Life & Health Insurance is critical to our lives. Here is why.

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I’ve always been a Life guy when it comes to Insurance.  While there is a lot of interesting stuff on the Property and Casualty space (P&C), there is always interest (and a special place in my heart) for Life. It’s where I started and grew up in this industry and where I plan to focus for years to come.

A few weeks ago, I was speaking with my friend Andrew Johnston, (Global head of InsurTech Research for Willis Re).  He informed me that the Q2 2018 Quarterly Briefing (which is put together by Willis Re and Willis Towers Watson Securities, with data and graphs from CB Insights) would be focused on Life and Health. This got me very excited and I asked if I could review the report earlier this week before it was publicly released (under embargo of course), so I could be the first one to write about it.

Of the many research publications on Insurtech (not the daily/weekly ones I previously shared), the Insurtech Quarterly Briefing is one that I look forward to the most.

I look forward to it because it is a great combination of 1) numbers/investments 2) thought leadership, and 3) quality company profiles (aka – if a company is in this report, I know they are a quality company).  

This week, I summarize some key findings from the report along the lines of these three areas.  I do encourage you to read the full report here.  I’ve also included a link to all the previous Quarterly Briefings at the end of this article for reference.

Q2 Investment in Insurtech

Funding throughout the quarters

Investments by country

The quantitative analysis can be found toward the end of the report.  Some highlights from these numbers can be found below (taken from the report):

  • There were 71 InsurTech deals with a total value of $579 million
  • The deal count was 8% higher than in Q1 2018, with total funding amount down 20%
    • While deal volume is up from Q1, total funding is down 20% due to a lack of high-dollar transactions, like the seven $30+ million transactions we saw in Q1 (vs. the two $30+ million transactions in Q2 2018)
  • 71 transactions in Q2 2018 represents the highest transaction volume of any quarter to date
  • For Life and Health (L&H), the 27 transactions announced in the quarter were the highest amount since Q2 of 2017 and the second highest on record
  • 43% percent of P&C and 56% of L&H transactions in Q2 2018 involved B2B companies, compared with 35% and 47%, respectively, of all transactions since 2013
  • With a total of 34 investments, Q2 2018 set a new record for the volume of technology investments by (re)insurers and represents an increase of 26% and 6% from Q1 2018 and Q2 2017, respectively
  • Investment from international markets remains strong; transactions outside of the U.S. account for 58% of total transactions since 2013 and 62% in the quarter
  • There were 22 strategic partnerships between (re) insurers and technology companies in the quarter, which equaled the same amount seen in Q1 2018

Further, as noted in Willis Towers Watson Securities’ CEO, Rafal Walkiewicz’s forward, ‘Life & Health InsurTech has attracted more than $5 billion in funding over the last five years, 20% more than P&C over the same time period’.  Further, L&H ‘funding rounds leading to an average funding round size that is 45% larger than the average for P&C.’

What can be derived from these stats?

Firstly, seeing more investment in Insurtech outside of the U.S. should come as no surprise, especially from countries like China, India and the UK.  China has actually leapfrogged a few other countries to go second after the US last quarter – perhaps a sign of things to come?

Secondly, a record number of investments from (re)insurers should also come as no surprise.  After all, just take a look at the number that have VC arms now.

Lastly, I was pleasantly surprised to see that there has been more investment into L&H vs. P&C since 2013.

At the many conferences and events I have attended, as well as the daily articles I read, there seems to be a slightly higher focus on what’s happening in the P&C space vs. the L&H.  I’ve even had some people from the P&C side tell me they think the L&H side is boring as compared to P&C.  

I would agree there are more products in P&C to enhance and innovate  (travel, home, renters, auto, business, gig economy, etc etc).

However, with L&H, we have the opportunity to help people live longer and healthier lives.  

