Tag Archives: digital insurer

10 Insurtech Trends at the Crossroads

The emergence of insurtech has reshaped the strategic insurance agenda. Here are the top 10 insurtech trends as we enter 2018.

Insurtech Trend #1 – Automation will replace human effort across the entire insurance value chain

This is a trend that is not unique to insurance. But it is a trend that will significantly affect the insurance sector. This is because much of the insurance industry still operates in pre-internet ways. It is also because many personal lines are being atomized. Small parcels of insurance protection cannot be packaged and sold with human input and remain cost-effective. It is also because customers demand it. They want a purely digital experience that does not require human contact when a machine will do nicely, thank you.

One to watch: ZhongAn

Insurtech trends article: Is the Rise of the Digital Advisor the new InsurTech Game Changer?

Insurtech Trend #2 – Insurance premiums will become highly personalized based on greater tech-enabled insight on customers and their individual risk

When you add together the massive growth in new sources of data together with tech-enabled data science, it is inevitable that premiums will become highly personalized. This will be enabled by tech such as wearables, telematics, IoT and smartphone apps. Not to mention the ability to build insights through relationships that exists across data sets. Gone will be the days when people of the same age and gender, with identical cars or homes living on the same street, will pay the same premium. In the future, other factors will apply to reflect greater granularity in their individual risk profiles. Data science will become a key set for underwriters and actuaries.

One to watch: Sherpa

Insurtech trends article: Insurance distribution is about to get personal

Insurtech Trend #3 – The blockchain era has begun, and there will be a rapid shift from pilot to production of distributed ledger technology

It is hard to find a major insurer that is not involved one way or another with a blockchain initiative. This will only continue as this disruptive tech continues to prove its ability to provide a viable solution. Of course, there are still some big questions to answer in terms of scale, performance and security, but those answers will come. The big breakthrough in insurance for blockchain will be in the back office for the complex and global world of wholesale, commercial and reinsurance (which is desperately in need of moving into the internet age).

One to watch: ChainThat

Insurtech trends article: R3’s partnership with ChainThat is one giant leap for insurance

See also: Insurtech: The Year in Review  

Insurtech Trend #4 – The lines between the old and new will blur as insurtech becomes mainstream by 2020

The defining characteristic of the Fourth Industrial Revolution is speed of change. This certainly applies to insurtech and its impact on the world of insurance. The rate at which insurtech startups are popping up all over the world is not surprising. Everyone wants a piece of this $7 trillion cake. The incumbents have responded, too. By investing in, partnering with and acquiring insurtechs, the incumbent insurers have wholly embraced the movement. This will lead to the creation of whole new digital brands, designed to cannibalize traditional business. And because it is simply too expensive and takes too long to transform legacy operations, the incumbents will ring fence and run them down.

One to watch: Munich Re

Insurtech trends article: Digital transformation is the strategic imperative no insurer can ignore

Insurtech Trend #5 – Digital engagement through lifestyle apps will change the relationship dynamic between insurer and insured

Lifestyle apps are the norm. It is hard to find anywhere in the world where this is not the case, so lifestyle apps are the perfect vehicle to provide the peace of mind that customers want when they buy insurance. Instead of the annual chore of hunting for the lowest-priced insurance then having nothing more to do with it unless you suffer a loss, lifestyle apps offer value on a daily basis. This makes them sticky, which, for insurers, means less churn. They also give insurers greater insight into their customers’ behavior, which means better-informed risk assessments and personalized premiums. And they build brand loyalty, which, if you believe in behavioral economics, will result in lower levels of claim embellishment and fraud.

