Why #Insurtech Doesn’t Matter

manage risk

Last week, I included my summary of what we do in Insurance: 

Insurance is a business where we provide people with peace of mind, allowing them to know that there will be a monetary solution provided when they suffer a major loss/accident (or minor, depending on coverage purchased).  This loss/accident can either in the form of health, death or to some sort of property, and the solution is at a time when a person typically needs it most.  That is the core of our business.  

This also relates to the 3 pillars of Insurance, which I mentioned a few weeks ago too:

1) 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

2) Reserves – to pay my

3) Claims – in a timely manner.

As with many of us, I read and follow a lot of news on Insurance and Insurtech.  Every day, my LinkedIn feed and email inbox is flooded with Insurtech news, including new investments in start-ups, new Insurtech partnerships formed, expansion of start-ups into new markets/states, etc.  

I love reading all of this – as it shows the growing level of awareness of how new technology solutions can enhance the customer experience and also help companies with operational efficiency.   I am a huge fan of what the future entails.  

However, I am also cautious of the risks currently present in the world of Insurance (and the world in general!).  

Currently, the pace of change and adoption of Insurtech solutions is faster than ever before.  It seems there are no signs of slowing down.  However, as with any good plan, it is important to have risk mitigation and contingency plans.  

As mentioned in last weeks’ post, the new technology solutions that we are building for the Insurance industry (i.e.Insurtech), are just an enabler.  It’s not that these solutions don’t matter…But, if the risks are not managed properly and plans are not in place for these solutions, then the progress of the many Insurtech initiatives may slow down, or in some cases, not be around to matter.  

What are some risks as it relates to Insurtech?  I will focus on three, which have been themes in the news for the past couple of months.  In fact, these are risks that exist in our industry regardless of Insurtech.

By no means are these the only risks that need to be mitigated for, yet I do see these as some of the ‘big’ ones:

  1. Macroeconomics
  2. Weather/Natural Disasters
  3. Regulation


Since 2008, global stock markets have been on a tear.  It’s no wonder that there is so much money pouring into Insurtech investments.  

What happens if there is a market correction and we go into another global recession? Will we see the same sort of investment in Insurtech solutions as we have been seeing?

And that’s just the equities market.  What about fixed income?

In this FT article from August, Chubb’s CEO Evan Greenberg warns about the low interest rate environment, and its effect on Insurers.  He says, ‘Many companies are not earning their cost of capital — and many are losing money, or will lose money in the future’.  This is a big deal.  This may have an impact on an Insurers ability to pay claims in the future. Obviously they will have to keep their solvency requirements due to regulation, but if this continues, we could see massive premium hikes for customers and/or withdrawal from certain product lines.  

Stock markets and fixed income aside, the next big risk that could impact the progress in Insurance and Insurtech has to do with climate change.

Weather/Natural Disasters

Over the past few months, we have seen Hurricanes Irma, Maria and Harvey ravage much of the Southeastern US and islands nearby.  California has been blazing in fire over the past few weeks. In other parts of the world, there have been many natural disasters too.  I’ve seen a number of articles on this subject.  They range from ‘how to claim from your Insurance company in wake of natural disaster’ to ‘how much insurers will be out of pocket for weather related claims’.  With climate change increasing, the unknowns also grow.  I’ll admit, I’m not an expert in catastrophe pricing, but I would suspect that this increasing factor will make it much more difficult to price products in the future.  

So, equities may fall.  Interest rates may not come up.  And natural disasters could be on the rise.  These risks are big, but the last one could take the cake: regulation.


Last week, as it relates to US health care, President Trump signed two executive orders – one which will allow customers to purchase cross state border and one that limits funding for Obamacare (though that seemed to change course yesterday).  

The impact that these have on the US health care and Insurance market is unknown for now.  This is a topic that deserves it’s own write up and I plan to cover this sometime in the near future.  

Regulation can really screw things up; if not looked at properly. I wrote about government collaboration a few weeks ago.  Some governments are more open to collaborating with with incumbents to better understand Fintech and Insurtech. However, for those of us that have worked with regulators, we know that their minds can change quickly and knee jerk reactions can be made, forcing our plans to change.  

