December is the perfect month to predict the key insurtech trends for the year to come and to think of New Year’s resolutions: what specific trends to tap into to enhance the digital strategies. We believe these trends should relate to what an insurance carrier would like to accomplish, to what a winning insurance firm of the future would look like. We believe that that such winning insurance firms will have four essential elements.
1: They are always part of their customers’ lives
Fast-changing customer behavior and new market dynamics make it essential for insurance carriers to increase the contact frequency and provide more value in these contacts. Fortunately, all sorts of connected devices offer an unprecedented entry into customers’ daily life.
2: They continuously build contextual ecosystems
Adding value is about solving the real problem. People don’t want a mortgage; they want a nice house to live in. Insurance is usually just part of a solution, but rarely the entire solution to the real problem a customer is facing. To help solving the real problem insurers need to become more part of the context, and of the ecosystem of companies and organisations that play a part in that context.
3: They act ‘simply human’
With all sorts of new technologies being applied to digitise processes insurers run the risk of neglecting the feelings side of customer engagement. People crave for organisations that are human. The solution is to create ‘the best of both worlds’; to leverage technology to empower front liners.
4: They strive for operational excellence
Digital transformation to improve operational excellence will continue to be top of the agenda in the years to come. And rightfully so. Yet, at the end of the day, digitalised processes and a lower cost base are table stakes. It is simply not enough to stay in sync with fast changing customer behaviour and new market dynamics. Operational excellence is essential, but it also a qualifier, not a winner. Engagement innovation needs to be built on top. This is where the previous three essential elements kick in.
It is these four essential elements that drive our Top 10 Insurtech Trends for 2018; the key trends that set the Digital Insurance Agenda. We’ll illustrated each trend with insurtech solutions that featured at the 2017 DIA editions.
Key words? Platforms and partnerships. Obviously, we’ll pay ample attention to this at DIA Amsterdam 2018 (May 16-17).
Trend 1. Data-driven Services
In order to really become part of customers’ daily lives new data streams from e.g. connected devices need to be turned into new insights and these new insights need to be turned into new propositions and services. This is where insurance carriers need to explore opportunities beyond their traditional primary process to really help solving the real problem that customers are facing. Many insurtechs are dedicated to supporting incumbents in these efforts.
DIAmond Award winner The Floow (Sheffield, UK) designs telematics systems to make vehicles safer and cheaper for all. Their GoWithFloow (GWF) is a platform for car sharing. It is sort of the Airbnb in cars, including rating the owner or borrower of the car. But where the platform differs from other examples of car sharing and vehicle lending is the addition of The Floow telematics engine and scoring system which is integrated into the software. This means that when a driver borrows a car their behavior can be tracked using the smartphone-as-a-sensor capabilities. The Floow use this information to develop a score for the driver to help lenders decide who to lend their car to. The Floow is engaging with insurance companies to bring the proposition to market. This sort of capability will help meet changing mobility demands by creating a marketplace of vehicles.
HeartShield (Vienna, Austria) developed an artificial intelligence platform that uses patient data to recognize risk factors and determine whether someone is a potential candidate for a heart attack or heart failure in time. Instead of using 19th/20th century statistics, they allow computers to learn warnings signs autonomously using data from all sorts of devices that can measure heart rate; including smartphones, smart watches and clinical or portable ECGs. Peer-reviewed scientific papers show that the algorithms behind HeartShield outperform the best heart rate variability predictors in detecting heart disease, and is more reliable than blood test based risk scores in recognizing coronary artery disease.
Trend 2. Invisible Insurance
In banking we notice that more and more payments are becoming invisible. Think of machine to machine payments, of what Amazon is doing with Dash, and how you pay for a ride with Uber and for a song at iTunes. We see the same thing happening also in insurance. You purchase a product and there is already an insurance embedded in that.
Customers purchasing the BMW i3 or the i8 are entitled to a seven-day free-of-charge, comprehensive car insurance from BMW Car Insurance. This is simply activated over the phone by the customer. Customers are then provided with an overview of insurance options available to them after their seven-day free policy has expired; all designed and backed by Allianz.
DIAmond Award winner Qover (Brussels, Belgium) have built an ‘Insurance as a Service’ platform to change the way insurance is designed, managed and distributed. Qover is a cover holder of Lloyd's of London and acts as a digital wholesaler of proprietary white label insurance. They target among others large non-insurance distributors; basically any business, from automotive brands and utility companies to ecommerce merchants and traditional retailers, to seamlessly integrate insurance into their products via open API's.
