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What Small Firms Want to Buy

American entrepreneurship is alive and well and growing! There are countless rags-to-riches stories of how people with a good idea, boundless energy and infectious optimism have made it big, or simply made a rewarding livelihood and legacy for themselves and their families. Today’s fintech and insurtech movements are testament to this in spades! And while most national news stories focus on big business, and national cultural events like Black Friday tend to overshadow small businesses, there’s a growing movement embracing these vital contributors to our communities and economy.

Insurance and other services are vital components for the vitality, risk protection and longevity of small businesses, and suppliers that are easy to do business with can capture a larger percentage of the market. Unfortunately, new research by Majesco, The Rise of the Small-Medium Business Insurance Customer: Shifting Views and Expectations…Is Your Business Ready for Them?, reveals that the insurance industry (as compared with other industries with which small businesses work) is “not easy to do business with.” The problem creates an opening for insurance startups.

The Rise of Small Businesses and the Shop Small Movement

On Nov. 26, 2016, the 7th annual Small Business Saturday event sponsored by American Express and the National Federation of Independent Businesses (NFIB) was held to encourage shopping and patronage of local small business merchants – in the wake of the preceding day’s big box store Black Friday shopping hysteria.  According to research done by these organizations after last year’s Small Business Saturday, more than 95 million consumers shopped at small retailer businesses, spending $16.2 billion, up 8% from 2014. Interestingly, the event garnered support from many corporate sponsors – many of which count small businesses as their customers.

Millennials show strong support for local small businesses, indicating they want to be “connected” to the products and businesses they buy from. A study by Edelman Digital showed that 40% of millennials preferred to buy goods and services from local small business retailers, even if doing so cost more.

See also: Why Start-Ups Win on Small Business  

While Small Business Saturday and Buy Local have a decidedly retail focus to them, the importance of all types of small businesses cannot be overlooked. U.S. Census Bureau figures from 2014 showed that businesses with fewer than 10 employees make up nearly 80% of all firms in the U.S. This is a huge market with enormous needs for products and services, including insurance to keep them running, protected and competitive.

Where’s the Love?

The Rise of the Small-Medium Business Customer research sought to understand small-medium business decision makers’ perceptions and views of those who support and supply them, including insurance. Four hundred business owners were surveyed using the Census Bureau’s definitions of very small to medium-sized businesses (SMBs), which we grouped into three segments (1-9 employees, 10-99 employees and 100-499 employees). The survey provided insights to evaluate perceptions on SMB customer views of insurance as compared with other businesses

The results were enlightening. Interestingly, fair price was more important than lowest price across all of the business segments. However, the ability to create a custom product from a range of options is more important than both lowest price and the ability to pick from a set of “pre-packaged” options. This finding reflects the increasing demand for personalization rather than price-driven mass production of insurance products.

Even more revealing were the results among the smallest (1-9 employees) businesses. The survey highlights that the traditional insurance business model has not been built with the capability to adequately meet the unique needs and expectations of SMBs. The industry has, instead, pursued a “one size fits all” approach. The consequences are that this segment of smallest SMBs (though with the largest number of such businesses) is uninterested in insurance, sees little value in insurance and considers insurance a necessary commodity or “necessary evil” required for their businesses.

All three segments of SMBs, regardless of size, did not rate insurance as being particularly easy to do business with, in terms of researching, buying and servicing products, compared with the other types of businesses we asked about in the survey. Among the 1-9-employee segment, P&C, life and employee benefits ranked in the bottom half on all three of these aspects.

Much more telling, however, this segment gave the lowest Net Promoter Scores (NPS) to insurance, showing a gap of as much as 60 points between insurance and the top business. (Net Promoter Scores measure the likelihood that a customer will make a recommendation to a prospective customer.)

Adding fuel to the fire, these small businesses were the least likely to say insurance was responsive, innovative, had easy to understand products and provided good value for the money. This is not a pretty picture for traditional insurance — but a great opportunity for innovative “greenfields” and startups.

Going Small Requires Big Thinking

Increasingly, small business customers are demanding a personalized and digital experience, representing the shift from mass standardiza­tion of insurance to the micro-personalization of insurance, requiring broader data and sophisticated analytics to truly understand and respond to small businesses as well as a digital experience via a multi-channel approach.