Different product lines have different opportunities, and different risks

For some lines of Insurance – mainly P&C, Insurtech has a huge play, and there are many opportunities to disrupt and change the current Insurance value chain.  If autonomous cars come into existence, the whole auto Insurance industry will change.  For property Insurance, smart homes and devices to monitor buildings will help to better optimize pricing and policies for consumers.  

For travel Insurance, Insurance to protect material objects (Mobile phones, electronics, etc), UBI and Insurance for the sharing economy, there will be opportunities to disrupt and enhance the customer proposition too.    

For Life, Health and Catastrophe, it becomes a different story.   We see a lot of term life online, but what about whole life, universal life, annuities etc?  What about other, more complex products for individuals/businesses (Disability, Long Term Care, Commercial)?  

My biggest worry comes from within these types of products.  My years in Insurance have primarily been on the Life, Health and annuities.  The pricing structures of these types of products have a longer tail than P&C.  Health is annual renewable, but the cost of healthcare and frequency of visits to doctors have been increasing, which will make pricing more difficult.

So what can we do about this?

First and foremost, every start-up and incumbent needs to have a risk mitigation strategy and contingency plan as it relates to their Insurtech initiatives.  It is easy to get caught up in the excitement of what we are doing, and talking about risk is not always the most ‘fun’.  The risks above are just a few macro ones.  Each company and each initiative will carry its own set of risks, which need to be assessed accordingly.

Secondly, collaboration continues to be key.  Especially cross-border collaboration.  We need to share best practices globally. Regulators will also need to continue to work with incumbents and start-ups to understand the solutions being put in place and risks to customers.  

Thirdly, actuaries need to get with it – quick.  They need to use their skills of actuarial modeling and work with the data scientists out there to better understand all the data points available to them and how this can be incorporated into pricing models.  

The marrying of actuarial pricing principles and data science will be one of the most powerful forces of change in our industry.  Incumbents have been managing risk for hundreds of years.  The nature of managing risk has changed with the explosion of data. It’s no longer about just looking at what has happened in the past and predicting what will happen in the future.  Let’s also get underwriters in this conversation.  

We need to find opportunities to know what is working where, and what is also not working, so we can plan accordingly.  We are all in this together, and we need to help enhance our industry together.  We all have a collective responsibility, ultimately, for our customers.

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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.

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

Can governments collaborate when it comes to Insurtech regulation?


When I first started writing this blog a few weeks ago, I never, ever thought the first quote that I used would be from Donald Trump, but here we go…

Last week, during his speech to the UN, President Trump said the following:

‘All responsible leaders have an obligation to serve their own citizens, and the nation state remains the best vehicle for elevating the human condition. But making a better life for our people also requires us to work together in close harmony and unity, to create a more safe and peaceful future for all people.’

Daily Fintech is not a political site and I will focus on Insurtech and financial services regulation within this post.  Although I have used a quote from Trump, this does not make me a supporter of him or his policies.

There has been a trend recently in the world with countries looking inward towards expanding their own economic priorities (i.e. Brexit).  I’m not going to debate whether this is right or wrong.  Looking at the end of Mr. Trump’s quote ‘making a better life for our people also requires us to work together in close harmony’, I find this to be the most interesting as it relates to our industry.  

As mentioned in my first post, I have lived and worked in the US, Europe and Asia.  Each place I lived in had many differences, but a lot of similarities too.  Within the insurance and financial services industry, the differences between product offerings and services in different countries primarily comes down to customer preferences and savviness.  However, the high level concerns that customers have when investing in an insurance or financial product are quite similar in almost all markets exist:

  • Will the financial institution, either insurance company or bank, become insolvent? And what sort of laws are in place to ensure the financial institution does not do something irresponsible with my money?
  • How are brokers/agents remunerated and does this drive bad behavior?
  • What sort of data is being collected on me, how is it being collected and how will it be used?
  • Am I getting good value for money?

The answers to these questions may be different, depending on the market.  They do form some of the fundamental questions that customers will have before making a decision to purchase.

