Tag Archives: Guidewire

How AI Is Redefining Insurance Industry

The insurance industry has operated with great consistency and clear processes for many years. People may not always like or agree with how things work, but nearly everyone from the consumer to the provider essentially goes with it — no uprisings to drive change, no big shakeups. That is until recently. Seemingly all of a sudden, artificial intelligence (AI) is infiltrating the insurance industry, which may be a bit scary to those devoted to long-established practices.

In reality, we are witnessing relatively quick developments and sparks of innovation, considering the overall life cycle of the insurance industry. And what AI offers — now and promises to in the future — is anything but scary. It’s actually quite exciting as the industry enters a truly transformative period that will result in greater efficiency, significant cost savings, and far better service and care.

What Constitutes AI

AI has become one of the biggest buzzwords in the tech landscape, so I want to define what it really means, particularly as it pertains to the insurance industry. AI is a computerized system that exhibits behavior that is commonly thought of as requiring human intelligence. Taking this a step further, it essentially translates to machines acquiring a certain level of “human-ness” so that interactions with software become more like interactions with real people. It also mandates that a system has the ability to learn and improve on its own.

Advances in AI come because of a number of factors, but, undoubtedly, consumer-based technologies have led the charge. Voice, machine learning, computer vision and deep learning have been refined in consumer products, services and platforms, but they are now being combined to create really powerful automated solutions for some of the biggest issues organizations face.

See also: 4 Ways Machine Learning Can Help  

Specific to the insurance industry, novel AI-based applications can shift the workforce and advance what companies are able to assess and offer as well as how quickly they can do it. And this is just over the short term. McKinsey predicts that AI “has the potential to live up to its promise of mimicking the perception, reasoning, learning and problem solving of the human mind. In this evolution, insurance will shift from its current state of ‘detect and repair’ to ‘predict and prevent,’ transforming every aspect of the industry in the process.”

The Rise of Insurtech

This may sound a bit abstract and futuristic, but AI advances have already led to a whole new market segment: insurtech. A slew of new companies have popped up, showcasing strong growth by bringing AI and machine learning to market with the industry’s very specific and nuanced needs in mind. For example, Cyence, which was acquired by Guidewire Software, developed a platform to ascertain the financial impact of cyber risk and management of risk portfolios; and Cape Analytics provides a service to property insurers that combines AI and geospatial imagery to analyze property and streamline the underwriting process — and these are just two examples. Other AI-based companies have emerged to reduce costs in claims operations, identify various insurance protection options, and transform mobile and social media marketing for insurance companies.

The insurtech segment is not defined by new players alone. Several incumbents have also dipped their toes into the AI waters to develop innovative applications. State Farm developed Distracted Driver Detection that uses dashboard camera images. Allstate has ABIE, a virtual assistant to help agents with information regarding Allstate’s commercial products, and Progressive now applies machine learning on top of data collected from client drivers through the “Snapshot” mobile app.

What Does It All Mean?

First and foremost, the rise of insurtech indicates that the insurance industry is changing profoundly as it modernizes. The ability to analyze countless data points in mere seconds opens ways to assess and predict that humans simply cannot hope to accomplish. This does not mean that humans are no longer needed in the industry. Quite the contrary. People still possess higher-level thinking skills that machines are not equipped to gain. The capacity to factor in intangibles, to make judgment calls, to see and interpret what lies beyond the screen — these are human skills that will always be in demand.

See also: Key Challenges on AI, Machine Learning 

In this light, AI and machine learning applications should be leveraged to streamline and better inform the decisions that humans must make. When this happens, workers are freed to focus on the facets of their jobs that matter the most. In addition to benefits to workers, organizations experience multiples of improvement in cost savings by increased efficiency, accuracy and better predictions generally. Simultaneously, customer service and patient care improve by providing answers and resources tailored to their specific case in a fraction of the time.

Perhaps the most exciting impact of insurtech, however, will be the new business models that arise. The notion of how we administer care will change, as will the way we construct policies for individuals and companies. Essentially, what has never been possible before is suddenly on the table. The options may appear overwhelming or even threatening to the existing way of life, but AI and insurtech have arrived. The advancements that will occur over the next decade will be extraordinary for all constituents. Pay attention and embrace the innovation long needed in the insurance industry.