The rapid emergence of digital direct-to-SMB insurers and MGAs such as Assurestart (now part of Homesite/American Family), Cover Your Business.Com (a Berkshire Hathaway company), Hiscox, Insureon, Bolt, Slice and others are leveraging these ideas to reach the small business market. They are providing innovative products, streamlined and simple processes and digitally engaging capabilities that are extending the direct business model to SMB customers. In addition, aggregators, comparison sites or new distribution channels like Ask Kodiak help small businesses find the insurance products they need more easily.

Our research identified gaps between many industry-held perceptions and customer-defined realities, which expose an insurance industry steeped in tradition — its business models, business processes, channels and products that are difficult to find, buy and service — and opens the door to new competitors. We have seen this play out before with personal lines over the last 10 to 15 years. The difference is that the pace of change and adoption of a digital play is unfolding more rapidly this time in commercial insurance, demanding that insurers respond, because the window of opportunity is smaller.

Each company serving the SMB market must itself strategic questions, such as: “How do we bridge between the past, today and the future? How do we keep current customers loyal and engaged as we redefine our business to meet the needs of the vastly underserved and growing small business market? How do we get on par with other digital businesses that are setting new expectations for the SMB market?” If traditional insurers don’t ask these questions and respond, others will – taking current and future market share.

See also: Secret Sauce for New Business Models?  

Small businesses today are at the forefront of building new, technology-enabled, digitally first, innovative businesses that operate in a multi-channel world … like what we are seeing in insurtech. These businesses are increasingly led by millennials who have “grown up” digital and, as a result, seek fresh alternatives to age-old formulas … especially for insurance needs and offerings, helping them effectively meet their unique needs and expectations.  It’s time for the insurance industry to translate the good will from the Buy Local and Shop Small movements into big thinking and innovative solutions.

A new generation of small business insurance buyers with new needs and expectations create both a challenge and an opportunity. There is no clear path or destination. The time for plans, preparation, and execution is now — recognizing that the SMB customer is in control. Those who recognize and rapidly respond to this shift will thrive in an increasingly competitive industry to become the new leaders of a re-imagined insurance business that aligns to a rapidly growing, millennial-owned, innovative SMB marketplace.  Insurance companies must stop talking about the opportunities and being digital, and start doing something about it by using the disruption and change as a catalyst for “real change.”

Asia Will Be Focus of Insurtech in 2017

Asia will be the key pillar in the coming revolution of insurance and in all likelihood will become the hottest market for insurance technology (insurtech) globally. It’s no longer just a pipe dream, as this time all the stars are aligning. Take the sheer population size and rapidly emerging tech-savvy middle class, together with low effectiveness of traditional insurance distribution. Combine that with a destabilizing wave of political populism, making its rounds across much of the developed world, and you’ve got most of the ingredients for a region that will take on a leading global role for insurtech.

So what, if anything, is missing to really ignite insurtech in Asia? It turns out that while the region is ripe for insurtech, the actual quantity and quality of startups in Asia is nowhere near that of other regions… at least not yet.

Share of investments in insurance startups can be used as a good proxy to the overall level of insurtech activity around the world. According to the figures, the U.S. takes 63%, with Germany (6%), U.K. (5%) and France (3%). China is at 4% – which doesn’t account for Zhong An’s massive investment in 2015 — and India at 5% (Source: CB Insights).

See also: The Future of Insurance Is Insurtech  

So the logical question is, why aren’t there more startups in Asia, considering the substantial opportunity and funding that exists in the region? Is it due to a shortage of experienced entrepreneurs, difficulty of starting a business, lack of access to investment or something else? The answer is that it’s likely a combination of a few factors, including a weaker early-stage entrepreneurial ecosystem, which doesn’t yet effectively support startups, and a cultural aspect of lesser tolerance for failure. Both of these are changing fast, though, and entrepreneurs across Asia are starting to identify and test innovative insurtech solutions.

