Tag Archives: ecosystem

Industry Demands an Open Ecosystem

Can you imagine a world where the open ecosystem dream is a reality? A world where our collective insurance platforms talk to each other? A world where the industry moves faster and better by working together? Oasis and Simplitium, along with a host of others, including SpatialKey, are on this path. While the dream feels idealistic, it is possible. Making data more portable between platforms—interoperability—is not something novel. It’s just fundamental and increasingly vital for long-term survival whether you’re a re/insurer, broker, MGA or solutions provider. We all have a stake in this conversation, and a responsibility to move our industry forward.

Industry demand for an open ecosystem is overwhelming. We increasingly depend on ecosystems, and we need greater interoperability to overcome inefficiencies and redundancies. Matthew Jones of Simplitium provides three key stepping stones we must embrace for greater interoperability:

  1. Avoid a monolithic “one system does all” approach
  2. Minimize the number of catastrophe risk modeling platforms, while maximizing choice in models across multiple vendors
  3. Design systems so that the possibility of change is embedded

Leading organizations are already heading down this path. Lloyd’s recently announced that after losing £1 billion in 2018 it’s looking to drive efficiencies, and one way is through “an ecosystem of products and services that all market participants have access to.” One size does not fit all—and a monolithic approach has proven unsuccessful time after time. Rapid innovation in risk management requires systems that are flexible, scalable, designed for change—and built in close collaboration with those who serve the industry.

See also: The Insurance Lead Ecosystem  

Interoperability drives efficiency

Across our industry, we need to find ways to drive efficiency gains by making data more portable between core systems. If premium is scarce, then finding ways to eliminate waste in the system is not just how you save money, but rather how you make it.

Consider this: How much time do analysts spend keying information into different systems of record? Or, underwriters for that matter. Now, think about how much that costs your business. According to McKinsey, underwriters spend 30% to 40% of their time on administrative tasks like rekeying data or manually executing analyses. It’s inefficient and redundant and increases the risk of error, yet it’s a standard in our industry across every insurance workflow. This creates a massive amount of waste.

Now, imagine if analysts could pass exposure data seamlessly from system to system —with just the push of a button. We work with clients to perform these types of integrations all the time at SpatialKey. Core systems must talk to each other so that insurers can reap efficiency gains while leveraging the best that each chosen provider has to offer. Modern technologies and well-designed solution architectures allow us to integrate disparate value-driving systems easily—and the only thing in our way is us!

The market is advocating cooperation for the greater good. There will be more commercial opportunity and innovation generated through “coopetition” than by trying to knock each other out of the market. Solutions providers must find ways to differentiate that aren’t in opposition to the industry they serve.

Interoperability is “perfectly possible”

You may think it’s not possible—that the type of interoperability I’m advocating for requires too much change. To quote Dickie Whitaker of Oasis: “Don’t think it’s impossible, because it is perfectly possible.” He goes on to say at a climate change conference last year: “What’s important in solving these big problems is not to be beholden to our existing culture. Our existing view. Our existing experience. We’ve got to look to others that may be able to reframe the problem in a way that actually gives us insight into solving [it].”

So, if you’re not leveraging or supporting creative partnerships and ecosystems, perhaps it’s time to consider that they present a “perfectly possible” path to interoperability.

See also: Building Ecosystems Requires Guts  

Let’s make the open ecosystem dream a reality

We’re in an era where your solutions are only as powerful as your connections. Interoperability is the name of the new game. We must make systems do a better job of talking to each other. Doing so is a step change for the industry. And, while an open ecosystem may appear to be a dream, it’s already well on its way to reality. Like we’re seeing with Lloyd’s and elsewhere, purposeful change happens when the status quo is no longer sustainable.

It’s time to reach out to your partners and tell them what you need to be successful. Discuss your requirements for interoperability. Drive change that inspires innovation. Edward de Bono, an authority on creative and “lateral” thinking, said, “The system will always be defended by those countless people who have enough intellect to defend but not quite enough to innovate.”

Will you defend the status quo or innovate the future? The choice is yours.

How to Extend Reach of Auto Insurance

Loyal customers are becoming harder to find for auto insurers. As many drivers compare policies based on price, insurers have a difficult time differentiating themselves in an increasingly commoditized marketplace. And, once they buy, customers aren’t afraid to churn based on a single subpar experience or a lower price elsewhere.