Cyber: Black Hole or Huge Opportunity?

You own a house. It burns down. Your insurer only pays out 15% of the loss.

That’s a serious case of under-insurance. You’d wonder why you bothered with insurance in the first place. In reality, massive under-insurance is very rare for conventional property fire losses. But what about cyber insurance? In 2017, the total global economic loss from cyber attacks was $1.5 trillion, according to Cambridge University Centre for Risk Studies. But only 15% of that was insured.

I chaired a panel on cyber at the Insurtech Rising conference in September. Sarah Stephens from JLT and Eelco Ouwerkerk from Aon represented the brokers. Andrew Martin from Dyanrisk and Sidd Gavirneni from Zeguro, the two cyber startups. I asked them why we are seeing such a shortfall. Are companies not interested in buying or is the insurance market failing to deliver the necessary protection for cyber today? And is this an opportunity for insurtech start-ups to step in?

High demand, but not the highest priority

We’ll hit $4 billion in cyber insurance premium by the end of this year. Allianz has predicted $20 billion by 2025. And most industry commentators believe 30% to 40% annual growth will continue for the next few years.

A line of business growing at more than 30% per year, with combined ratios around 60%, at a time when insurers are struggling to find new sources of income is not to be sniffed at.

But the risks are getting bigger. My panelists had no problem in rattling off new threats to be concerned with as we look ahead to 2019. Crypto currency hacks, increasing use of cloud, ransomware, GDPR, greater connectivity through sensors, driverless cars, even blockchain itself could be vulnerable. Each technical innovation represents a new threat vector. Cyber insurance is growing, but so is the gap between the economic and insured loss.

The demand is there, but there are a lot of competing priorities. Today’s premiums represent less than 0.1% of the $4.8 trillion global property/casualty market. Let’s try to put that in context. If the ratio of premium between cyber and all other insurance was the same as the ratio of time spent thinking about cyber and other types of risk, how long would a risk manager allocate to cyber risk? Even someone thinking about insurance all day, every day for a full working year would spend less than seven minutes a month on cyber.

It’s not because we are unaware of the risks. Cyber is one of the few classes of insurance that can affect everyone. The NotPetya virus attack, launched in June 2017, caused $2.7 billion of insured loss by May 2018, according to PCS, and losses continues to rise. That makes it the sixth largest catastrophe loss in 2017, a year with major hurricanes and wildfires. Yet the NotPetya event is rarely mentioned as an insurance catastrophe and appears to have had no impact on availability of cover or terms. Rates are even reported to be declining significantly this year.

See also: How Insurtech Boosts Cyber Risk  

Large corporates are motivated buyers. They have an appetite for far greater coverage than limits that cap out at $500 million. Less than 40% of SMEs in the U.S. and U.K. had cyber insurance at the end of 2017, but that is far greater penetration than five years ago. The insurance market has an excess of capital to deploy. As the tools evolve, insurance limits will increase. Greater limits mean more premium, which in turn create more revenue to justify higher fees for licensing new cyber tools. Everyone wins.

Maybe.

Growing cyber insurance coverage is core to the strategy of many of the largest insurers.

Cyber risk has been available since at least 2004. Some of the major insurers have had an appetite for providing cyber cover for a decade or more. AIG is the largest writer, with more than 20% of the market. Chubb, Axis, XL Catlin and Lloyd’s insurer Beazley entered the market early and continue to increase their exposure to cyber insurance. Munich Re has declared that it wants to write 10% of the cyber insurance market by 2020 (when it estimates premium will be $8 billion to $10 billion). All of these companies are partnering with established experts in cyber risk, and start-ups, buying third party analytics and data. Some, such as Munich Re, also offer underwriting capacity to MGAs specializing in cyber.

The major brokers are building up their own skills, too. Aon acquired Stroz Friedberg in 2016. Both Guy Carpenter and JLT announced relationships earlier this year with cyber modeling company and Symantec spin off CyberCube. Not every major insurer is a cyber enthusiast. Swiss Re CEO Christian Mumenthaler declared that the company would stay underweight in its cyber coverage. But most insurers are realizing they need to be active in this market. According to Fitch, 75 insurers wrote more than $1 million each of annual cyber premiums last year.

But are the analytics keeping up?