This is where regulation comes in.  Regulation is there to help give customers peace of mind in saying ‘I know this big financial institution I am investing in has some rules governing it, and even though I may not understand this annuity/Insurance policy/ETF/fund, etc, I feel safe in knowing that there are laws that protect me.’  

When I was living in London, the Retail Distribution Review (RDR), was coming into effect.  While in Malaysia, the LIFE Framework was announced, which had a lot of similarities to FAIR in Singapore.  Not too long after this, the DOL Proposed Fiduciary Rule was released.  All of these were aimed, in some way shape or form at protecting consumer’s interest and enhancing the industry proposition in these respective markets.  I remember thinking at that time, ‘if these regulators just got together to discuss this, find out where the commonalities and differences are, then maybe they can help each other within their own regulations and probably gain from some lessons learnt in countries who have walked this path before them.’

Then, this week, I saw some news which gave me some hope:

FCA strikes third fintech pact with Hong Kong

Financial Regulators Of Japan And Abu Dhabi Global Market Cooperate On Fintech

U.S. and EU Sign Covered Agreement on Insurance Regulation

While I do have my reservations on the US and EU agreement and the statement regarding reinsurance to ‘eliminate collateral and local presence requirements for EU and U.S. reinsurers operating in each other’s markets,’ all of these collaborations represent a growing interest by regulators to understand quickly growing disrupting market forces, in an effort to protect the customer.  

Many of the innovations we are seeing in both Fintech and Insurtech are amazing, and will provide for a differentiating proposition and experience to customers than we see today.  However, many of these technologies are advancing at a speed much quicker than regulation can keep up with.  Depending on the market, and existing regulation in that market, new offerings can come to the market without even the need of being looked at by the regulator; meaning new financial solutions could be available to customers that have no protection to them whatsoever.  There have always been these kind of alternate solutions available, however in the age of accelerations and digital economy we are living in, these can be launched, marketed and distributed faster than ever before.  As such, it is important for regulators to not look inward only to what they are experiencing in their home market, but also what is happening abroad.  The International Association of Insurance Supervisors, could help with this.  From my experience, regulators are learning about innovation and are generally quite open and receptive to it.  Now the real question is what are some of the tangible first steps that can be taken to enhance and promote innovation?  This can help to avoid an Uber type situation in insurance where startups are forced to look for loopholes and other ways to do it, in spite of regulation.

With platforms like Open Source Initiative, people can collaborate and share ideas worldwide.  As such, it would make sense that regulators stay on top of developments in other countries, so from an Insurance and Financial services standpoint, we can, as Mr. Trump so eloquently puts it, ‘create a more safe and peaceful future for all people.’

Look forward to seeing many of you next week at Insuretech Connect!

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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.

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.

Tropical storms pour flurry of topical Insurance news in advance of Insuretech Connect


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:

Flood insurance rates impacted by hurricanes

How to get the most from your insurance company following a natural disaster

Hurricane Irma will hammer insurance industry — up to $65 billion in damage is projected

As an insurance professional, these articles bring to mind the 3 pillars of Insurance. These three pillars are critical in the Insurance supply 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).

  1. PricingWas the policy I purchased priced properly to take care of the costs of the insurance company running their business and will they have enough
  2. Reserves – to pay my
  3. 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 supply 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.  

Speaking of Reinsurers and travel insurance…

I look forward to seeing many of you at Insuretech Connect in a week and a half to discuss these topics and more!

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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.

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

Zhong An IPO tells Insurance incumbents that full stack Insurtech has arrived

red carpet

The day has arrived – Zhong An has secured approval for its IPO on the Hong Kong stock exchange!

CB Insights has done a great job breaking down the IPO prospectus.

Zhong An is China’s first fully digital insurance company that was founded in 2013 through a joint effort of Ping An, Tencent and Alibaba.  As mentioned in the link above from CB Insights, Zhong An started with a shipping insurance product for merchants and has now expanded to over 240 product lines.  They have sold 7.2 billion insurance policies, serve 492 million customers and have close to $500 million in gross written premium in 2016.  