How boring can that be? (italics inserted in place for cynicism I can’t express through just writing…)

Data, Customer Centricity and Advisory Services

3 pillars

Regardless of the line of business of focus for Insurtech initiatives, how to harness new sources of data, build more customer centric products and provide services above and beyond just paying claims are on the agenda of all (re)insurers and entrepreneurs.  

For L&H, as Mr. Walkiewicz points out, ‘the complexity of change occurring within the Life & Health insurance value chain is much greater than in other insurance subsectors and the potentially positive impact on the quality of life for the consumer is much more profound.’  

All three of these pillars can help to enhance the L&H value chain to help individuals live longer and healthier lives.  

ecosystem

Use of Data

Data areas of interest

As with other lines of business, there is a lot of data already existent within the L&H processes and more and more data becoming available.

The need and amount for medical information in order to provide preventative advice as well as to pay claims is very high and very messy.  How can this information be shared between doctors and patients to provide better care? How can this information be shared between hospitals and (re)insurers to pay faster claims?

There are new data sets being brought to the foray from use of wearables and genomic reports.  How will this data be used for underwriting (taking into account legal and ethical considerations)?  How will this data be used to provide better advice and engagement to customers?

And how will all of this data be incorporated into existing (legacy) systems, processes and analytics that the company undergoes?

dacadoo is one company helping with this, by creating a Health Score, similar to a Financial Credit Score.  Their solution helps with engagement of customers by providing personalized feedback on their lifestyle.  The Health Score also provides Insurers with a different data set to help them with underwriting and ongoing monitoring of premium rates based on the individual’s health choices.  

Atidot is a company helping on the data and predictive analytics side.  They are one of the only providers I have seen specifically focused on Life products.  Their solution targets three groups of individuals – CFOs and Actuaries, Sales/Distribution teams and Retention/Customer Care teams.  They help all of these teams with providing better insights on their in-force book of business as well as information to reach out to their policyholders (in the case of a cross-sell/up-sell or potential lapsation).  For full disclosure, Atidot has been a client of mine this year.

Customer Centric Products

products area of interest

For all Insurance products, the way in which consumers determine their needs (especially when purchasing digitally) can definitely be improved.  Further, the products that they buy can be more flexible in nature.

In P&C, we have seen UBI products, especially for Auto, which offer policyholders the opportunity to pay for the exact amount of miles that they drive.  The use of telematics will also help in providing policyholders discounts for driving better (and potentially premium hikes for driving poorly!).

For L&H, these types of products (UBI based) are a bit more difficult to imagine.  However, using the advanced data and analytics as described above can help with providing policyholders and Insurers with more information as individuals progress through their lives.  

As such, the process for determining the amount of coverage an individual needs at the purchase of their policy as well as throughout the term of their policy are of utmost importance.  Further, products should be built in such a way that are more flexible for policyholders and less onerous if they have a change in needs (i.e. limited additional invasive underwriting).

Anorak is a fully automated, fully digital Life insurance advisory platform looking to tackle the meaningful protection gap of nearly 8.5 million individuals in the UK who are currently uncovered or under-covered by Life insurance.  The process starts with a ‘check-up’, which is like a needs analysis for the individual on their current situation.  Once this is done, ‘impartial advice’ is provided on what type of cover the individual may need. Then, three policy options are provided to the individual.  Their product offers an API which can be integrated into price comparison sites, agencies, online retailers and more.

As a person that likes to focus on the needs of and suitability of products being recommended to an individual, I love what Anorak is offering.  

Ladder Life is a digital MGA that offers online Term Life Insurance.  Their tagline of ‘Life Insurance Just Got Easier’ can be seen through their quote and application process:

  • Consumer answers a brief set of questions (many responses are avoided through supplemental data).
  • Consumer receives an instant insurance quote with no obligation to purchase.
  • If supplemental information is needed, Ladder sends a medical professional to complete an exam (free of charge to the customer).

In most cases, the need for blood and urine samples for underwriting has been eliminated.  