Despite the existence of cyber analytic tools, part of the problem is that demand for insurance is constrained by the extent to which even the most credible tools can measure and manage the risk. Insurers are rightly cautious, and some skeptical, as to the extent to which data and analytics can be used to price cyber insurance. The inherent uncertainties of any model are compounded by a risk that is rapidly evolving, driven by motivated “threat actors” continually probing for weaknesses.

The biggest barrier to growth is the ability to confidently diversify cyber insurance exposures. Most insurers, and all reinsurers, can offer conventional insurance at scale because they expect losses to come from only a small part of their portfolio. Notwithstanding the occasional wildfire, fire risks tend to be spread out in time and geography, and losses are largely predicable year to year. Natural catastrophes such as hurricanes or floods can create unpredictable and large local concentrations of loss but are limited to well-known regions. Major losses can be offset with reinsurance.

Cyber crosses all boundaries. In today’s highly connected world, corporate and country boundaries offer few barriers to a determined and malicious assailant. The largest cyber writers understand the risk for potential contagion across their books. They are among the biggest supporters of the new tools and analytics that help understand and manage their cyber risk accumulation.

What about insurtech?

Insurer, investor or startup – everyone today is looking for the products that have the potential to achieve breakout growth. Established insurers want new solutions to new problems; investment funds are under pressure to deploy their capital. A handful of new companies are emerging, either to offer insurers cyber analytics or to sell cyber insurance themselves. Some want to do both. But is this sufficient?

The SME sector is becoming fertile ground for MGAs and brokers starting up or refocusing their offerings. But with such a huge, untapped market (85% of loss not insured), why aren’t cyber startups dominating the insurtech scene by now? The number of insurtech companies offering credible analytics for cyber seems disproportionately small relative to the opportunity and growth potential. Do we really need another startup offering insurance for flight cancellation, bicycle insurance or mobile phone damage?

While the opportunity for insurtech startups is clear, this is a tough area to succeed in. Building an industrial-strength cyber model is hard. Convincing an insurer to make multimillion-dollar bets on the basis of what the model says is even more difficult. Not everyone is going to be a winner. Some of the companies emerging in this space are already struggling to make sustainable commercial progress. Cyber risk modeler Cyence roared out from stealth mode fueled by $40 million of VC funding in September 2016 and was acquired by Guidewire a year later for $265 million. Today, the company appears to be struggling to deliver on its early promises, with rumors of clients returning the product and changes in key personnel.

The silent threat

The market for cyber is not just growing vertically. There is the potential for major horizontal growth, too. Cyber risks affect the mainstream insurance markets, and this gives another source of threat, but also opportunity.

Most of the focus on cyber insurance has been on the affirmative cover – situations where cyber is explicitly written, often as a result of being excluded from conventional contracts. Losses can also come from ” silent cyber,” the damage to physical assets triggered by an attack that would be covered under a conventional policy where cyber exclusions are not explicit. Silent cyber losses could be massive. In 2015, the Cambridge Risk Centre worked with Lloyd’s to model a power shutdown of the U.S. Northeast caused by an attack on power generators. The center estimated a minimum of $243 billion economic loss and $24 billion in insured loss.

In the current market conditions, cyber can be difficult to exclude from more traditional coverage such as property fire policies, or may just be overlooked. So far, there have been only a handful of small reported losses attributed to silent cyber. But now regulators are starting to ask companies to account for how they manage their silent cyber exposures. It’s on the future list of product features for some of the existing models. Helping companies address regulatory demands is an area worth exploring for startups in any industry.

See also: Breaking Down Silos on Cyber Risk  

Ultimately, we don’t yet care enough

We all know cyber risk exists. Intuitively, we understand an attack on our technology could be bad for us. Yet, despite the level of reported losses, few of us have personally, or professionally, experienced a disabling attack. The well-publicized attacks on large, familiar corporations, including, most recently, British Airways, have mostly affected only single companies. Data breach has been by far the most common type of loss. No one company has yet been completely locked out of its computer systems. WannaCry and NotPetya were unusual in targeting multiple organizations, with far more aggressive attacks that disabled systems, but on a very localized basis.

So, most of us underestimate both the risk (how likely), and the severity (how bad) of a cyber attack in our own lives. We are not as diligent as we should be in managing our passwords or implementing basic cyber hygiene. We, too, spend less than seven minutes a month thinking about our cyber risk.