At Daily Fintech, we have covered the lead up to the Zhong An IPO here and here.

This is big news, folks.  Here are a few thoughts as to why I think this is so big:

  • Insurtech provides a viable full stack offering to consumers
  • China has now helped to push Asia to the top of the ‘Insurtech leader’s club’
  • Alibaba first, Amazon next?

Insurtech provides a viable full stack offering to consumers

We keep hearing about the number of full stack Insurtech start ups that are have been around and are continuing to pop up.  As I mentioned in last week’s post, these are filling up the ‘new’ circle.  However, for one of these Insurtech startups to now be listed, is huge.  Regardless of how this IPO or the eventually publicly traded stock performs, this represents a big stake in the ground to incumbents to say, ‘Insurtech is here, here to stay, and if you don’t transform, you will continue to see IPOs of other full stack offerings which will disrupt and/or put you out of business’.   More importantly, the public will take notice of this, hopefully doing for Insurtech what Netscape did for the Internet.  

All of us in the Insurtech community send a thank you to Zhong An for making Insurtech mainstream.

China has now helped to push Asia to the top of the Insurtech leader’s club

Silicon valley has been the hub for technology for decades.  Insurtech start-ups, accelerators and VCs are all over there.  There are many more across the states, in big cities like New York and Austin, but also smaller ones like Des Moines and Detroit.  The US is and will always be a big player in any arena that has to do with technology.

In Europe, Insurtech is an everyday word in places like London and Germany.  Start-ups, accelerators, incubators and investors alike are in these areas and building impactful Insurtech solutions.  

But none of these places, have yet to have an Insurtech start up on a listed exchange.  Being listed on an exchange means you’ve made it.  It means that you’ve earned a seat to be considered with the big boys and that you are recognized as a ‘real’ company.  Asia can boast that now.  Couple that with the amount of things happening in work being done in Singapore to make it a Fintech/Insurtech hub – Asia sits at the top of the charts in the Insurtech ranks currently.  

Alibaba first, Amazon next?

I’m not the first person to mention this, as can be found in this post from 2014 and another in 2016.  Alibaba has shown that it has the ability to scale its business across many different verticals (including insurance) .  A big reason for this is because of its brand presence and customer service.  Alibaba and Amazon are almost synonymous at this point.  So one must think… when will Amazon get into the Insurtech space?  Zhong An got started by offering Insurance for e-commerce; that is clearly no longer low hanging fruit. Amazon is not shy about moving aggressively into adjacent markets and so we can expect to see a big move soon.

While Amazon offers protection plans currently, the key difference between what they offer and what Zhong An offers is that Amazon’s products are underwritten by insurers, while Zhong An’s products are underwritten by Zhong An.  This would make the product offered through Amazon and not by Amazon, unlike the products which Zhong An offers, which they can offer through a number of different partners.

However, with the amount of investment and focus being made into Insurtech by incumbents, especially reinsurers, who’s to say that they won’t partner up with Amazon and launch a company similar to Zhong An in the US?

As for Zhong An, what’s next?  Will they follow the path of Alibaba and start expanding in Southeast Asia?  Or will they continue to expand their product expansion and reach in China solely?

We will continue to monitor how Zhong An does post IPO, as well as how this IPO affects the Insurtech industry.

Here’s to wishing you great success with your IPO, Zhong An.  I sincerely hope you do not follow the same share price trajectory of Netscape or the Lending Club

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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.

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


Cracking silos between insurers and asset managers: a Fintech solution

share data

Financial institutions are fenced within a regulatory terroir. Europe is a multi-lingual continent with less than half a dozen currencies and more than two dozen legal & economic jurisdictions. Wilkommen y benvenuto. Financial regulations in Europe can fill a library, if there was an audience for it. But I cant foresee any aficionados, so it is only the stakeholders affected that care about the MIFIDs and all other regulations protecting customers and economies that depend on financial service providers.

Regtech is one of the areas that Fintechs have focused on; using technology to address efficiently and cost effectively the needs of financial institutions for regulatory compliance. This is actually a broad area and includes challenges like data security, reporting accuracy, on-time delivery, and capability to identify relevance and applicability (to name a few).