The following are just a few recent notable insurtech startup examples across Asia that have already reached beyond Series A funding: Zhong An (an $8 billion Chinese insurtech startup), Connexions Asia (Singaporean flexible employee benefits platform with a U.S.$100 million valuation), and two large insurance aggregators out of India– Policybazaar and Cover Fox.

So why am I convinced that Asia insurtech startups will not end up dominating their regional home turf ?

Probability and “Survival of the Fittest”

The lack of critical mass of startups in the region means that they will not enjoy the same quality filters and network effects of the larger entrepreneurial ecosystems of the U.S., Europe and to a somewhat lesser degree China.

“Surviving” U.S. and European startups have to fight their way across a lot more competition to reach scale in their home markets. Hence, where a weaker startup in Asia could get repeated life support simply because there aren’t that many others to invest in, natural selection weeds out the weaker models in EU/U.S. much quicker in favor of more robust ones. Stronger startups then get to attract the best talent from the entrepreneurial ecosystem, including talented entrepreneurs whose models didn’t work as well, further reinforcing successful EU/U.S. startups.

Home Market Advantage

Success in a large home market like the U.K., Germany or a few U.S. states gives a substantial boost to any startup. It provides both credibility and cash flow to allow a much more aggressive expansion into other regions. This also gives a startup flexibility to develop the necessary adjustments to the business model to adapt it for Asia.

The U.S. and EU have a deep domain level of insurance expertise, which gives EU/U.S. startups from those regions a further edge to tap advisory expertise locally, because most of the largest global insurers are based in these two regions.

Lastly, considering that most startups adopt a collaborative approach with insurance companies, having a relationship that originates close to the top decision maker at headquarters gives an added advantage to EU/U.S. startups when they are looking at expanding to new regions. I’ve personally experienced examples of relationships developed in Europe that later carried over in creating a pre-warmed partnership with the insurer’s operations in Asia.

Regulatory Complexity

Asia is made up of a large number of countries, where each has its own insurance regulator, who possess views on how things should be run. This means an additional potential growth hurdle for Asian startups.

For example, a startup out of Singapore will need to figure out how to navigate the neighboring Asian country regulatory regimes pretty early in its growth cycle. Thailand, Malaysia, Indonesia and Vietnam markets all have diverse regulatory requirements. This lands the Singaporean startup at a disadvantage vs. a more mature startup out of EU/U.S. – which not only has experience dealing with regulators in its home market but also possesses a proven track record and a larger resource pool that it can use to overcome any regulatory issues.

Meet Future Leaders of Asia InsurTech

Here are  35 insurance startups from across the U.S., Europe and China that have a real shot at collaboratively shaping the future of Asia’s insurance . Granted that not all of these startups will successfully adapt their models for Asia, a few would and will go on to successfully dominate Asia’s insurtech landscape in the foreseeable future.

Credit: George Kesselman

Credit: George Kesselman

The future of insurance in Asia is coming fast, and it’s looking pretty exciting!

See also: Insurtech Has Found Right Question to Ask  

Below are links/brief description of each of these 35 ventures.

U.K.

  • Guevara – People-to-people car insurance
  • Bought by Many – Insurance made social
  • Cuvva – Hourly car insurance on-demand
  • SPIXII– AI insurance agent
  • Gaggel – A better alternative to mobile phone insurance.
  • ClientDesk – Digitizing the insurance industry
  • Insly – Insurance broker software

Germany

  • SimpleSurance – World’s leading e-commerce provider for product insurances
  • Friendsurance – The future of insurance (P2P)
  • Getsafe – One-stop digital solution for all your insurance matters
  • Finanz-chef24 – Germany’s largest digital insurance for entrepreneurs and self-employed
  • Money-Meets – Save money and improve finances
  • Clark – Insurance as easy as never before
  • MassUP – White-labeled platform for online insurance sales
  • FinanceFox – Your insurance hero