See also: Insurtech: The Year in Review
Trend 3. Upstream Platforms
Push strategies are becoming less and less effective. Pull is the name of the game. Pull is about understanding and solving the need behind the insurance solution and being present in that context. Insurers need to move upstream and be present in the context of specific life events and decisions, big and small.
Ping An has adopted the strategy of the synergistic development of traditional and non-traditional businesses. Pinganfang.com
for instance, is the largest real estate e-commerce platform in China and part of Ping An Group. Its business model integrates ‘real estate + internet + finance’ and seamlessly includes a wide range of financing services in the customer journey of buying a new home. Richard Sheng, director of branding & corporate communications Ping An Group in our book Reinventing Customer Engagement
: “We are creating all sorts of portals in non-traditional domains such as home, health, car, but also food and entertainment. Each and every one of them are new business lines that create new value for themselves, as well as for Ping An. All these platforms have large numbers of users and interactions, and advanced data mining and precision marketing capabilities. When relevant, and at a logical moment, customers are brought into contact with Ping An's traditional banking and insurance activities. The new business lines are not only increasing their own value; by enlarging the total customer base and by allowing new synergies they also increase the value of the entire ecosystem of Ping An enterprises.”
Abracar (Munich, Germany) was developed in 2016 as part of the Accelerator program of Allianz X and is the first spin-off of the incubator. The startup is Germany’s first professional car broker. They help car consumers to sell their car at the highest price without any effort. Abracar takes care of all steps of the selling process starting by creating a professional expert’s report, over 50 pictures, writing an attractive listing, filtering the potential buyers, negotiating the final price and preparing the contract. The car buyer benefits from the expert’s report, an Allianz warranty, financing solutions and competent consulting.
Trend 4. Bancassurance Revival
PSD2 is the new payment services directive by the EU. This directive makes it obligatory for banks to open up customer data to third parties. Originally, the intention was to increase the competition between banks to improve payment products, but it effectively creates opportunities to all sorts of third parties to provide new opt-in services to these customers. Although this is hardly on the radar screen of insurance carriers, we believe this will revamp the bancassurance model. Moving from bank partnerships for just distribution and using bank data in the marketing and underwriting processes to really being much closer to customers. When we interviewed Markus Pertlwieser, chief digital officer Deutsche Bank, at DIA Munich 2017 he agreed that the right PSD2 applications offer great opportunities to link insurance to a certain payment, making insurance much more individual and much more real time.
Also at DIA Munich 2017, Vikas Chhariya, global head of digital partnerships AXA Group, mentioned Aadhaar, India’s national biometrics identity program, as an interesting platform. Banks need to comply, so that fingerprints will give hundreds of millions Indians access to financial services, including insurance.
Strands is a leading provider of Personal Financial Management solutions (PFM) for banks such as Barclays, BBVA and Deutsche Bank. PFM uses payments and other data to help bank customers understand their financial situation, give some tips how to better manage finances and prevent overdrafts, and improve wiser financial decision-making. PFM drives engagement between banks and their customers. Strands is actually a fintech rather than an insurtech. In the last few years the company has been investing a lot in the development of smart recommendation engines (using AI and Machine Learning) that continuously learn about the user financial behaviour and then proactively make contextual recommendations of financial products, including insurance. Let’s say you are 40 years old and you have no pension plan in place. Through a Siri-like PFM medium, the Strands PFM will intuitively decide to offer you a pension solution.
Munich Re’s Life Financial Solutions Business has developed a new variable annuity product concept called SaveUp. It's the first attempt to revolutionize the savings life insurance space in Europe, through new product offerings and an entirely new distribution channel via a smartphone app but it also supports distribution via banks. SaveUp is a simplified savings product suitable for online self-service sales and management via web and smartphones. It is packaged for young consumers as a guaranteed savings and investment offering, allowing them to participate in investment markets while maintaining the security of their chosen guaranteed amount.
Trend 5. Innovation Multiplied
In a recent study DIA academic partners Alexander Braun and Florian Schreiber (University of St. Gallen) argue that real innovations require more than just new technological improvements to unlock new economic value. It is about combinations of innovative new models. Now think about insurtechs working closely together, combining their ideas to come up with something that is even more innovative. Innovation multiplied. And that’s exactly what we already see taking place in the DIA community.
KASKO + Picsure
KASKO (London, UK) supports insurance companies by offering an API-powered agile insurance product platform that sits in between digital customer touchpoints and your legacy IT, taking internal IT off the critical path to product launch. Picsure (Munich, Germany) creates smart AI solutions for the insurance industry, in particular for object recognition, fraud detection and identity checking. KASKO and Picsure teamed up to create an innovative watch insurance product for Swiss insurer Baloise.