Insurance companies are not immune to the tsunami of regulations even though payments and fund management have been more on the spotlight.

New Solvency II is one of the main regulations to come into effect in 2016, that will require insurers to identify underlying holdings in any funds they own. More than 4000 European insurance companies are affected. Deloitte reports that European insurance sector represents more than 42% of the fund industry; the insurance sector is actually a larger client than pension funds (36%).

Asset managers have been happily serving insurance companies because they are typically large, relatively sticky pockets of money, with a long-term investment horizon. Solvency regulatory framework has been around since 2013 but it has been proven very difficult for insurers to comply simply because most asset managers don’t have the capability to provide the granular data needed. The main requirement of this regulation is the “Look-through” principle which demands that asset managers provide their insurance clients sufficient data of their holdings so that risk metrics can be calculated associated with the Solvency Capital Requirement (SCR).

Insurers have been paying a high cost because they end up being charged (increased capital requirements – type 2 equity) on each of the underlying assets that they dont comply (i.e. calculate SCR). In simple words, if “Look-through” isn’t achieved, then the insurer ends up with higher capital adequacy requirements and with more stringent risk requirements (counterparty exposure limits and increased liquidity levels). As a result, insurance companies are out on the look for the Asset managers and asset service providers that can live up to the new standards of the solvency regulation. In effect, insurance companies are forced to choose asset allocations and risk exposures, based on the SCR calculation’s. As long as those calculations are distorted because of the lack of data, insurance investment decisions are suboptimal.

Luxembourg and Dublin, the two large fund centers of Europe, have decided to create an alliance and do something about this issue that affects insurance companies, asset managers and asset servicers. The Luxembourg Stock exchange created a consortium in 2010 that has evolved into Fundsquare that started operating about 2yrs ago as a user owned subsidiary of the exchange with expertise in fund technology. At the same time, in Dublin the Moneymate Group, a fund data technology group, launched a Fintech and SilverFinch was born. Silverfinch, is a Regtech utility for “Secure Data Sharing” to allow asset managers handle the look-through requests from their Insurance Company investors.

In late 2014, Silverfinch and Fundsquare partnered to accelerate the ability of European asset managers to service the needs of the insurance sector with regards to Solvency II demands. Once again Luxembourg is rolling out a “tapis rouge” on a bridge linking asset managers serving insurance companies.

The adaptation is a work in progress since it involves a multi-jurisdictional web of multiple financial assets. Silverfinch manages over $2.5 trillion of client assets (reported as of Oct 2015). Their value proposition is focused on data ownership and security, while providing the necessary reporting requirements for Solvency II.

The need to open a secure channel of communication between insurers and the asset managers that invest the premia collected by insurance company providers, is clearly a one-way street. Data flows from asset managers to insurers, solely for reporting purposes but of course, risk measures and capital requirements are determined from the data.

Imagine a flip flow of data: Insurers providing their asset managers with their customer related data. Anonymous but valuable data that can be turned into investable insights from Fintechs in the Big Data business. Which Fintechs can be a bridge between asset managers and insurers, to transform the structured data available to insurers, into investable insights that the asset managers serving them can have privileged access to? Looking for a flipped SilverFinch.

Which asset managers are exploring the possibility of exploiting data from their insurance clients? Looking for asset managers testing insurance provided data sets, to extract hidden value.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Efi Pylarinou is a Digital Wealth Management thought leader.



30,000 Foot Look at InsurTech


Guest Post by Matteo Carbone

30k foot

The insurance sector is undergoing a profound change. Digital transformation has become a major challenge for insurance companies all over the world. In Italy, this transformation is exemplified by the adoption of vehicle telematics. According to the latest IVASS data, black box became an integral part of 15.5% of new policies and auto renewals during the third quarter of 2015.


The insurance sector is now seeing the same dynamics already experienced in many other sectors, including financial services: with startups and other tech firms innovating one or more steps of the value chain traditionally belonging to financial institutions. InsurTech has seen investments of almost $2.65 billion coming in during 2015 compared with $0.74 billion in 2014. Similar to FinTech in 2015, it’s now InsurTech’s turn to define the elements to be included in the observance perimeter, this being a main point of debate among analysts.