USA

  • Metromile – Pay-per-mile insurance (usage-based auto insurance)
  • Oscar – Smart, simple health insurance.
  • Zenefits – Online HR Software | Payroll | Benefits – All-In-One (EB distribution)
  • Policy Genius – Insurance advice, quoting and shopping made easy
  • Embroker – Business insurance in the digital age
  • Slice – On-demand insurance for the on-demand economy.
  • Trov – On-Demand insurance for your things
  • Cover Hound – Compare car insurance quotes from top carriers
  • Insureon – Small-business insurance
  • Bunker – The marketplace for contract-related insurance
  • Lemonade – Peer-to-peer renters and homeowners insurance
  • Cyence – Comprehensive platform for the economic modeling of cyber risk

China

Commercial Insurers and Super Delegates

No matter how hard I try, I have been unable to avoid being bombarded with news about the presidential race. While most of the opinions and assertions leave me wondering, the additional insights into the importance of super delegates fascinated me. It turns out that winning the traditional delegates was important, but having the super delegates on your side really swung the field in your favor. In one way, it doesn’t feel quite right that any delegate should have any greater impact than another. However, because no one asked me how to run party primaries, I suppose I’m left to live with my feelings and just “figure out how to live within these rules.”

As I work with many of our commercial clients on strategies for their digital footprint (a concept I’ll discuss in a moment), I can’t help but think of our super delegate equivalent — the proliferation of insurance aggregators. Whatever you may call them — rate exchanges, quote engines, comparison sites, aggregators or digital agencies — these newcomers are increasingly important and relevant distribution channels, and, no matter how long we attempt to ignore them, they won’t be going away. They will simply be wielding their distribution clout, helping insurers to grow as they continue to rapidly expand their prospect pipelines. For commercial insurers who may not wish to pay attention to aggregator growth or for those who would like to reserve their judgments on the future of commercial sales, I would like to suggest that it is time to swallow your notions, accept the relevance of these super delegates and just “figure out how to win within these rules.”

How quickly can an industry turn upside down?

In politics, anything can happen. Approval ratings can rise and fall dramatically in 24 hours. Major players and influencers can come from nowhere. I think 2016 is proving my point. In 2015, we had no idea that our presidential race would look quite like this. What if, on Jan. 1, 2017, you awoke to find that most commercial polices were being sold online through digital agencies? If you hadn’t seen it coming, it would certainly hit your organization like a ton of bricks. If you had seen it coming and you hadn’t prepared, it would feel even worse. If you had seen it coming, and you had aligned your organization with some of these alternate channels, you might feel gleeful. The point is, the day of the digital agency is close upon us. If you aren’t preparing to sell in this space, you are probably being shortsighted. The super delegates have arrived, more are on the way through the insurtech movement and it is time to court them.

See also: Commercial Insurers Face Tough Times  

In the commercial space, we currently have companies such as NetQuote, CoverWallet and Insureon offering lead generation and quoting capabilities to commercial insurers as they offer real quotes to businesses in need of insurance. (Read more about new insurtech players in Majesco’s Future Trends report.) Insureon, probably the most-talked-about of the three, can quote on a fairly broad spectrum of business insurance. Insureon has tremendous reach and a good selection of insurers to bolster its offerings. If we see Insureon as our leading super delegate, what can we do to gain Insureon votes?

The digital footprint

Let’s step back for a moment and look at our high-level goals. Our goal is not to leave behind agent and broker service, but to embrace and prepare for new distribution channels by improving our digital footprint. As we often see, when it comes to digital preparedness, what’s good for one channel may be good for another. What is useful for the aggregators is likely to improve agent service, as well. Every step we take to become digitally ready, with the right back-end capabilities and integrations and the right front-end capabilities, will end up benefiting all channels, including traditional broker and agent capabilities. The real work of enabling the digital presence that these new channels require will prepare your organization for growth across channels by creating a consistent experience for both your delegates and your super delegates. If you have your digital footprint in position when a producer reaches out to your underwriter or phones in to your call center, they will capitalize on your improved capabilities, enhanced product offerings and simplified quote process.

The role of the super delegate

When I speak with clients, I often see how perspectives make all the difference. Insurers look at the existing distribution channels and all the technology options to further advance the agent and broker experience, and they see the newcomers like Insureon popping onto their scene. Most insurers seem to fall into two camps. Either they see aggregators as a threat or they view them as a smart option for distribution, reaching a broader set of customers and segments. This is the inside-out perspective. The insurer asks, “What can we do to engage or compete?”