At the same time, heavy losses and tepid new customer acquisition growth are putting financial pressure on insurers. Combined ratios for private auto insurance spiked to 105.9 in 2017, according to S&P Global, driven in part by a string of claims from recent natural disasters. New driver behaviors and the use of mobile technology (both ride-sharing and distracted driving) are also causing uncertainty for auto insurers.

In the face of this uncertainty, maintaining customer satisfaction and increasing customer lifetime value are key factors for strong long-term financial performance. Satisfied policyholders stay with their insurers longer, reducing churn and the costs associated with finding new customers. In addition, happy customers tend to buy more products and spread the word to their own network, building brand equity and referral traffic.

See also: The Evolution in Self-Driving Vehicles

To drive this level of loyalty, insurers first need to determine how to be more relevant to their customers throughout the auto-ownership lifecycle. Just half of customers have been in touch with their P&C insurer in the last year, according to a Bain survey of 172,000 policyholders worldwide. The same survey found that policyholders who had spoken with their insurer in the last year reported a Net Promoter Score (NPS) 15 points higher than those who hadn’t.

Enter the ‘Ecosystem’

To forge closer customer relationships, insurers are beginning to look beyond their underwritten suite of products. By creating an “ecosystem” of related services that meet customer wants and needs, carriers can become more relevant to their customers and tap into new ways to boost satisfaction and loyalty.

When customers receive these types of ecosystem services, Bain found, their satisfaction levels spike. Auto insurers that offered three or more so-called ecosystem services received an average NPS a full 40 points higher than those with no ancillary offerings. These services can include everything from vehicle sensors that provide maintenance alerts to financing advice. For auto policyholders, breakdown services top the wish list.

While the market is still nascent, interest in the ecosystem model is growing. Fewer than 10% of insurers currently offer three or more ecosystem services, but more than 80% of insurers in major markets say they’re interested in adding these services. To differentiate themselves and their offerings, forward-thinking carriers need to move quickly.

Driving loyalty with breakdown services

As the top pick for policyholders when it comes to ecosystem services, vehicle repair plans help drivers manage the hassles of breakdowns. Drivers typically pay a monthly cost for the plan, which pays for covered repairs and simplifies the entire repair experience – finding a trustworthy mechanic, arranging a tow truck, providing a loaner of your choice and sending periodic notifications of the status of the repair.

For auto insurers looking to expand their ecosystems, the benefits are clear. Vehicle repair plans meet a stated customer demand for breakdown services, helping to boost loyalty and differentiate from the competitive peer group.

Choosing a vehicle service plan partner

As auto insurers consider bringing vehicle repair plans into their product ecosystem, many are facing the “build-or-buy” question. For insurers eager to gain first-mover advantage under this model, partnering with a solution provider can help them get to market quickly without investing significant time or resources.

To ensure a flawless customer experience, however, insurers must choose wisely. Delivering on the promise of the ecosystem means making sure that each component added will delight customers. Here are four key considerations for insurers as they review potential partners:

A digital experience. More than half of insurance customers now research pricing or connect with providers online, reflecting a growing desire to interact through these channels. A digital vehicle repair plan solution can help insurers meet customer expectations for a convenient, personalized shopping experience. Online shopping allows policyholders to browse for coverage anytime, while emerging features like real-time pricing based on individual vehicle data connect customers with the best coverage and value instantly.

See also: 8 Things to Know About Insurance  

Transparent, high-quality coverage. Insurers should consider the types of plans available through providers, from bumper-to-bumper to basic powertrain, and if they can customize coverage levels and pricing based on customer driving habits and budget. In addition, partners should make it simple for buyers to understand exactly what’s covered and how much it will cost. A detailed, part-by-part overview helps drivers shop with confidence, enhancing customer satisfaction and avoiding any surprises when claims happen.

All-in-one solutions. As insurers juggle countless tech priorities, many don’t have the time to pull all the components together for a vehicle service plan product offering. A partner that offers the full stack, from plan options and financing to a shopping portal and customer service agents, can help speed time to market and reduce disruptions along the way.

Robust reporting. The more insurers learn about their policyholders, the better they can serve them, supporting continuing relationships and retention. By offering features like a customer portal that shows buyer activity and purchase trends, insurers can make data-driven decisions about pricing, product offerings and marketing activities.

In a time of industry transition, insurers that prioritize customer experience will lead the way into the future. By expanding their reach to include new services that matter most to their customers, insurers can protect policyholders in more aspects of their lives while strengthening their customer economics.