This lack of deep fear about the cyber threat (some may call it complacency) goes further than increasing our own vulnerabilities. It also the reason we have more startups offering new ways to underwrite bicycles than we do companies with credible analytics for cyber.

Rationally, we know the risk exists and could be debilitating. Emotionally, our lack of personal experience means that cyber remains “interesting” but not “compelling” either as an investment or startup choice.

Getting involved

So, let’s not beat up the incumbents again. Insurance has a slow pulse rate. Change is geared around an annual cycle of renewals. It evolves, but slowly. Insurers want to write more cyber risk, but not blindly. The growth of the market relies on the tools to measure and manage the risk. The emergence of a new breed of technology companies, such as CyberCube, that combine deep domain knowledge in cyber analytics with an understanding of insurance and catastrophe modeling, is setting the standard for new entrants.

Managing cyber risk will become an increasingly important part of our lives. It’s not easy, and there are few shortcuts, but there are still plenty of opportunities to get involved helping to manage, measure and insure the risk. When (not if) a true cyber mega-catastrophe does happen, attitudes will change rapidly. Those already in the market, whether as investors, startups or forward thinking insurers, will be best-positioned to meet the urgent need for increased risk mitigation and insurance.

10 Insurtechs That Tackle IT

Regulatory overhead + old technology = high prices + bad service.

A German insurer shared this telling formula with us, and it’s a perfect summary of the challenges that insurers are facing. Among the 75 executives we interviewed for our book Reinventing Customer Engagement: The next level of digital transformation, many said that maintaining legacy systems consumes 90% of technology budgets. Typical digital transformation programs therefore give a lot of attention to simplifying IT environments. Outdated systems not only result in high costs but also make it difficult and costly to act quickly and effectively on new customer wishes. The systems of insurers are often older than the customers they serve. Meanwhile, digital life has become so much more intuitive (Apple), interactive (Mint), contextual (Amazon), beautiful (Spotify) and intelligent (Google).

Insurers have to operate much closer to the market and foster the opportunities that new technologies offer with techniques such as the “lean methodology” to experiment with new ideas and processes, constantly tweaking these with fast feedback loops. So, in this blogpost, we included 10 insurtechs and innovative tech providers that help insurers with solving the legacy issue, taking IT off the critical path:

  1. KASKO
  2. Backbase
  3. Vlocity
  4. Keylane
  5. Faktor Zehn
  6. Roundcube
  7. Tieto
  8. OutShared
  9. Guidewire
  10. Ti&m

(The forthcoming DIA edition in Munich (Nov. 15 and 16) will, of course, feature the latest.)

1.  Kasko: Helping insurers to act like an insurtech startup

London-based Kasko is the first digital insurance platform for on-demand insurance products to enable insurance companies and brokers to quickly bring products to market. Kasko allows digital marketplaces and booking platforms to offer their customers contextually relevant insurance products via plugin or API. The company relieves clients from the regulatory and technological burdens associated with integrating directly within insurance companies. Kasko provides insurance solutions within the spaces of car, property, freelance, travel and events. By offering an API-powered agile insurance product platform that sits in between digital customer touchpoints and their customers legacy IT, they take the internal IT off the critical path to product launch.

Read more, click here.
Check demo, click here.

2.  Backbase: Omni-channel experiences, ready to go

Backbase has created the world’s leading lean customer experience platform, Backbase CXP. It has been designed to help financial institutions organize, create and manage deeply relevant customer experiences across all channels, on any device, to delight your customers and deliver measurable business results. Backbase has a flexible and modular architecture that puts insurance providers back in control of their digital experiences and strategy, which puts them back in touch with their customers. By putting their own business and digital marketing teams in the driver’s seat, insurers will be able to create the types of interactions that boost engagement, resulting in increased retention and a larger share of wallet and, most importantly, happy customers.

Backbase is a ready-to-go insurance solution. It fully supports internet, tablet and mobile experiences, including omni-channel, by facilitating cross-channel customer journeys, plus seamless handover and orchestration between channels and devices.

Read more, click here.
Check demo, click here.

