P2P Insurtech for Bitcoin and Ether exchanges needed

science-fiction

No, that headline was not created by a random buzzword generator – fun as that could be as a side project.

This is science fiction. If I worked for a big management consulting company I would call it Scenario Planning. Or you can call it “Venture Wanted”. AFAIK no venture addresses this need. If I am wrong, please tell me.

The idea came from reading our new Author, Ilias Louis Hatzis, who is writing our Blockchain, Bitcoin & Crypto weekly post on Monday.

The issue he was addressing was how Crypto Exchanges such as Mt Gox and Bitfinex have lost a lot of customer funds. He described traditional insurance addressing the problem in Japan (which we reported on here) but he also floated the idea of an an FDIC like organization for Bitcoin/Cybercurrencies and the idea from Andreas Antonopoulos that Bitcoin exchanges should create a “common risk pool fund”, that would insure customer funds in case of theft. Maybe a P2P Insurance venture looking for an early adopter market with a serious pain point is listening?

If you like this idea and want to contribute to making it happen – or know of a venture already offering it, please go to this thread on the Fintech Genome – the place where great conversations make things happen.

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Bernard Lunn is a Fintech  deal-maker, investor and thought-leader. 

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Insurtech Startups disrupting Life Insurance

On 7 April 2016, Amy Radin profiled 8 Insurtech Startups disrupting Life Insurance. As 14 months is an eon in startup time, we revisited them to answer the “whatever happened to?” question. We also look at any new entrants since then.

First we look at funding as proxy for traction:

Funding for the Life Insurance startups profiled in April 2016

I am only looking at pure play Life Insurance startups. Lots of ventures have Life Insurance as one part of their offering. They are not our focus today.

Data is from Crunchbase and Google search. If you have any updates, please go to this thread on Fintech Genome.

Of course if you do an ICO and raise $150m in hours like Bancor, funding is no proxy for traction. People now talk of Minimum Viable White Paper (MVWP) in ICO land. But back in the traditional world of VC, funding is a reasonable proxy for traction – it is the wisdom of a small elite crowd.

This post gives you some background why Life Insurance is a hard market to crack.

So the only two from the batch of 8 that have raised a substantial sum fairly recently are Sureify and Ladder. It is a Darwinian world.

New Life Insurance startups since April 2016

Fabric is interesting. They have a clear value proposition on their home page – “plans start at $6 pm and covered in 2 minutes.”

Their fund raise is small – $2.5m – but it is recent (March 2017) and the investors are top tier.

Who have we missed? What do you know about this space? Are there any great ventures still below the radar funding wise? What are the best examples of incumbents innovating in Life Insurance? Please go to Fintech Genome to share your knowledge.

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Bernard Lunn is a Fintech deal-maker, investor and thought-leader.

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No matter who wins UK election today, homeowners get a small break thanks to Neos Insurtech with AI + IOT

dripping-faucet

UK Insurtech Neos was in the news last week for raising a £5M Series A round, led by Aviva Ventures with strategic partner Munich Re.

In this post we dig below the news headlines to understand the trends illustrated by what they are doing.

More than a random buzzword generator

At one level, one could view Neos as combining all the hottest buzzwords to unlock VC funding:

  • Insurtech
  • IOT and connected home.
  • AI via Chatbot.

Our belief is that the hype cycle and the reality cycle are disconnected. Yes, all the above are hot, hot, hot. Yes, all will fall into the slough of despond, because that is what happens to all overhyped trends. Yet all three have huge value – if applied properly to solve a real pain point. That is what we now turn our attention to.

A win/win/win proposition

Neos is creating a win/win/win proposition for:

  • Homeowners. Brits love the expression “a stitch in time saves nine” meaning that paying attention to something small now – like a plumbing leak – will prevent an expensive disaster later.

 

  • Service contractors. They will benefit from a flow of work to fix those things – like the plumber coming in to fix a leak.

 

  • Insurance companies. They save on preventable expensive disaster claims and re-establish themselves as being central to their customer’s lives (not just a premium bill to be paid each month).

 

Look at this chatbot conversation to see something that will resonate with almost every homewner:

Screen Shot 2017-06-02 at 09.39.13

That makes IOT and connected home useful in a way that the oft-hyped milk buying fridge does not do. It also shows the use of AI Chatbots to deliver something useful; we believe that AI Chatbots will become as ubiquitous as websites and mobile apps, no longer a source of advantage, simply a must have item.

Now if only somebody could apply that same thinking to something even more precious than a home – the human body. Prevention is the back to the future of healthcare and health insurance and IOT sensors and AI Chatbot will be the key to this market as well.