One to watch: Metromile

Insurtech trends article: Metromile, the pioneers of digital engagement

Insurtech Trend #6 – The all-in-one insurance policy is here to stay

It has taken longer than I predicted back in 2015, but the all-in-one insurance policy is here. From a customer’s perspective, the all-in-one policy makes perfect sense. Especially for the millennials and Gen Y’s. Why can’t they simply have one relationship with one insurer and have everything covered in one go? And it’s not just for younger generations. Imagine giving the insurer the details about your car, home, health, travel, pets and possessions. The insurer gives you one overarching policy, a fair price and the ability to flexibly adjust the cover as needed. Operating on a membership model, the platform can provide safeguards and advise the customer on good and bad decisions. This is AI territory and relatively straightforward to automate. IMHO, this is a winner; watch this space!

One to watch: Getsafe

Insurtech trends article: Getsafe take the Lemonade model one step further

Insurtech Trend #7 – New models will challenge the traditional insurance value chain 

In the digital economy, where insurance is embedded into lifestyle products or distributed through ecosystems, the traditional insurance model doesn’t work. The inherent inefficiency in a highly intermediated value chain, too dependent on human effort, makes insurance products expensive. When as much as 80% of premium is lost on distribution, leaving barely a fifth for the risk pool, you know something has to change. In the words of Jeff Bezos, “your fat margin is my opportunity.” These new models will see the carriers squeezed as the reinsurers provide risk capital directly to digital brands. Regulatory frameworks will be reworked to reflect these shorter value chains that don’t require the many layers they have today.

One to watch: Amazon

Insurtech trends article: Redefining the insurance value chain

Insurtech Trend #8 – Lemonade has set the pace in Insurtech 2.0; copycats will follow

The first phase of insurtech was all about distribution and data. Then came Lemonade. In September 2016, they launched in New York, and a year later they cover around 50% of the U.S. population with their renters and home insurance products. For me, Lemonade have defined Insurtech 2.0. Many insurtech startups claim to redefine or reinvent insurance, but they simply don’t, whereas Lemonade has. It is inevitable that the copycats will appear. Some will be insurtech startups, although they will need to be as well-marshaled, experienced and funded as the Lemonade team to have any chance of success. And some will be the incumbents, which will have a go at creating a Lemonade model from within. These will almost certainly fail!

One to watch: Lemonade

Insurtech trends article: Lemonade really do have a big heart, killer prices and instant everything

See also: Top 10 Insurtech Trends for 2018  

Insurtech Trend #9 – Claims settlement will become an automated, self-service and quick-to-pay experience for customers

Insurers spend too much of a customer’s premium on handling the claims process. This is because the process is manual. And because the carrier wants to double-check the claim. And because customers don’t always tell the truth. And because there is too much time in the whole process. And and and and and. The insurtech solution is to put the claims process in the hands of the customer. This sounds counter-intuitive, but it isn’t. Taking a self-service approach, the customer provides video and images at FNOL and is in control of the claims process. Automated reviews of claims handle the vast majority of cases and award instant payouts. The money can be with the customer in a matter of hours. No long processing cycles, no time to embellish the claim and high levels of customer satisfaction. Those that fail the automated review are the exceptions handled by the carrier, which is what they’re looking for anyway! This will become the norm for claims management, once the fears and resistance of the lifelong claims directors can be overcome.

One to watch: Rightindem

Insurtech trends article: Democratizing insurance claims restores trust for customers

Insurtech Trend #10 – Tech-enabled loss prevention will become a key feature in the insurance product

Advances in everyday technology are increasing the ability to predict the likelihood of an event or outcome occurring. In home and motor, tech is being used to model behavior and identify exceptions. Sensors and phones and devices are all collecting data that define our individual norm (as opposed to a collective norm). As a result, any deviation can be instantly assessed, and action can be taken. To handle scale, this is 100%-automated, driven by AI and machine learning. Which means the opportunity for insurance is immense, because, instead of being a passive risk taker (which carriers are today), insurers will become active risk managers.