See also: 10 Insurtechs for Superb Engagement  

3. Faktor Zehn: innovative agile insurance solutions

Munich-based Faktor Zehn is well known as the product house for agile insurance solutions. The international IT consulting and software company, provides innovative consulting services in combination with concrete solutions based on the platform-independent programming language Java. Faktor Zehn focuses on product management, policy management and sales and service systems to help insurance companies to innovate and develop competitive advantages. All products are developed to support insurance companies to generate speed of innovation as well as competitive advantages. Therefore, all business transactions are executable through web services to ensure a high rate of fully automatic processing. The user interface is optimized to process complex issues while leaving intact all primary batch processes, such as follow-up debit and premium due date mutations. While using products of Faktor Zehn, business and IT development teams of an insurance company work hand in hand with product development to improve time to market, to make sure that the products meet the high standards and to launch products or product variants quickly and efficiently.

Read more, click here.
Check demo, click here.

4.  Keylane: software with smart robotic applications for insurers

Keylane is the showcase of insurance 3.0. The state-of-the-art Keylane technology platform supports core processes such as policy administration, sales and distribution and underwriting, and enables companies to excel in operational performance as well as in customer service. Keylane’s software solutions enable companies to engage effectively with their customers; providing operational agility (founded on best practice), in the insurance and pension markets. New technologies such as speech recognition, social analysis and predictive analytics are already integrated with the Keylane solutions to make the insurance customer experience as easy and friendly as possible. The integration of core solutions with smart robotic applications provides front-line workers within a matter of seconds with a more holistic view of their information landscape. Improving efficiency, effectiveness and lowering of costs. The user-friendly multi-channel portals integrated with flexible administration systems enable insurers to boost customer experience as well as excel in operational efficiency, achieving cost savings of more than 50% on the IT budget.

Read more, click here.
Check demo, click here.

5.  Vlocity: Adding industry-specific process applications to Salesforce

Developed in partnership with Salesforce, Vlocity extends the Salesforce Sales Cloud, Service Cloud, Communities Cloud and other clouds with very specific business process applications for, among others, the insurance and health insurance verticals. The Vlocity apps on Salesforce add value to the user through a much faster time to market, a lower total cost of ownership and the agility of a product that stays in sync with Salesforce all the way through. Those are huge benefits from a business perspective.

ABD Insurance, a top 100 insurance broker in America, sells all different lines of insurance across multiple carriers and uses Salesforce, which ABD liked it but which couldn’t do all the things the broker wanted. Vlocity came in and deployed Vlocity Insurance in just 45 days.

Read more, click here.
Check demo, click here.

6.  Roundcube: Why a “fat” mid-office is healthy for insurers!

To be truly agile as an insurer, you need an almost unattractive body: a slim back office, a flat layer that enables connectivity at the front end and a rich, “fat” mid office that is the engine that drives it all. It’s the mid-office where connections should be made. We cannot wish our legacy systems away, we cannot simply upgrade, we cannot continue to add channels that add cost without bringing in more business.  But what we can do is use the back office for its core and stable strength by extracting relevant data and let it run the more stable admin tasks. This system can run at a different heartbeat and cost than a mid- and front office, while still making use of your existing investment. The Roundcube Insurance Platform is an agile mid-office engine where data becomes relevant information, where you can build experiences with the customer through relevant offerings.

Read more, click here.
Check demo, click here.

7.  Tieto: an ecosystem for business renewal

Tieto, the largest IT services company in the Nordic region and creator of the world’s first internet bank, digital health records and e-invoice solutions, has already helped a large number of worldwide businesses in banking, insurance, retail, manufacturing, healthcare and public services with the digital leap in highly competitive markets. What’s more, Tieto actively builds an ecosystem of leading innovators and startups to complement its offering on data-driven areas. Tieto has several internal startups in the company focused on Tieto’s main growth areas: Customer Experience Management (CEM), Internal Internet solutions and Security Systems. This benefits customers by allowing them an increased ability to speed up digitalization.

Read more, click here.
Check demo, click here.