Insurtech Ecosystem Emerging in Asia

Building on T.J. Geelen’s blog post about the thriving fintech ecosystems in Asia, I’d like to share with you some insights relating to the emerging insurtech ecosystem in the region. Although insurtech in Asia is in its infancy, since 2015 we’ve seen a surge of interest. By the way, I’m a big believer that Asia has a real potential to power the next wave of global insurance innovation.

Four flavors of insurtech

First, let’s revisit the definition of insurtech to make sure we are all on the same page. Essentially, there will be three major camps of insurtech: one that enhances existing insurance structures, another one that aims to disrupt by providing alternative digital risk transfer mechanisms and the third type coming from existing insurance firms attempting to defend their existing market positions. The first and third types broadly can be broken into the following sub-types:

  • Product sales/distribution (aggregators, online portals, apps)
  • Risk management (IoT, healthtech, blockchain)
  • Fraud detection/prevention (big data, machine learning)
  • Claims management (big data, machine learning, vendor network management solutions)
  • Service management (chatbots)
  • Investment management (portfolio optimization, asset/liability matching)

The second type attempts to drive an end-to-end structural innovation, either removing part of the structure or fully digitizing it.

Why Asia for insurtech

Asia is attractive from both an insurer and an insurtech perspective due to the size of its significantly underinsured population. The region has traditionally seen a large part of the risks self-insured through family and community networks. As the region experiences rapid growth in the affluence of its population, together with an aging population, the risk exposure is becoming even more apparent, and the need for alternative risk transfer mechanisms, including insurance, increases. Insurtech, alongside traditional insurance, can help.

Further, there are near-perfect locations for the launch of a program. Singapore, for one, allows for sandboxed experimentation, regulatory support and advanced tech infrastructure. Limitations of traditional insurance distribution channels and the rapid increase of 4G mobile penetration mean that insurers are also highly interested in exploring innovative partnerships that help them connect with potential customers.

See also: Matching Game for InsurTech, Insurers

Insurtech in Asia

Asia is a very diverse region and has a mix of developed and emerging countries. So far, the major push for insurtech has come from China, India, and Singapore, while Japan, Korea and emerging Vietnam, Cambodia, Taiwan, Philippines, Thailand, Indonesia, Malaysia and Burma have lagged. (While Australia and New Zealand are geographically close and are very well integrated in the Asian region, the markets are much more ”Westernized” and hence are less applicable to this blog post.)

There’s China, and then there’s everyone else when it comes to insurtech. The first full stack (end-to-end) innovator, Zhong An, is valued at a massive $8 billion and raised $931 million. It accounts for more than a third of the global insurtech funding in 2015. It is also worth mentioning TongJuBao (peer-to-peer) insurer and FWD (Asia’s second-richest family’s insurance venture, which is re-positioning itself from traditional insurer to an agile digital insurance competitor).

India, another vibrant insurance market, has seen its insurtech innovation focus mostly on distribution. Not surprisingly, two of the major aggregators come from India: Policy Bazaar and CoverFox have seen healthy level of customer take-up as well as sources of funding. CoverFox has recently expanded its service proposition, now assisting customers with their insurance claims.

Being based in Singapore, I have a particularly detailed view of the insurtech landscape in Southeast Asia. So far, I have gathered the following mapping of Asia insurtech startups as they fit within the insurance value stack. There’s a mix of very-early-stage as well as more mature Series A and listed ventures. The list keeps growing.

Please feel free to comment and reach out if you come across any additional startups that I’ve missed out in the list below, and I’ll update it.

Area:

Distribution

Actual Losses

Operating Insurance Co.

Value:

20%

55% Losses + 5% Fraud

20%

Role:

Aggregators

Leads Generation

Customer Transactions

Improving risks

Fraud detection

Rewarding healthy

Risk assessment

Loss adjustment

Operational/Service Efficiency

Start-ups: Policy Bazaar (Aggregator)

CoverFox (Aggregator)

Health/House-front

Latize (Fraud) JustMove (Health)

Uhoo (Health IoT)

Harti (Health)

WaveCell (Comms platform)

Fixir (Finding repair garage)

MyDoc (Health claims)

Stash.ph (Health claims)

GoBear.sg (Aggregator)

Cxa (Employee benefits)

PolicyPal (Policy mgm.)