UK innovation is alive and well

My home country has been down in the dumps since Brexit and goes to the polls today to decide who will lead the future of the country.  Whatever direction the country goes in, innovation will be the key to jobs and prosperity. Neos shows that UK innovation is alive and well.

Join the debate;

On this election day, do you think UK can reclaim tbe fintech capital of the world title?

Bernard Lunn is a Fintech thought-leader and deal-maker. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

InsurTech and the regulators

When disruptive technology and regulation meet, the world changes.

Pity the poor regulators faced with competing demands:

  • Protect citizens from losing money

 

  • Encourage innovation that drives jobs and GDP growth

 

  • Don’t upset the incumbents too much

 

Oh, and do all that when technology keeps changing the game. For example, think of Auto Insurance, IOT and Self Driving Cars.

 

Auto Insurance, IOT and Self Driving Cars

This is just one segment of Insurance, but think of these tough questions:

  • Who owns the data? If I let the telematics in my car tell my insurance company what sort of driver I am, do I own that data or does the insurance company? The issues are similar to those driving PSD2 regulation in banking.

 

  • Who is responsible? If I let the car drive while I catch up on Netflix binge watching and there is a crash, who is responsible, me or company I bought/leased/rented the computer on wheels?

Then we have the regulation that used to be simple – Capital Adequacy.

Capital Adequacy

In ye olden days, Capital Adequacy simply meant a Regulator telling the Insurance company how much capital they need to hold in reserve. Only big established firms could play this game. Now think of these tough questions:

  • An Insurtech startup is only insuring small items, the sort of stuff that was seldom insured in the past because it was too much hassle, but now a couple of swipes on a phone does it. How much capital do they need compared to a company insuring life, health, house or car?

 

  • A minimally capitalized Insurtech startup creates a digital experience on top of a Reinsurance company platform. Whose capital has to be adequate, the Insurtech startup or the Reinsurance company?

 

  • A group of Hedge Funds, acting like the Lloyds Names of old, offer to cover Insurance through some variant of Cat Bonds and lay off some of that risk into derivatives contracts in the capital markets. Where is the capital and how do we know it will be adequate when the time comes?

Smart Contract meets big legal bills

You sign up for an instant payout policy (real time settlement) where proof of event is recorded on an immutable blockchain. The payout should be automated and immediate, but it does not happen. Who ya gonna call?

You are from Switzerland, but you are visiting New York, the Insurtech startup is in London, but is regulated in Bermuda and the servers are Iceland. Your lawyer starts talking about jurisdictional issues while he plans for a long and expensive project.

Bernard Lunn is a Fintech thought-leader and deal-maker. 

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Lemonade, Root and Slice and Asian Insurtech go for full stack

full-stack-fb

The accepted wisdom in InsurTech is that it is all about partnerships rather than disruption. New ventures offering a new digital experience work on top of a platform provided by a Reinsurance company that provides the data and models for underwriting risk. This is what we call Reinsurance As A Service and we have reported on it many times.

Some companies are bucking this trend. They still believe that they can offer a full stack solution and compete head on with the incumbents.

In recent news, both Lemonade and Slice started offering products in California.

Root is also going State by State, starting in Arizona.

Doing this in America is tough as it is a replacement market with tough incumbent competitors. This is only for deep-pocketed startups and all these have raised significant rounds. It remains to be seen whether it is enough to compete head on in multiple states let alone multiple countries. The cost of both regulation and marketing is very steep. We may see a lot of M&A action soon as incumbents buy the ventures that get traction.

It is easier to do this in Asia, as it is more of a greenfield market. This is where we see action from companies such as PolicyPal and Inzsure as reported here. In Singapore, we see action from Singapore Life and CXA Group (who we profiled here). In China there is Zhong An.

The battle will all be about data. It is similar to banking (where the front lines of the data battle are around PSD2). If Insurance incumbents control the data, they will add digital user experience (buy or build). If that data can be aggregated online, the startups will win. This is where the data rich behemoths we calll GAFAM (Google Amazon Facebook Apple Microsoft) may hold the best cards.

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Bernard Lunn is a Fintech thought-leader, investor and deal-maker. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

 

Intersection of Insurtech and WealthTech

intersection.jpg

When Insurtech first started to surface (see here for our first post in March 2015), some people viewed it as separate from Fintech. We always viewed it as a subset of Fintech. This post explains why and the interesting intersections between InsurTech (which we cover each Thursday) and WealthTech (which we cover each Tuesday).

The simple reason we view InsurTech as a subset of Fintech is that is how the Financial Services business has viewed it historically. More importantly, customer engagement requires solving pain points regardless of categories. Opportunity often lies at the intersection between historically separate categories. This post looks at some of those opportunities at the intersection of Insurtech and WealthTech.