But the digital agencies themselves have taken advantage of starting with a fresh perspective to make the customer experience seamless and easy. They are taking the outside-in perspective, asking, “What can we do to make ourselves more appealing?” They start with business preferences and how businesses will want to buy something. In that practice, they have positioned themselves as extensions of our internal systems. They are funnels attracting businesses like flowers attracting bees. If done correctly, integrating with these third-party players can mean a material addition to our distribution model, with little change to the traditional agent/broker approach. In this way, the super delegate has not only become an aggregator, but has become a cheerleader. It is their marketing and their messaging that will drive insurers’ businesses. (Read more about perspectives and purchase trends in the blog, The Power of Observation for Insurers.)

See also: How to Win in Commercial Lines  

If I look at companies like Insureon as my super delegate (and cheerleader), I can see how I can tip the balance in my favor. I still have to win the affinity and loyalty of my agents and brokers, but having these new alternative distribution options could mean the difference between maintaining my business or breaking out to new customers, products and accelerated growth.

In Part 2 of this series, we’ll look at possible approaches to preparing the digital footprint and some of the questions an insurer should ask itself before beginning. We will also look closely at why business insurers may want to begin by developing insurance products for small, niche businesses.

This article was written by Robert Buhrle and originally appeared on Majesco.com.

InsurTech: Golden Opportunity to Innovate

The insurance industry has remained much the same for more than 100 years, but over the past decade it has seen a number of exciting innovations and new business models.

As part of PwC’s Future of Insurance initiative, we’ve interviewed numerous industry executives and have identified six key business opportunities (illustrated below) that incumbents need to take advantage of as they try to meet customer needs while improving core insurance functions.

See Also: Key to understanding InsurTech

Because FinTech offers substantial promise to take advantage of emerging opportunities, funding for start-ups is surging. Increased funding activity not only demonstrates venture capitalist investors’ interest but also indicates how incumbents may leverage FinTech to address their specific business challenges.

The insurance-specific branch of FinTech, InsurTech, is emerging as a game-changing opportunity for insurers to innovate, improve the relevance of their offerings and grow. InsurTech, has seen funding in line with FinTech investment overall, and we expect investments to increase as new players and investors enter the space.

1 2 3 4

As Figures 2 and 3 show, activity around early-stage InsurTech companies has generated considerable buzz. Moreover, experienced insurance executives have joined start-ups, including Insureon and Lemonade, to help them develop new types of products and services, like small business aggregators and peer-to-peer insurance models. All of this indicates that investors and the industry are eager to get on board with early stage start-ups to meet the six areas of opportunity we illustrate above and describe in detail as follows:

1) Meet changing customer needs with new offerings – Customer now expect personalized insurance solutions. One size simply does not fit all any more. Usage-based models are partially addressing these expectations, but the sharing economy also is challenging existing, more traditional insurance products. New players are able work from a clean slate and leverage a variety of available resources to fill market gaps. For example:

  • Metromile, a start-up, has developed a customer- (rather than risk-) centric value proposition for occasional drivers. It offers a low base rate and then charges a few cents per mile driven. Metromile also offers an app that provides personalized driving, navigation and diagnostic tips, and can even remind drivers where they parked. Furthermore, the company has entered into a partnership with Uber that allows drivers to switch from personal to Uber insurance.
  • USAA has invested $24 million in Automatic Labs, a telematics platform that claims it will “connect your car to your life” and provides a full suite of integrated apps (including wearables).
  • In the life sector, Sureify has developed a platform that allows insurers to underwrite life insurance based on lifestyle data inputs they obtain from wearables.
  • In the peer-to-peer space, Lemonade claims to be the world’s first peer-to-peer carrier, but other companies like Guevara and InsPeer have been exploring variations of the same model. Bought by Many, a start-up that uses social platforms in its go-to-market strategy, helps individuals join or even create affinity groups, as well as find insurance solutions for their specific needs across different product lines. Of note, leading Chinese insurer Ping An has partnered with Bought by Many to create personalized travel insurance by leveraging social media data.