One to watch: Surely

Insurtech trends article: Digital implementation is the strategy insurers have been looking for

Insurtech prediction lists from previous years 

Looking forward with insurtech Insights – 10 predictions for 2017

Daily Fintech’s 2016 predictions for InsurTech

Sign up for more insurtech Insights here

Lemonade: A Whole New Paradigm

We’ll admit it; we were caught asleep at the wheel on this one. We had heard of Lemonade a few months ago and how it successfully raised $13 million in investor funding, but given that there are 500-plus other insurtech startups out there, we didn’t pay that close attention. Then on Sept. 21, it opened for business. Both Carly and Tony were in Hawaii for the CPCU Society Annual Meeting and entirely too busy drinking Mai Tais, err, I mean, working the event to even notice that Lemonade went live. We’re back in the lower 48 now, back at our day jobs and, after almost a month working on catching up, it just recently hit us that Lemonade is a BIG deal. A REALLY BIG DEAL.

A lot of digital ink has already been spilled at ITL with at least three great articles about Lemonade, but we still needed to give our own point of view. As Insurance Nerds, we are completely geeked out, and, as millennials, we can’t help but want to move our own insurance to Lemonade and are actively wondering when the company will expand to Pennsylvania and Georgia, where we live.

Lemonade is not just another insurtech startup. It is an actual, mobile-first, legacy-system-free, licensed carrier offering P2P (peer-to-peer) insurance to delighted customers in the state of New York through a seemingly magical iPhone and Android app. To start understanding what this is all about, you must watch the three short videos in this article:

That first video looks like a VERY snazzy proof of concept, and it almost makes you wonder if this thing will ever go live or if it will simply be vaporware. But it’s already live! Maya, the young lady who asks you in plain English a few simple questions to “get you some great insurance” is not a call center rep in NYC, Des Moines or even in Delhi; she’s an artificial intelligence chat bot. This technology is so new that it was unknown before 2016 and is only starting to be experimented with in the high-tech industry, and it’s live on Lemonade, helping people buy homeowner’s and renter’s insurance.

Notice how, as the user fills in his address, the system automatically pulls potential matching addresses, and once it has a full match it automatically displays a map to confirm. Then it asks whether you have roommates, a fire alarm or a burglar alarm, if you answer yes to any of those, the system knows what else it needs to ask.

See also: Lemonade: Insurance Is Changed Forever  

It immediately pulls data from databases, analyzes all the underwriting characteristics it needs and offers an incredibly cheap policy. Oh, and if you already have a policy, Lemonade will even cancel it for you and get you a refund! Coverages are shown in a simple, graphical illustration, and just tapping on a darkened icon adds that coverage to your quote immediately. Enter your credit card info, and done. The whole video takes about 40 seconds to get to a bound policy. In real life, it probably takes about 90 seconds. You even get to sign your contract right on your touchscreen. It’s downright magical.

The ease of use and freedom from legacy systems by themselves are probably enough to get 70% of millennials (and many Xers and Boomers) to leave their existing insurers and go with Lemonade instead! As Michael Tempany explains, no existing insurer can produce an app like this because of our legacy systems, workforce and processes. It’s simply not possible. He even argues that “the only solution for traditional insurers wanting to compete with Lemonade is to start from scratch. In short, they need to create a company or subsidiary unencumbered by legacy systems, workforce constraints and intermediaries.”

But that’s just the beginning. Rick Huckstep of the Digital Insurer is absolutely right that “This is what insurance is meant to be: mutuality in the pooling of shared risk.” He argues that “the industry has lost its way with the evolution of mass scale personal lines in the 20th century. The profit motive has gotten in the way of trust; the insured and the insurer are both chasing the same dollars. And now, their interests are no longer mutual but are misaligned. The insured wants a helping hand and to be ‘made whole.’ The insurer wants to satisfy its duty to shareholders.” This is true even with mutual companies with no shareholders; the existing model of every other insurance carrier puts the customer’s interests against the carriers interests at least to some extent. While Lemonade is a full-on risk-bearing carrier, it has eliminated the existing dilemma of every other carrier: Lemonade takes a 20% cut of the premium as a fee, and that’s it. If you have a loss, you get paid for it (immediately and without questions), and, if you don’t have losses, and your policy produces a profit, it gets donated to the charity of your choice.