First, in a big city a long way away and a long time ago…

History lesson: Citibank and Travelers

The modern banking conglomerate emerged when Citigroup was created in 1998 from the $140 billion merger of a bank (Citicorp) and an Insurance company (Travelers Group). They had to change the law to accommodate that deal (sayonara Glass Steagal). Travelers Group was more than Insurance. It had been put together by Sandy Weil from parts that included credit services, consumer finance, brokerage, as well as insurance. Sandy Weil was a visionary deal-maker and entrepreneur who understood that consumers and businesses needed all these services and there could be efficiencies if they were in one entity. This was Rebundling 1.0. The problem is that in the digital age, tightly coupled interfaces are a problem and the future lies in loosely coupled interfaces using Open APIs – this is Rebundling 2.0.

For now, back to the past. Sandy Weil was a visionary deal-maker who understood one thing very well, which is that Banks are distribution channels. This is the same today, whether it is a traditional FS product or Fintech, banks are seen as distribution channels.

One product sold through those distribution channels is Insurance.

The problem today for Incumbents is that traditional Insurance sold through traditional Banks is no longer good enough. That is where the Digital Challenger Banks maybe the new route to market for digital insurance.

Plus ca change, plus c’est la même chose (a bit of schoolboy French in honour of our liberté, égalité, fraternité friends who voted that way recently). It is still all about distribution, it is just that the channel has changed.

Life insurance is a wealth management tool

Actually all insurance is a risk management tool and risk management is a critical aspect of wealth management. You pay now to protect against a big payout later that could destroy whatever wealth you have accumulated. Add some tax optimization and it becomes a savings and investment tool.

Insurance is a tool for Fixed Income investors

This is what we learned when we looked at Tradeplus 24. We knew that Insurance could be applied to mortgages aka the toxic CDS pools at the heart of the Global Financial Crisis. Seeing insured credit as the key to lower cost finance for SMEs was an eye-opener.

Insurance is a tool to bring Bitcoin into the mainstream.

This is what we learned when we looked at Bitcoin in Japan. Insurance makes consumers feel safer. If you make consumers feel safer about Bitcoin they will use it more.

Stackonomics: Below the Reinsurance layer is the capital markets layer.

At first we thought that Insurance was forming into a 3 layer value stack, but after interviewing Joe Taussig we learned that it is a 4 layer stack and below the big iceberg of Reinsurance is an even bigger layer of the Capital Markets.

4-layer-insurance-stack

 Bernard Lunn is a Fintech thought-leader and deal-maker. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

 

What the 5 biggest InsurTech funding raises tell us about the state of the market

The data is for the last 90 days and comes from Venture Scanner. You can get the full FinTech Market Report and data at Venture Scanner.

Note: we view funding as a proxy for traction. You don’t get to raise a lot of money without real traction (usually, there are some exceptions). So figuring out why they are getting traction is useful analysis.

The Top 5

Tradeplus24 raised $100M. Note that this is debt not equity. We profiled the company here. In short, we believe that Insurance moving into SME lending could be a game-changer for a seriously broken market.

Singapore Life raised $50M. They are still in stealthmode, with no details on their site. The company said it is unable to share the details of the product till “we have the approval from authorities”.  It is interesting to note the global cross border funding from a) a company in  China/Hong Kong (Credit China FinTech) and  b) a UK fund (IPGL).  As the name implies, Singapore Life is focused on Life Insurance (here is an index to Life Insurance posts from our archives).

Trōv raised $45M. We profiled Trov in their early days back in Nov 2015. We thought they were going places then and they clearly are. The takeaway is that insuring smaller items was too big a hassle in the old way of doing things, but digital engagement makes it viable. The fastest ever exit (Blink) which we profiled last week echoes this.

Next Insurance $29M. This illustrates three trends we have been writing about a lot:

 

  • Focus on SME (the biggest, most broken market out there). Last week we wrote about the substantial exit by Simply Business.

 

  • Domain specific data wins (Personal Trainers, Photographers, Contractors in their case).

 

  • Funding from Strategic investors (MunichRe in this case).

 

CXA Group $25M. Our coverage is here. The takeaway is that Health Insurance innovation is not limited to USA and that super angels are challenging institutional funds.

Geographic breakdown

Funding action is all over the map with a bias to Asia and America as usual.

Tradeplus24 in Switzerland

Singapore Life and CXA Group in Singapore

Trov and Next Insurance in America.

Bernard Lunn is a Fintech thought-leader, investor and deal-maker. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.