In my opinion, all players within the insurance sector will have to become InsurTech-centered in the coming years. It’s unthinkable for an insurance company not to pose the question of how to evolve its own model by thinking which modules within their value chain should be transformed or reinvented via technology and data usage. Realizing this digital transformation can be achieved by building the solutions in-house, by creating partnerships with other players—both start-ups and incumbents—or through acquisitions.


Based on this view that all the players in the insurance arena will be InsurTech—meaning organizations where technology will prevail as the key enabler for the achievement of strategic goals—the way to analyze this phenomenon is via a cross-section view of the customer journey and the insurance value chain. This mental framework, which I regularly use to classify every InsurTech initiative—whether it’s a start-up, a solution provided by established providers or a direct initiative by an insurance company—is based on the following macro-activities:

  1. Awareness: Activities that generate awareness in the client—whether person or firm—regarding the need to be insured and other marketing aspects of the specific brand/offer;


  1. Choice: about an insurance value proposition, which, in turn, are divided into two main groups:
    1. Aggregators, who are characterized by the comparison of a large number of different solutions;
    2. Underwriters, who are innovating the way to construct the offer for the specific client, irrespective of the act to compare different offers.


  1. Sales/Purchase: Focuses on innovative ways in which the act of selling can be improved, including collection of premiums;


  1. Use of the insurance product: clarifies three very distinct steps of the insurance value chain: policy handling, service delivery—which is acquiring an ever-growing significance within the insurance value proposition—and claims management;


  1. Recommendation: Part of the customer journey which is becoming a key element in the customer’s experience with a product in many sectors;


  1. The Internet of Things (IoT), we can include in this category of activities—transversal to the activities described above—all the hardware and software solutions representing the enablers of the connected insurance (the motor insurance telematics is the most consolidated use case);


  1. Peer-to-peer (P2P): Initiatives that, in the last few years, have started to bring peer to peer logic to the insurance environment, in a manner similar to the old mutual insurance.


Based on my interpretations of the evolution of the InsurTech phenomenon I would say:

  • on the one hand, there is a tendency towards ecosystems in which each value proposition becomes the integration of multiple modules belonging to different players


  • on the other hand, the lines between the classical roles of distributor, supplier (coming even from other sectors), insurer and reinsurer are getting blurred.


In a scenario like this, the balance of power (and consequently the profit pool) among various actors is bound to be challenged and each one of them may well choose to collaborate or compete depending on context and timing.


Daily Fintech Advisers provide strategic consulting to organizations with business and investment interests in Fintech.


The InsurTech Spectrum – the 7 colours of digital innovation


rainbow_5997cBy Rick Huckstep

It is almost a year since I published my first post on Daily Fintech. The subject was simply ‘where’s the Insurance Tech in Fintech?’

I had just been to a Fintech innovations awards dinner in the heart of London, the spiritual home of insurance. Of the nominated Fintech’s, only one was an insurance business. This was Bought By Many, who, rather ironically as the only insurer there, they went on to win the award for Fintech Innovation of the Year!

One year on and InsurTech is now established in a class of it own; no longer a sub category of Fintech.

In 2015, $2.65bn of VC money was invested in InsurTech. We now have InsurTech focused accelerators with the excellent Startupbootcamp in London, the Global Insurance Accelerator in Des Moines, USA (about to start it’s second cohort), and Mundi Lab announcing its startups for their insurance program in Madrid.

Insurance startups around the globe are bringing digital innovation and new business models to insurance. And about time too!

Since that first post a year ago, I have interviewed more than 50 InsurTech startups and for most of them, I have written their story. From this research into the background, purpose and intent of the startup, common themes have appeared.

From Distribution to Data, the spectrum of InsurTech

Red – Distribution

Distribution is all about making insurance easier to buy, consume, understand and relevant. They put the customer first and build their insurance proposition from the customer out (unlike incumbents who organize their business around internal capabilities).

These startups are all about the customer and their propositions are characterized by convenience, on-demand, personalization and transparency (and of course, digital).