The claims process is also amazing. You open the app, tell it you had a claim, answer a couple of questions, sign on the screen, record a quick video explaining what happened and get paid, on the spot, immediately.

Oh, and by the way, Lemonade is A-rated and reinsured by Lloyds of London.

The second video explains the science that makes it all work and has a great line: “Insurance that is a social good, not a necessary evil.” This tag line is going to be killer awesome. Also, very interesting that Lemonade explicitly explains what Geico’s “15 minutes can save you 15% or more” line has always meant: There are no brokers or agents involved.

Nobody explains Lemonade better than Dan Ariely, behavioral economics expert, Duke professor and Lemonade’s chief behavioral officer. “In the very structure of the old insurance industry, every dollar your insurer pays you is a dollar less for their profits. So when something bad happens to you, their interests are directly conflicted with yours. You’re fighting over the same coin. Basically if you tried to create a system to bring out the worst in people, you would end up with one that looks a lot like the current insurance industry.”

See also: It’s Time for Some Lemonade  

And a fantastic commercial making it all crystal clear to the customer:

Make no mistake, Lemonade will expand beyond New York, and we’d expect it to be in all 50 states within the next five to seven years at the very latest, and it will expand beyond renters and homeowners.

A lot of questions remain open: Will Lemonade have decent underwriting results? Will the underwriting results even matter given the fee-based structure? Will the company be able to come up with an equally genius model for auto insurance? How about commercial insurance?

A couple of things are absolutely certain: Millennials have no issue leaving legacy insurance companies and will be thrilled to try this out; and our industry has changed forever. Lemonade is what we will get compared with from now on. How will your company compete?

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3rd Wave of P2P Insurance

The P2P insurance model promises to change the conflict dynamic between insured and the insurer. From Friendsurance to Guevara and the eagerly anticipated Lemonade, P2P insurance has already evolved two generations in six years. Now, we see the emergence of the next generation of P2P insurance; the self-governing model.

People-to-People Insurance

The jury may be out on the peer-to-peer insurance model, but that hasn’t stopped the steady stream of new entrants who believe in fundamentally changing the dynamic between insured and insurer.

Back in December, I wrote this article on P2P insurance and featured two very different InsurTech start-ups.

First, there was TongJuBao, a Chinese peer-to-peer insurer that provides social risk sharing insurance products. Recently, Tang Loaec, the founder/CEO sent me this announcement of a strategic partnership to distribute the company’s products through Huaxia Finance across Greater China.

See Also: Is P2P a Realistic Alternative?

The second was Guevara, the U.K. motor insurer that was first to take the P2P model beyond a pure distribution play. I must give credit to Paul Andersen, Guevara’s co-founder and CEO, for the term “people-to-people insurance,” which is way more appropriate than peer-to-peer.

Since that article, there has been a stream of announcements from the pseudo-stealth peer-to-peer insurer Lemonade.

First, the company caught everyone’s attention with a $13 million seed round (which is significantly higher than usually associated with a pre-revenue, no-customer first raise.)

Then, the company announced a list of high profile reinsurers lined up to back the business when it launches later this year. The latest news is the announcement that the company had hired a chief behavioral officer in guru Dan Ariely.

There’s much speculation about what they’re going to do when they go live, but we’ll just have to wait and see on this one.

In the meantime, I’ve been drawn to a new wave of P2P insurers. Some on the blockchain, some using Bitcoin and all based on a self-governing, peer-to-peer network model.

The Next Wave of Peer-to-Peer Insurance is “Self-Governing”

The first wave is based on a distribution model where “friends and family” risk pools self-insured each other’s deductibles to lower premiums.

Then we saw the carrier model, wave 2. Here, the pools are the primary bearers of risk, and they share in any retained premiums not paid out in claims.

Wave 3 is the self-governing model, A back-to-the-future model that takes us further toward a mutual insurance than we’ve seen to-date.

To find out more, I Skyped with Alex Paperno, the co-founder of Teambrella, the Russian InsurTech that uses Bitcoin to hold client money.