See also: What Incumbents Can Teach Insurtechs  

8.  OutShared: a digital insurer in a box

OutShared offers an in-house developed and built digital insurance platform in a SAAS solution to the market. OutShared’s platform is an all-in-one insurance solution for policy management, quotations, claims origination and processing: from back-office database through middle-office processing to front-office web and app interfaces. Built on today’s digital ethos, and offered through strategic BPO and SaaS operations, OutShared offers the smart integrated solution for insurance specialists, developed for both new market offerings and the renovation of established operations migrated to the platform. HEMA for instance, an established retail brand, converted its traditional business to OutShared’s platform. As a result, the operational cost ratio decreased by 50%, the loss ratio improved by 10 percentage points in one year. The portfolio was converted in two months, from zero to live in six months.

Read more, click here.
Check demo, click here.

9.  Guidewire: Personalized and hassle-free customer journeys with among others a chatbot and Facebook messenger service

The California-based company builds software products that help P&C insurers replace their legacy core systems and transform their business. Providing insurers with solutions for the main drivers for a successful customer journey; digitalization, personalization and a real omni-channel strategy.

Guidewire products enable insurers to deliver excellent service for all stakeholder within the insurance lifecycle, increase market share and lower operating costs. The platform is based on three elements – core processing, data and analytics and digital engagement. These work together to strengthen the insurers’ ability to engage and empower their customers, agents and employees, allowing insurers to select, deploy and upgrade best-of-breed applications individually or as a pre-integrated suite, according to their requirements and priorities. More than 260 P&C insurers off all sizes and business lines around the world have selected Guidewire. In Europe alone, Guidewire has more than 45 customers across 11 countries.

Read more, click here.
Check demo, click here.

10.  Ti&m: the benchmark for a personalized digitalization strategy

Ti&m is a Swiss market leader for digitalization and security products. The ti&m channel suite is the simple, fast, trusted and efficient way to digitalize customer relationships. With flexible business modules, ti&m creates a personalized digitalization strategy. The ti&m security suite provides the necessary security for all channels and makes the digitalization journey safer and faster. Together they set the benchmark for business digitalization. The ti&m approach is cost efficient with an extremely low cost of entry and compatible with most of the current security providers

Read more, click here.
Check demo, click here.

IoT: Collaboration Is Now Mandatory

The definition of collaboration is the action of working with someone to produce or create something. That seems far too simplistic a way to describe the many types of collaboration already at work in the insurance industry and moreover does not begin to convey the looming and enormous demand for working together that will be required for success in implementing the Insurance Internet of Things (IoT).

Historically, the insurance industry has had to use a wide variety of collaboration tools to succeed as data, information, consumer behavior, products and regulations changed with increasing velocity. These tools included e-mail, texting, instant messaging, content management systems, enterprise social platforms and formal enterprise collaboration software. Insurers have even begun to leverage the use of digital technology and web-based collaboration tools such as Slack to empower employees, enhance user experiences, improve internal communication and strengthen agent and broker relationships.

See also: Insurance and the Internet of Things  

Looking beyond insurance companies themselves, we note the emergence of insurtech accelerators and incubators, both independent and captive. What is becoming apparent is that there is a convergence taking place between these entrepreneurial startups and the traditional carriers, sparking collaboration between the new, small and fast market entrants with the old, big and slow incumbents. Much more of this kind of collaboration will be required for the insurance industry to survive and thrive in tomorrow’s world.

New forms of collaboration are emerging in the insurance ecosystem, some more formal than others. Strategic alliances and partnerships are being announced daily, as are vendor-vendor and carrier-carrier arrangements. Recent examples are plentiful; CoreLogic joined the Guidewire PartnerConnect program to deliver more accurate property risk pricing and residential estimating more efficiently to Guidewire’s property insurance customer base, and Insurity collaborated with Allstate Business Insurance to quickly deliver a new self-service quoting app with convenient data pre-fill.

Co-opetition is a more innovative form of collaboration that has been gaining traction. Former competitors work together to leverage a common, defined opportunity that yields better results for each company than either could have achieved on its own. In the world of insurance IoT, of which the connected car is a major subset, we increasingly see original equipment manufacturers (OEMs) participating in programs with auto insurers with telematics data exchanges and with each other in developing vehicle-to-vehicle (V2V) communication standards.

In other areas of insurance IoT, we are seeing a rapidly increasing number of health and property insurtech partnership announcements with insurers delivering innovative new risk-management products and services to consumers (e.g. Vitality-John Hancock, Roost-Liberty Mutual, True Motion-Progressive, etc.).