UEX (Group policies)

Zhong An (General Insurance) CH

TongJuBao (Peer to Peer Insurance) CH

DirectAsia (Direct General Insurance) SG

FWD (General / Life Insurance) HK

Singapore Life (Upcoming Life Insurance Startup) SG

 

Corporate insurtech

Singapore, with its advanced infrastructure and innovation-supportive financial services regulator (MAS), has secured a leadership position for Asia’s corporate insurance innovation as reflected by the high concentration of insurance innovation centers. Eight of 10 Asian insurance innovation centers are based in Singapore. The innovation centers are powerful corporate change catalysts and typically include elements of awareness building and cultural transformation.

Firm Innovation Center Country Focus Status
Aviva Digital Garage Singapore Digital Transformation Active
Manulife Loft Singapore Digital Transformation Active
MetLife LumenLab Singapore New business models Active
Allianz Digital Labs Singapore Digital Transformation Active
AXA Data Innovation Lab Singapore Big data Active
AIA Edge Singapore HealthTech Active
Munich Re Innovation Lab China General Insurance Launched Q1 2016
Swiss Re

India IoT, AI, Big data Planned July 2016
IAG

Singapore

Rumored 2016
NTUC

Singapore

Rumored 2016

 

In summary, Asia is a region to watch when it comes to insurtech. Whether it be the home-grown insurance innovation from China and India, corporate innovation from Singapore or innovation concepts imported from elsewhere and deployed in Asia, the region is likely to deliver a vibrant insurtech ecosystem during the course of the next two to three years. And when the dust and excitement settles down five years down the road, we’ll have a fundamentally stronger set of competitors.

Wanting to accelerate insurance innovation, we’ve created InsurtechAsia, an action-oriented community of insurance practitioners, entrepreneurs and industry stakeholders across Asia. We are aiming to attract the best minds to tackle the challenges and opportunities in insurance, connect entrepreneurs with the best enablers, validate concepts and help business scale rapidly.

See also: New Insurance Models: The View From Asia  

A dedicated and company-agnostic insurtech accelerator, such as Startupbootcamp InsurTech, which was launched in London in late 2015, would go a long way to spur further insurance innovation here in Asia. We eagerly await the day when Startupbootcamp InsurTech will come to Singapore.

Are you passionate about making a change to the insurance industry? If so, join us at www.insurtechasia.com and follow this great team of like-minded people on Twitter: @insurtechasia.

Innovation Trends in 2016

For the past few years, the innovation rate in the global insurance industry has run at peak levels, in good part because of digitization, which continues to be a pervasive influence—if not as disruptive as early projections.

Initial expectations of a departure from traditional distribution channels turned out not to be the case. Clients preferred direct, personal contact when buying insurance products. While online channels have not generated major changes—for example, in the vehicle insurance sector in Italy (5% of premiums today are generated online, compared with 1% in 2012) —telematics has had a substantial impact. It represents 15% of all insurance policies today in Italy. (These policies did not exist in 2002.)

Digital transformation is, of course, leaving its mark in four macro areas.

First, consumer expectationsA Bain survey suggests that more than three out of four consumers expect to use a digital channel for insurance interactions.

Second, product flexibility: The traditional Japanese player, Tokio Marine, for example, started offering temporary insurance policies via mobile phone, e.g., travel insurance limited to the dates of travel and personal accident coverage for people playing sports.

Third, ecosystems: They are created when the insurance value proposition depends on collaboration with partners from other sectors. For example, when Mojio sells a dongle (at, say, a supermarket) that requires connection to an open-source platform to be installed in a car, third-party suppliers are able to extract driving data from that platform and create services based on it. Onsurance, for one, offers tailor-made insurance coverage based on the data collected.

Fourth, services: Insurers today are moving away from the traditional approach of covering risks to a more comprehensive insurance plan, which includes additional services.

Connected insurance: a telematics “observatory” to promote excellence 

The fact that the Italian insurance market represents the best of international automotive telematics practices gave rise to the idea of creating an “observatory” to help generate and promote innovation in the insurance sector. Bain, AniaAiba and more than 25 other insurance groups are among its current participants.

The observatory has three main objectives: to represent the cutting edge of global innovation; to offer a strategic vision for major innovation initiatives while reinforcing the Italian excellence paradigm; and to stimulate research and debate concerning emerging insurance issues such as privacy and cyber risk.

The Observatory on Telematics Connected Insurance & Innovation, will focus not only on vehicle insurance (where Italy has the highest penetration and the most advanced approach worldwide), but on additional important insurance markets related to home, health and industrial risk, which, I am convinced, represent the next innovation wave.