This article appeared in The Digital Insurer.

Maturing Use of Mobile in Insurance

“Can you hear me now?” The use of mobile technology is indeed maturing in the insurance industry!

Recent SMA research shows that, over the last year, insurers have increasingly invested in developing digital strategies. Most intend to migrate, over time, to a comprehensive digital insurer approach. Some others pick a specific area to work on, such as mobile agent/broker support or self-servicing capabilities for policyholders. Although both approaches are perfectly justifiable, we strongly recommend to tie all digital and mobile initiatives together under a “digital insurer” strategy. This approach will ensure consistency between business functions, market segments and customer experiences – and it is the approach that will help prioritize investments.

A big part of a digital strategy is a plan for implementing mobile technology. Most phones are not being used primarily to make calls anymore. (When I was overseas last week, and my phone didn’t work, I experienced first-handed how much we all rely on our smart phones for information and transactions, restaurant and hotel bookings, travel info, weather, banking and shopping.) Today, people expect to be able to transact on their mobile device as if it is a desktop or laptop. So how is our industry responding to these expectations?

Especially in the direct writing, personal lines space, mobile has become a mature and widely implemented technology. Direct writers support pretty much all informational and transactional interactions with their policyholders via mobile devices. In the last year or two, we have also seen carriers with agent/broker distribution channels invest heavily in mobile services. This investment tends to be triggered by one or more of three drivers: cost savings because of self-servicing; distribution channel experience (ease of doing business) and expectations; or competitive pressure. Almost all of these carriers start their mobile implementations with purely informational capabilities, followed by enabling transactions. In addition, some of the multi-channel carriers are now starting to expand their mobile capabilities beyond the distribution channels into the policyholder relations, carefully balancing what to communicate directly to policyholders and how to continue to fully engage the agent/broker.

On the commercial side of the business, we have seen a slightly different approach to mobile enablement. Carriers first built mobile capabilities around loss or risk management functions, including information on replacements materials and costs, uploading pictures of damaged assets, providing tools for risk assessments or location-specific information. In most cases, these capabilities were first rolled out to distributors; now we see some carriers that also offer them to their policyholders. Especially in the commercial segment, however, insurers are very cautious about reaching out directly to policyholders, and almost all communication is a three-way process among carrier, agent/broker and policyholder.

As both our research and our interactions with specific insurers have shown, mobile strategy and implementation have matured rapidly. Our industry is definitely past the “can you hear me now” days. The next focus area will be how to integrate mobile into a true digital strategy and how to capitalize on the information we are starting to gather on our policyholders and partners. That is the point where all investments made will truly start paying off.

A Report From MIT on the Next Revolution

Inspired. Extraordinary. Insightful. Transformative. Innovative. These are the words describing what I heard, saw and experienced at the recent MIT Sloan CIO Symposium, titled “Lead Your Digital Enterprise Forward:  Are you Ready for the Next Digital Revolution?” The symposium had more than 700 business and IT leaders, from  a wide range of industries, converging to discuss what was expressed by many panelists: We are at the forefront of witnessing the greatest disruption of every industry, the likes of which has never before been seen – the digital enterprise!

MIT leaders stated that the top issue expressed by executive boards and executive committees is the fear of the disruption of business models and the risk to revenue models because of new entrants, new technologies and new customer demands. Every industry is or will be affected, some sooner than others, and all will feel the pain of disruption. The degree of pain will depend on how well companies create new strategies; embrace innovation; fund transformation initiatives; and create a business that will be flexible, adaptable and valuable in the new digital future.

Sadly, only a handful of insurance executives attended the symposium. This stresses the danger we face and the challenge we have as an industry to recognize the disruption that is underway and our need to innovate and collaborate with leaders and thinkers outside our own industry. My observations align with SMA’s Top 8 Essentials for Preparing for the Digital Revolution, identifying critical elements that insurers must acknowledge and embrace as they rethink their businesses to become a Next-Gen Insurer.