As the number of connected things expands exponentially, so, too, will the frequency and velocity of data generated by these sensors and devices. The ability to receive, normalize, manage and use all of this digital data will quickly exceed the capacity and expertise of even the largest insurers, so collaboration with a new generation of information management and data science providers will be mandatory.

See also: 12 Issues Inhibiting the Internet of Things  

For insurers and others to successfully navigate this burgeoning ecosystem, access to relevant knowledge and competitive information will also be mandatory, and one effective way to gain these insights is participation in subject-specific industry conferences where expert speakers and industry thought leaders share their experiences and insights. One such event is the Insurance IoT USA Summit taking place in Chicago on Nov. 30 and Dec. 1.

So critical will be effective collaboration in the future that it is conceivable that formal courses, certifications and degrees in collaboration will be offered by business schools in response to the exploding demand for this set of business skills and expertise driven by IoT proliferation and adoption. In any event, participants in the insurance ecosystem that best master the art of collaboration are sure to be the market leaders of the IoT future.

Insurtech: How to Keep Insurance Relevant

In the age of the fourth industrial revolution, risks are changing. The advent of technology has made digital assets more valuable than physical ones.

In this scenario, the insurance sector has been increasingly left to deal with technological change and disruption and is having to reconsider the way it defines itself. Having had the opportunity to discuss this transformation in more than 15 countries, I have seen that insurtech is helping to redefine the way the insurance industry is perceived.

Insurance is about providing protection for people in life and in employment. It is about providing a contract where someone promises to indemnify another against loss or damage from an uncertain event, as long as a premium is paid to obtain this coverage – the concept has been around since 1347.

It’s unthinkable for an insurer today not to ask how to evolve its business architecture by thinking which modules within the value chain should be transformed or reinvented via technology and data usage. I believe all the players in the insurance arena will be insurtech – that is, organizations where technology will prevail as the key enabler for the achievement of the strategic goals.

See also: Core Systems and Insurtech (Part 1)  

Insurtech startups have received more than $18 billion in funding to date, according to Venture Scanner data. Fantastic teams and interesting new insurance cases have been grabbing the attention of analysts.

Full-stack insurtech startups are generating a lot of excitement in the investor community and attracting relevant funds, and some have achieved stellar valuations, with Oscar, Lemonade, Sonnet, Alan, Element, Zhong An some of the most fascinating players. It looks like the aim of disrupting the status quo, combined with a skepticism about the incumbents’ ability to innovate, is focusing the attention on players to create new insurance products.

A business model adopted by more and more players is the MGA/MGU approach (Managing General Agents/Managing General Underwriter), a way to satisfy investor appetite for players covering a large part of the activities in the insurance value chain and partnering only with an incumbent for receiving underwriting capacity. Trov, Slice, so-sure, Insure the Box, Root, Bought By Many and Prima are some examples of this approach.

I am positive about the ability of the incumbents to innovate, and about the potential for incumbents and insurtech startups to collaborate. This view is based, for example, on the impressive international success of players such as Guidewire and Octo Telematics. I believe service providers for the insurance sector will be more successful in scaling at an international level than the other models described above. This kind of collaboration is leveraging on the incumbents’ technical knowledge and their customers’ trust, which has frequently been underestimated by insurtech enthusiasts. The most relevant opportunity is the collaboration between incumbents and specialized tech players capable of enabling the incumbents’ innovation in the different steps of the business model.

Denim for the awareness, Digital Fineprint for the choice, Neosurance for the purchase, MotionCloud for the claims, Pypestream for the policy management – these are a few players innovating on each step of the customer journey, based on my map to classify the insurtech initiatives.

For insurtech startups to outperform traditional insurance companies, they need to have their business models concentrated in what I call the four axes (4 Ps): productivity, profitability, proximity and persistency.

An excellent example is Discovery Holding, with its Vitality wellbeing program. This has been replicated in different business lines and countries with different business models – they are carriers in some countries, operate joint ventures with local insurers in other regions and are a service provider in other nations. They are using state-of-the-art technologies such as wearables and telematics to create a model based on value creation outperforming on all the four Ps, enabling them to share value with their customers through incentives and discounts.

See also: What’s Your Game Plan for Insurtech?  

Insurtech adoption will make the insurance sector stronger and in that way more able to achieve its strategic goal: to protect the way people’s lives and organizations work.