Sentiance + Sureify
Sentiance (Antwerp, Belgium) is a data science company turning IOT sensor data into rich insights about people’s behavior and real-time context. These insights enable insurance companies to understand how customers go through their everyday lives, discover and anticipate the moments that matter most, and adapt their engagement to real-world behavior and real-time context. Sureify Labs (Silicon Valley, USA) created a platform that engages a customer over their lifetime. Their Lifetime Platform is a set of cloud-based software applications that allow insurers to digitally engage with their policyholders via web, mobile and various personal health and device data sources. The platform drives customer loyalty, brand recognition and better customer experience. After winning the DIAmond Award earlier this year Sentiance won again at DIA Munich through their collaboration with Sureify. They demonstrated the wizardry of the Sentiance technology that extrapolates behavior insights from a diversity of mobile-user data, and then showed the full circle that Sureify provides by turning these insights into buying signals and engagement opportunities.
Trend 6. Competitors Cooperate
Innovation beyond digitising the current processes and thoroughly exploring the opportunities that insurtechs around the world have to offer require a certain scale. Only the few carriers have sufficient size and presence to do this all by themselves.
Teaming up with other insurers is the solution. The ultimate in cooperation can be found in Germany. Twelve insurers, ranging from multinationals such as Allianz, Generali and Munich Re, to domestic players like Versicherungskammer Bayern, LV1871 and Nürnberger Versicherung, have all put money into WERK1; an incubator that already supports ten insurtechs, located in an old cookie factory in Munich. And because these insurers are convinced that it is about continuously developing a stronger ecosystem, they have launched Insurtech Hub Munich in July 2017. The Insurtech Hub Munich initiative is unprecedented, in terms that twelve insurance carriers, big and small, are working closely together with leading universities and research institutions, with the State of Bavaria and the City of Munich as well as with blue chip corporates from adjacent industries such as automotive, health care and cybersecurity.
Our DIA database shows that 180 insurtechs have ties with Munich. To put that into perspective: California, where Silicon Valley is situated, host 160, according to Braun and Schreiber’s survey. In our view, that makes Munich the de facto insurtech capital of the world. The activities of Insurtech Hub Munich will strengthen that position even further.
Trend 7. Network Effects
Scale economies get an extra meaning. Scale benefits are not just about ever-growing efficiency in processes within the business. It's also about ever-growing added value through network effects. Network effects can for instance be created by leveraging the growth and activity of estLibrary
ablished allied platforms. PayPal, for instance, grew on top of eBay.
Zhong An teamed up with Alibaba’s online shop Tao-Bao to create a shipping return policy seamlessly integrated into every transaction. They’re selling hundreds of millions policies.
AXA Group engaged in partnerships with companies such as Alibaba, Uber and car sharing platform BlaBlaCar. Clearly a clever choice to profit from network effects. They’re all fast growing digital players; so AXA’s business with them will almost automatically grow as well.
We mentioned in trend 2 that Qover is targeting large non-insurance distributors to seamlessly integrate insurance into their products via open API's. Also a perfect example of ‘how to create scale through network effects’.
With insurtech becoming mainstream, the challenge is adoption at scale. Leveraging network effects is a great way to achieve this.
Trend 8. Empathy Empowered
According to many headlines algorithms are displacing human advisers, saving costs. We believe there is ample opportunity to create the best of both worlds by combining new digital technologies with human skills. To relate to their customers, financial institutions need to secure the feelings side. Humans inject emotion, empathy, passion, creativity, and can deviate from the procedure if needed. Deploying technology to empower human front liners such as brokers and agents results in better conversations, higher conversion and finally, greater solutions for customers.
SaleMove (New York City, USA) provides solutions for delivering a high-touch, in-person customer experience online. SaleMove enables for instance life insurance brokers to interact with their online customers in real-time through voice, video and collaborative browsing - leading to better conversations, higher customer satisfaction and increased conversions.
DIAmond Award winner Wefox (Berlin, Germany) combines the personal advice of a traditional insurance business with modern app technology, thereby bringing together the evolved needs and expectations of customers, insurance brokers and insurance companies. Wefox’s long term vision is to pull the entire insurance industry, in particular brokers, into the digital age, leveraging to the max what digital has to offer. They are very successful with already more than 150.000 end customers and over 600 brokers in 3 countries.