Screen Shot 2016-02-16 at 12.43.58 PM

Italy is currently the best practice leader in connected insurance. Italian expertise in vehicle telematics is finding applications in other insurance areas, particularly in home insurance—where Italy is the pioneer—and in the health sector, where we recently launched our first products.

InsurTech on the rise

Another sector that has seen an increased number of investments in 2016 is InsurTech. Until last year, attention focused on many types of financial service start-ups. Today there is significant growth in investments in insurance start-ups: almost $2.5 billion invested in the first nine months of 2015, compared with $0.7 billion in 2014 [according to CB Insight]. Many new firms are entering the sector, bringing innovation to various areas of the insurance value chain. The challenge for traditional insurers will be to identify firms worth investing in, and also to create the means for working with those new players.

The challenge is integration

Ultimately, the main challenge for insurers will be to find ways to integrate the start-ups into their value chains. The integration of user experience and data sources will be key to delivering an efficient value proposition: It is untenable to have dozens of specialized partners with different apps in addition to the insurer’s main policy. It will be necessary to manage the expansion and fragmentation of the new insurance value chain.

To come up with an answer to this problem, start-ups are generating innovative collaborative paradigms. One example is DigitalTech International, which offers companies a white-label platform that integrates various company apps and those of third-party suppliers into a single mobile front end, even as it offers a system for consolidating diverse client ecosystems (domotics, wearables, connected cars) into a single  data repository.

Integrating and managing complex emerging ecosystems will be one of the greatest challenges in dealing with the Internet of Things (IoT) for the insurance industry.

(A version of this article first appeared on Insurance Review.)

industries

Outsiders Retreat From Insurance

Cargill, Monsanto, Wells Fargo and John Deere are officially out of the crop insurance business, according to a recent article from Bloomberg. Large companies like these expanded into different aspects of the agriculture industry over the past few years, and their debut in the insurance industry made quite an impact. With their newly acquired insurance operations, they were the market players to watch – and now we’re watching them leave the industry.

Behind this exodus is the matter of profit. Large companies, especially those that are publicly traded like Monsanto and John Deere, have a different perspective on risk and profit than the typical insurer.

Let’s take crop insurance profit and loss over the past couple years, which is driven by fluctuations in crop prices. As Bloomberg explained, “Bumper harvests have sent corn, the biggest U.S. crop, to less than half its 2012 peak, ratcheting down the premiums farmers pay to insure against loss. Other crops have also seen steep price declines.” At the same time, the broader insurance industry has been seeing lackluster results. The most recent numbers from the Congressional Research Service indicate an underwriting loss of $1.3 billion in 2012 and profit of $657 million in 2013. For insurers, although these are not welcome results, the reality is that there will be challenging years – and insurers are accustomed to anticipating them. They are in for the long haul. But large, diversified commercial companies such as Cargill, John Deere and Monsanto have a much harder time adjusting to these financial results.

So, were these big external players a collective blip on the map, or a real disruption? A pattern visible across many industries offers a possible answer. Large companies diversify around their current offerings, and, if the results are disappointing, they realize the expanded offerings are not core to their business. Google has been extremely successful in most of its diversification, but Google+, its social network offering, never became the powerhouse the compay had hoped would challenge Facebook. If these large companies are unsuccessful, they often leave the new industry.

This is not to downplay the role that new entrants have in the insurance ecosystem. They push our thinking and ways of doing business in directions that might otherwise have taken years for the industry to adopt. New players like Haven Life and Google are not attempting to be the same old insurer, only better. Their goal is to disrupt the business of insurance and to create something in a niche that the industry had not perceived. The disruption they cause can take many forms, from new solutions to new distribution channels. They can go after these markets without owning the entire process – and, in doing so, they create real changes in how the insurance industry has to operate.

Driverless cars will present similar challenges. Volvo and Ford have both mentioned the possibility of covering product liability insurance. How will this affect the insurance industry? Will automakers really cover the liability, or will they front it? Autonomous vehicles will change the insurance landscape by opening doors for these new thinkers. But will the insurance industry need to step in to present new insurance products that provide the necessary coverage? What role will insurers play in the new auto world?

Disrupters like Monsanto, Cargill and John Deere were not in the market for a long time, but they do have an impact. They invested in changing the claims process, and they applied data, analytics and automation in areas that were previously very manual – which causes us to rethink other processes. We can hope that their new ways of doing business opened some eyes in the industry. They did not change the game so much as establish that the game needs to be changed.