Further, they offer a solution to allow policyholders to adjust their coverage as needs change (called ‘laddering’), without paperwork, meetings, phone calls, cancellation or penalty fees.

For those of you who have ever sold or bought Life Insurance, I hope you would agree that the process and flexibility outlined above are better than some of the ‘traditional’ methods.

Lastly, they have just launched the Ladder API and a partnership with Sofi, helping to provide a more extensive offering to the individuals in Sofi’s ecosystem.

Regard has designed products to address coverage gaps and rising out-of-pocket expenses that many customers in the U.S. face as more employers shift to high deductible Health plans.

This is a huge and increasingly larger problem for the U.S. health market.  

According to the report, Regard differs from many other InsurTech agencies in three important ways: (1) emphasis on institutional distribution needs as the starting point for product and technology vs. a direct to consumer strategy; (2) its position at the nexus of new specialty insurance products and proprietary technology vs. traditional products with off the shelf IT; (3) its ability to participate in premium income through risk retention in addition to MGA commissions compared to a commission-only revenue model.

Digital Advisory Services

advisory services area of interest

Insurance is in an age where we are transforming from a collector of premiums and payor of claims, to a service provider that helps individuals manage and prevent risk in their day-to-day lives.  

The solutions that are becoming available in the L&H space are helping with this to enable policyholders to connect with their doctors and hospitals as well as have 24/7 services through the use of AI and machine learning.  This will help to make L&H products more interactive for their policyholders with an ultimate aim of living longer and healthier lives.

Boundlss provides a AI-powered health assistant for L&H insurers.  Their platform helps to support individuals with their wellness goals and acts as a ‘personal trainer/health coach’ for users.  

The Boundlss platform collects, analyzes and aggregates data from over 400 wearables and mobile apps, allowing insurers to gain new insights into their member populations and their behaviors.

Further, if the AI engine does not provide a response that is sufficient for the individual, a human coach can be brought seamlessly into the conversation.  

Oscar is a fully licensed Health Insurer operating in New York, New Jersey, California, Texas, Ohio and Tennessee.  I’ve covered Oscar before when writing about my own Health Insurance purchase and I believe they are a company to watch for the years to come.  With their recent rise from Alphabet, you can ensure that building a digital ecosystem will continue to be at the forefront for this company.  I liken the ecosystem they are building to that of Ping An and believe they have begun to build a company that is focused equally on advisory services as it is on delivering a quality product.    

‘The Insurtech Grand Prix’

It would be remiss of me if I did not mention the thought leadership piece in the Briefing by Greg Solomon, Head of Life & Health Reinsurance at Willis Re International.  Greg is based in Hong Kong.   

In this, he uses the analogy of the Grand Prix to identify initiatives that are:

  • ‘In the Driver’s Seat’ – Insurers taking a lead in initiatives to better distribute and interact with their policyholders with examples coming out of South Africa and Asia.
  • ‘Rear-wheel drive’ – developments outside of the L&H sector that are changing the dynamic of how products are distributed and built for customers.  Examples here include the joint healthcare venture with JPMorgan & Chase, Berkshire and Amazon, online search and aggregator sites
  • ‘Emerging Tech: Towing Them Along’ – different technologies such as Machine Learning, AI, Blockchain, cryptocurrency and genetic testing, that could change/enhance many elements of the L&H value chain.  
  • ‘Along for the ride’ – tools like wellness platforms that help Insurers be alongside of their policyholders throughout the life of their policy.  

Summary

From this summary, I hope for two things:

  1. That you are inclined to read the whole report!  You can find the link here. There is a lot more information in there, especially deep-dives on the companies mentioned including interviews from their management team.
  2. That I was able to change some of the P&C folks’ opinions of L&H from boring to at least interesting!

I am pleased to see the amount of investment and transformation in the L&H space.  As with all other lines, it is long overdue.

The opportunity for our industry to be part of helping individuals live longer and healthier lives is extremely exciting for me (and should be for you, too).   

Previous Quarterly Briefings

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

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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