See also: Global Trend Map No. 2: Insurtech
Trend 9. Behavioral Economics
The ongoing success of South African health insurer Discovery’s Vitality program is creating more and more awareness for intelligent combinations of data and behavioural economics. Adrian Gore, founder and CEO of Discovery, in our book Reinventing Customer Engagement
: “If you promote healthier behaviour, you can offer more sustainable insurance. Behavioural science says that people need incentives to change. The Vitality program is a complete wellness system that tracks everything from physical activity to nutrition over the course of a person’s life. It combines engaging policyholders through personalized and regular interaction, motivating and incentivizing them to manage their wellness, live better and to make healthier choices through tailored programs.”
Lemonade (New York City, USA) offers homeowners and renters insurance. We like Lemonade so much because it is fully powered by artificial intelligence and behavioral economics. By replacing brokers and bureaucracy with bots and machine learning, Lemonade promises zero paperwork, instant everything and killer prices. Lemonade’s chief behavioral officer Dan Ariely helped designing systems and processes that ensure that the interests of the insurer and the insured are aligned. But also how behavioural economics reflects in Lemonade's daily customer experience. When we interviewed CEO Daniel Schreiber on the occasion of Lemonade’s first anniversary he shared: "Not just our business model but also the whole product flow is informed by behavioural economics. For example, we ask people to sign on the top of the form, not at the bottom. Behavioural research shows that asking people to pledge honesty first, results in forms that are actually more accurate." Insurers could benefit much more from psychology and social sciences.
Consumer engagement is becoming more and more important in the health insurance industry. Dacadoo (Zurich, Switzerland) has developed a mobile health engagement solution enabling individuals to track, manage and benchmark their health and well being in an easy and fun way on their smartphones. The Health Score indicator moves up or down in real-time, depending on how body values, emotional wellbeing and activities change (exercise, nutrition, stress and sleep). To help individuals remain engaged, motivation techniques from behavioral science are used such as online gaming, social and collaborative features from social networks, and personalized feedback.
Trend 10. Purpose Reboot
New digital technologies are not only critical in repositioning the industry along customer-centric models but also offer insurance carriers the opportunity to reboot themselves as a force for good in the communities in which they operate. More and more insurers leverage insurtech to tackle important global challenges today and in the future. Connected devices and advanced algorithms are already improving patient care while simultaneously decreasing costs. Micro-insurance solutions are offering protection to low income populations that were previously considered uninsurable. Insurtechs strike the right chord among millennials that are dangerously under-insured. And insurtech innovation is helping to offset the damage caused by natural disasters such as hurricanes and floods.
Allm (Tokyo, Japan) is dedicated to reshaping healthcare by developing HealthTech medical communications platforms for healthcare professionals and the medical industry, using cloud technologies and smart devices. A more efficient communication and new innovative technologies help to improve decision making and can save more lives and reduce costs while improving customer experiences.
Understory (Minnesota, USA) is a smart weather hardware and analytics company that creates unprecedented details of how weather affects people and businesses. The data applications for Understory’s sensors are enormous, as US$ 485 billion of the US economy fluctuates with weather. With Understory’s white-labeled weather and home safety insurers can easily help their customers know what to do to prevent potential property damage.
Incumbents have difficulty connecting to millennials. As a result this segment of the future is hardly aware of the importance and necessity of insurance, with a high number of under-insured as a result. The average attention span of people is getting lower and lower and our daily lives seem to be made up of micro moments related to the use of smartphones. Neosurance (Milan, Italy) provides micro-insurance solutions for insurance carriers that want to address the ‘connected generation’. By gathering contextual data, the Neosurance is capable of identifying a potential specific insurance need for that customer and send a notification on the smartphone. The user can choose to activate the cover with 4 easy taps on the screen. A great way to get a whole new generation more familiar with the benefits of insurance.
DIAmond Award winner BIMA (Stockholm, Sweden) provides insurance and underwriting to millions of low-income people via innovative partnerships with major mobile network operators and financial services businesses. They offer a range of affordable life, personal accident and health micro insurance products. BIMA partners with leading telecoms players such as Telefonica, Orange and Axiata Group. Consumers can pay for insurance via deduction of prepaid airtime credit. In just six years, the BIMA model has transformed the insurance landscape in the countries where they operate, proving that it is possible to reach consumers at the bottom of the pyramid at scale. BIMA has over 24 million registered customers in 14 countries across 3 continents, 93% living on less than $10 per day.
Check out www.digitalinsuranceagenda.com for more info on DIA Amsterdam (16 and 17 May 2018).