  1. Digitalization is everywhere. And it is necessary for winning and retaining customers. We live in a world that is digitally charged and connected, and it is growing exponentially more so. This change is driven by new technologies and the customer experiences that have been reshaped by the use of these technologies, creating an increased preference for digital in the process. In response, modern technology and digitalization must now change how companies view themselves – no longer as value chains but rather as enterprise ecosystems that must be connected.
  2. Digitalization is dramatically destructive. A disruptive, foundational change is taking place in the way all businesses are approaching value creation. The ubiquitous connections of people via the Internet and emerging technologies (such as social media, the Internet of Things, crowdsourcing, mobile and cloud) are disrupting traditional business assumptions – from how to engage customers, to the products and services offered and, ultimately, to business and revenue models. The barrier to new entries into all industries is falling or is already gone, creating more risk to existing business and revenue models. New entrants are finding it easier to build, launch and sell much more rapidly.
  3. Data and information are the new currency in the digital world. And it is critical to the acquisition of insights about customers, the offerings of products and services, the creation of new products and services and more. Increasingly, data is being connected to the cloud, allowing data to be available anytime, anywhere and in any way.
  4. A massive paradigm shift in how we view and understand the world has occurred. The necessity to view businesses in a bigger frame of the world must follow suit, otherwise the view will be too small and detrimental. Align around a vision, projecting possibilities and outcomes. Spend to achieve an opportunity or possibility, not to complete a project; otherwise, you will find yourself trailing the competition. Just think big.
  5. Operational excellence is table stakes, and innovation is the price for future success. The absence of action and innovation creates significant business risk and a potential for lack of relevance. Innovation is the price for strategy enablement and the creation of possibilities. Life-long learning, creativity, an entrepreneurial spirit and the understanding of computer science, math and data are critical characteristics for future success.
  6. Innovation and collaboration are mandatory for future success. These are critical components for digital companies today, but the success with which they are employed will separate out the market leaders of tomorrow. The flow of information to engage collaboration through a network of resources and communities is vital to developing new products and services. The collective intelligence of ecosystems promotes entrepreneurship, provides a greater understanding of new technologies and stimulates the learning and creativity that together are key characteristics for future success.
  7. Customer empowerment defines new engagement models. We used to shape customer experience; now it is shaped for us by the rest of the world. As customers gain market power, are increasingly comfortable with technology, have a stronger voice and demand collaboration, companies must reinvent themselves and have a unified digital strategy that enables customer experience consistency and connectivity.
  8. All technology must be viewed as customer-touching. Social, mobile, analytics, cloud, wearable devices, robotics, the Internet of Things, telematics, driverless vehicles, biotechnology and much much more all influence and define customer relationships. Technology is super-connected. It’s creating new outcomes, new experiences and new products and services. And the future will be the cloud of things, with a world of distributed data, devices, technology, intelligence, computing and more that are highly connected.

Many insurers indicate they are on the journey to becoming a Digital Insurer, a key characteristic of a Next-Gen Insurer. Others are tactically investing in new websites, smart-phone apps or social media presence, but without a framework that can bring together a unified digital strategy and an omni-channel experience for driving consistent, connected customer experiences. But far too many others have yet to begin the journey. SMA’s coming digital insurer framework will help insurers to develop a strategy that brings together all of the critical components, recognizing that all  technology touches the customer in some way and at some level.

Yes … it is a brave new world. But, unlike the world of AD 2540, envisioned by Aldous Huxley in his 1931 book, Brave New World, we can envision and anticipate how the rapid growth and use of technology can bring about good and positive changes, and how the explosion of data and customer expectations can profoundly change each and every business for the benefit of everyone. The industrial revolution disrupted and transformed our world in the early 1900s, and the information age in the mid- to late 1900s. We are now in a new age of disruption and transformation. Rather than being cynical and afraid of these changes like Huxley was, we can welcome them. Embrace the digital revolution. Re-envision, reinvent and change the business. Be brave. Become a Next-Gen Insurer.