Some large insurers have decided to develop start-ups in-house. For example:

  • MassMutual is using internal resources to build Haven, a new, stand-alone, direct-to-consumer business.

2) Enhance interaction and build trusted relationships – Established carriers have to manage increasing customer expectations and provide seamless service despite their large and complex organizations. In contrast, new market entrants are not burdened with large, entrenched bureaucracies and typically can more easily provide a seamless customer experience – often using not just new technology but new service concepts.

For example, self-directed robo-advisers are convenient, 24/7 advisers that provide ready access to information that can empower consumer decisions about financial planning and investment management. And investors have taken notice:

  • Northwestern Mutual acquired Learnvest, a leading robo-adviser with an estimated value of more than $250 million.
  • Other robo-advisers, such as FutureAdvisor, have been part of important deals, while others (including Betterment, Personal Capital and Wealthfront) have raised funds above $100 million.

Moreover, disintermediation and the emergence of new online channels is occurring in all lines of business:

  • The Chicago-based start-up Insureon has created an aggregator that specializes in micro and small businesses. It taps into existing profit pools that personal and commercial carriers are trying to reach.
  • To become a B2C player in the digital small business market, ACE Group has recently taken a 24% ($57.5 million) stake in Coverhound, which enables customers to directly compare coverage options and pricing from various carriers.

3) Augment existing capabilities and reach with strategic relationships – The insurance industry historically has included intermediaries, service providers and reinsurers. In most cases, the carrier has led the business relationship because of its retail market position and scale. However, companies increasingly are peers. Accordingly, joint ventures and partnerships are a good way to augment existing capabilities and establish symbiotic relationships. For example:

  • BIMA Mobile has partnered with mobile telecom companies to provide life insurance solutions to uninsured segments in less developed countries. It offers simple life, personal accident and hospitalization insurance products on a pay-as-you-go (PAYG) basis for a set time period (usually just a few months). Policyholders can obtain a pre-paid card and activate and manage their policy from a mobile phone.
  • AXA has acquired an 8% stake in Africa Internet Group for EUR75 million, opening opportunities for the company in unpenetrated markets.

New B2B2C entrants also are helping forge mutually beneficial relationships:

  • Zenefits was one of the first to create channels to connect insurers, brokers, employers and employees.
  • Flock, which features broker managed benefits where plans can be designed to cover a range of options from enrollment to life events, offers what it says are “absolutely free” HR and benefits solutions.

4) Leverage existing data and analytics to generate risk insights – Established insurers traditionally have had the advantage over prospective newcomers of being able to leverage many years of detailed risk data. However, data – and new types of it – now can be captured in real-time and is available from external sources. As a result, there are new market entrants that have the ability to generate meaningful risk insights in very specific areas.

  • Several Internet of Things (IoT) companies, including Mnubo, provide analytics that generate insights from sensor-based data and additional external data sources like telematics and real-time weather observation. The promise of the better risk assessment and management resulting from this model is likely to appeal to personal and commercial carriers.
  • Facilitating this real-time data collection are drone start-ups, including Airphrame and Airware. Drones provide the ability to analyze risk with embedded sensors and image analytics. They also can operate in remote areas where it has traditionally been difficult for humans to tread, thereby saving time and increasing efficiency. In fact, American Family’s venture capital arm is investing in drone technology to explore new approaches to access and capture risk data.
  • In the life space, P4 Medicine (Predictive Preventive, Personalized and Participatory) offers insurers better insights that they can apply to life and disability underwriting. Lumiata is offering the potential for better predictive health capabilities, while Neurosky is developing next-generation wearable sensors that can detect ECGs, stress levels and even brain waves.

