the US/world. Bitcoin/cryptocurrency are currently being used as a speculative asset versus a different payment method.
Couple any one of these macroeconomic events with the recent surges in drastic weather around the world, and we could see a major change in plans/focus from Insurers on their innovation initiatives as well as an outpour of investment into new, unproven start-ups.
Bonus Prediction – Global collaboration will continue to be the real driver of change
I can’t end the predictions list with a negative point on macroeconomics (though if you couldn’t tell, my overall outlook on the macroeconomy is a bit more bearish).
Regardless of what happens on the macro, I think the real drivers of change are going to be all of us. By all of us, I mean people that are reading this, that work in this space and that work on innovation and insurance every day. I have seen so much cross-border collaboration personally and through my daily readings in the past year.
The excitement of being able to innovate an industry that has been around for hundreds of years and is worth trillions of dollars is exciting to people both new and old to the industry. People are flying and getting flown all over the world just to hear and/or speak about what is happening at the other end of the world. Regulators are signing MOUs on fintech/Insurtech almost weekly it seems! Start-ups are getting the opportunities their solutions to carriers in different countries all the time. It is truly remarkable and will be exciting to be a part of.
This is my last ‘original content’ post of the year. Next week will be a re-post of one of my articles as I will be on year-end holidays. Wishing everyone a Happy Holidays, regardless of what you celebrate!
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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Other 2018 Predictions – in no specific order