Examples include;

  • Bought by Many
  • Knip
  • Cuvva
  • Insquik
  • PolicyGenius
  • Moneymeets

Orange – Enterprise

Here we see a new breed of enterprise class software providers. These are Software as a Service platforms running on the cloud. They have consumption based pricing models that replace the traditional $million up front licence fee and multi-year implementation.

In the main, these InsurTech’s have taken hold of the SMB space but it is a matter of time before they prove themselves as genuine enterprise solutions for tier 1 insurers.

Examples include:

  • Vlocity
  • Zenefits
  • Insly
  • Surely
  • Riskmatch

Yellow – Mutual

New peer 2 peer business models return insurance to its roots of mutualisation and community. The model relies on the notion that social grouping and affinity will change behavior and address moral hazard (thereby reducing claims payouts and premiums).

The question of scalability still hangs over P2P insurance but if it succeeds as a business model, it could form the foundation of a new breed of insurer. Just as kids call to their parents in their hour of need, customers will call to the insurer in theirs.

Examples include:

  • Friendsurance
  • Guevara
  • TongJuBao
  • Lemonde
  • Uvamo
  • Gaggel

Green – Consensus

Blockchain technology will fundamentally change the way the insurance industry works (as well as banking and society as a whole IMHO).

The promise is huge although as yet, unproven. From smart contracts to identity authentication, from fraud prevention to claims management, blockchain technology will provide the underlying technology foundations for a trustless consensus that is transparent to all parties.

Examples include;

  • Everledger
  • Tradle
  • SmartContract
  • Dynamis
  • Blockverify

Blue – Engagement

For me, this is the most significant of the characteristics from InsurTech in personal lines. Here the product becomes integrated in the customer’s lifestyle. It becomes sticky and overrides the annual buying exercise where price is the key buying criteria. Digital natives are responding well to lifestyle apps that sit on top of the underlying insurance product.

Examples include;

  • Vitality
  • Trov
  • Oscar

Indigo – Experience

The true value of insurance is only realized when the customer makes a claim. New tech solutions that improve the customer journey through the claims process will not only improve the customer experience, they will also reduce the cost of claims and claims payouts.

Examples include;

  • 360Globalnet
  • RightIndem
  • Tractable
  • Vis.io
  • Roundcube

Violet – Data

This is all about new sources of data to rate and underwrite risk. This is about using data science, machine learning, artificial intelligence and high performance computing to process data in completely new ways.

Whilst Distribution is vital to change the way customers interact with insurers, it is the data players that hold the key to fundamental change in the way insurance is manufactured.

Examples include;

  • Quantemplate
  • Analyze Re
  • Meteo Protect
  • The Floow
  • Fitsense
  • Influmetrics
  • RiskGenius

What’s missing?0005027_prismfoil-rainbow-unicorn

So far, we have not seen a new entrant creating a completely new business model for an insurance carrier, but we will, the promise has already been made!

Meanwhile, incumbent insurers have a sense of protection behind two major barriers to entry for new players – capital adequacy and regulation.

IMHO, this will show itself as a false sense of security over time.

The UK’s FCA is leading the way in embracing innovation with Project innovate and the creation of the regulatory sandbox. Cynics might say it will never work; time will tell, but I don’t think so. Regulators around the world watch the FCA and will follow their lead.

As for capital adequacy, this is a huge obstacle, but not so huge that it cannot be overcome. Capital has shifted and the traditional sources are being replaced. It is entirely feasible that new sources of capital will fund new insurance business models built on new tech. Interesting times!

Au Revoir!

This is my last InsurTech post for the Daily Fintech.

It has been my pleasure to work with Bernard and Efi to produce fresh and relevant content every week for the past year. I will be forever grateful to Bernard for inviting me to write for Daily Fintech.

This is a great team with tremendous insight and experience in the world of Fintech.

Finally, I would like to thank the people who have read my posts on Daily Fintech, and especially all those who have left comments, whether they be good, bad and indifferent!

Daily Fintech Advisers provide strategic consulting to organizations with business and investment interests in Fintech.