5) Use new approaches to underwriting risk and predicting loss – Protection-based models are shifting to more sophisticated preventive models that facilitate loss mitigation in all insurance segments. Sensors and related data analytics can identify unsafe driving, industrial equipment failure, impending health problems and more. More deterministic models, like the ones that now exist for crop insurance, are starting to emerge, and new entrants are offering both risk prevention (not just loss protection) and a more service-oriented delivery model. For example:

  • The South Africa-based company Discovery has a partnership with Human Longevity. They are teaming to offer whole Exome, whole genome and cancer genome sequencing, to clients in South Africa and the UK. Gene sequencing can identify risks before they manifest themselves as problems, but also raises ethical questions. It has the potential to completely disrupt life underwriting and places certain responsibility on the company to help customers manage genetic risks (while being careful about actually mandating lifestyle choices). But, on the whole, managing genetic risks in advance can benefit both the end-consumer and the insurer because, if they work together, they can better manage or even avoid long-term health problems and associated expenses.
  • On the automotive side, Nauto, a San Francisco- based company, offers a system that provides visual context and telematics with actionable information about driving behavior, including distracted driving. The company claims that its system can help insurers design new pricing strategies and pinpoint areas of premium leakage that they otherwise may not notice.

See Also: InsurTech Trends to Watch For in 2016

6) Enable the business with sophisticated operational capabilities – Effective core systems enable insurers to operate at a large scale. Because of cost, establishing these systems has traditionally been a barrier to market entry. However, access to cloud-based core solutions has facilitated scalability and flexibility. Developments like this, combined with new developments like robotics and automation, have provided new market entrants compelling differentiators.

As just one example, underwriting automation is now available in life and commercial lines (notably for small and medium businesses). Some carriers have adopted simplified processes and “Jet” underwriting, in which they leverage external data sources to expedite approval. This has resulted from the availability of risk insights that support new underwriting approaches. Several companies are offering to optimize and augment processes via improved collaboration, artificial intelligence and more. For instance:

  • OutsideIQ offers artificial intelligence solutions via an as-a-service underwriting and claims workbench that uses big data to address complex risk-based problems.
  • In addition, automating claims can improve efficiency and also effectively assess losses. Tyche offers a solution that uses analytics to help clients estimate the value of legal claims.

Implications: Think like a disruptor, act like a startup

In a time when societal changes, technological developments and empowered customers are changing the nature of the insurance business, established insurers need to determine how InsurTech fits in their strategies. The table shows the various approaches insurers are taking.

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More specifically, insurers are:

  • Exploring and discovering – Savvy incumbents are actively monitoring new trends and innovations. Some of them are even establishing a presence in innovation hotspots (e.g., Silicon Valley) where they can learn about the latest developments directly and in real time.

Action Item: Plan an InsurTech immersion session for senior management. This should be an effective eye opener and facilitate sharing of relevant insights on desired InsurTech solutions. Subsequently, FinTech analyst platforms can keep management up to date on the latest developments and market entrants.

  • Partnering to develop solutions – Exploration should lead to the development of potential use cases that address specific business challenges. Incumbents can partner with start-ups to build pilots to test in the market.

Action Item: Select a few key business challenges, identify possible solutions and find potential partners. A design environment (“sandbox”) will help boost creativity and also provide tools and resources for designing and fast prototyping potential solutions. This approach also can help establish the baseline and approach to building future InsurTech solutions.

  • Contributing to InsurTech’s growth and development – Venture capital and incubator programs play an important role strategically directing key innovation efforts. Established insurers can play an active role by clearly identifying areas of need and opportunity and encouraging/working with start-ups to develop appropriate solutions.

Action Item: Define a strategy to direct startups’ focus on specific problems, especially those that otherwise might not be addressed in the short term. Incumbents should consider start-up programs such as incubators, mechanisms to fund companies and strategic acquisitions. (N.B.: It is vitally important to protect intellectual capital when imparting industry knowledge to start-ups.)

  • Developing new products and services – Being active in InsurTech can help incumbents discover emerging coverage needs and risks that require new insurance products and services. Accordingly, they can refine – and even redefine – product portfolio strategy. This will result in the design of new risk models tailored to underserved and emerging markets.

Action Item: Take a close look at emerging technologies and social trends that could be business opportunities to define product strategy, determine required capabilities and develop a plan to build a portfolio and seize market opportunities. FinTech has become a buzzword, but whichever way the FinTech/InsurTech market itself goes, the reality underpinning it is not a passing fad. Insurers that are actively involved with InsurTech in any of the ways we describe above stand to gain, whichever way the market moves. They can use their capital and understanding of customers and the market to both inspire and exploit innovative technologies and correspondingly grow their business.