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Insurtech: The Year in Review

As we reach the end of 2017, the first full 12 months where insurtech has been recognized as a standalone investment segment, we wanted to reflect on what has been an incredible year.

From the start, we at Eos believed that insurtech would be driven globally, and that has certainly played out. This year, we’ve visited: Hong Kong, Amsterdam, New York, Las Vegas, Nigeria, Dubai, India, Singapore, Bermuda, Milan, St. Louis, Munich, Vienna, Paris, Zurich, Cologne, Chicago, San Francisco, Silicon Valley, Seattle and Toronto. We’ve expanded our geographic footprint to include the East and West coasts of the U.S. and India and have seen fantastic progress across our expanding portfolio. We’ve welcomed a number of new strategic partners, including Clickfox, ConVista and Dillon Kane Group, and launched our innovation center, EoSphere, with a focus on developing markets

At the start of the year, we published a series of articles looking at the key trends that we believed would influence insurtech and have incorporated these in our review of the year.

We hope you enjoy it! Comments, challenges and other perspectives, as always, would be greatly received.

2017: The year innovation became integral to the insurance sector

How are incumbents responding?

We are seeing a mixed response, but the direction of travel is hugely positive. A small number of top-tier players are embracing the opportunity and investing hundreds of millions, and many smaller incumbents with more modest budgets are opening up to innovation and driving an active agenda. The number sitting on the side lines, with a “wait and see” strategy is diminishing.

“If 2016 was the year when ‘some’ insurers started innovating, 2017 will be remembered as the year when ‘all’ insurers jumped on the bandwagon. And not a minute too soon! When I joined 3,800 insurance innovators in Las Vegas, we all realized that the industry is now moving forward at light speed, and the few remaining insurers who stay in the offline world risk falling behind.” Erik Abrahamson, CEO of Digital Fineprint

We are more convinced than ever that the insurance industry is at the start of an unprecedented period of change driven by technology that will result in a $1 trillion shift in value between those that embrace innovation and those that don’t.

Has anyone cracked the code yet? We don’t think so, but there are a small number of very impressive programs that will deliver huge benefits over the next two to three years to their organizations.

“We were pleased to see some of the hype surrounding insurtech die down in 2017. We’re now seeing a more considered reaction from (re)insurers. For example, there is less talk about the ‘Uber moment’ and more analysis of how technology can support execution of the corporate strategy. We have long argued that this is the right approach.” Chris Sandilands, partner at Oxbow Partners

Have insurers worked out how to work with startups? We think more work may be needed in this area….

See also: Insurtech: An Adventure or a Quest?  

The role of the tech giants

“Investors are scrambling for a piece of China’s largest online-only insurer… the hype could be explained by the ‘stars’ behind ZhongAn and its offering. Its major shareholders — Ping An Insurance (Group) Co., Alibaba Group Holding Ltd., Tencent Holdings Ltd.” – ChinaGoAbroad.com

“Tencent Establishes Insurance Platform WeSure Through WeChat and QQ” – YiCai Global

“Amazon is coming for the insurance industry — should we be worried?” – Insurance Business Magazine

“Aviva turns digital in Hong Kong with Tencent deal” – Financial Times

“Quarter of customers willing to trust Facebook for insurance” – Insurance Business Magazine

“Chinese Tech Giant Baidu Is Launching a $1 Billion Fund with China Life” – Fortune 

We are already well past the point of wondering whether tech giants like Google, Amazon, Facebook, Apple (GAFA) and Baidu, Alibaba, Tencent (BAT) are going to enter insurance. They are already here.

Notice the amount of activity being driven by the Chinese tech giants. Baidu, Alibaba and Tencent are transforming the market, and don’t expect them to stop at China.

The tech giants bring money, customer relationships, huge amounts of data and ability to interact with people at moments of truth and have distribution power that incumbents can only dream about. Is insurance a distraction to their core businesses? Perhaps — but they realize the potential in the assets that they have built. Regulatory complexity may drive a partnership approach, but we expect to see increasing levels of involvement from these players.

Role of developing markets

It’s been exciting to play an active role in the development of insurtech in developing markets. These markets are going to play a pivotal role in driving innovation in insurance and in many instances, will move ahead of more mature markets as a less constraining legacy environment allows companies to leapfrog to the most innovation solutions.

Importantly, new technologies will encourage financial inclusion and reduce under-insurance by lowering the cost of insurance, allowing more affordable coverage, extending distribution to reach those most at need (particularly through mobiles, where penetration rates are high) and launching tailored product solutions.

Interesting examples include unemployment insurance in Nigeria, policies for migrant workers in the Middle East, micro credit and health insurance in Kenya, a blockchain platform for markets in Asia and a mobile health platform in India.

Protection to prevention

At the heart of much of the technology-driven change and potential is the shift of insurance from a purely protection-based product to one that can help predict, mitigate or prevent negative events. This is possible with the ever-increasing amount of internal and external data being created and captured, but, more crucially, sophisticated artificial intelligence and machine learning tools that drive actionable insights from the data. In fact, insurers already own a vast amount of historical unstructured data, and we are seeing more companies unlocking value from this data through collaboration and partnerships with technology companies. Insurers are now starting to see data as a valuable asset.

The ability to understand specific risk characteristics in real time and monitor how they change over time rather than rely on historic and proxy information is now a reality in many areas, and this allows a proactive rather than reactive approach.

During 2017, we’ve been involved in this area in two very different product lines, life and health and marine insurance.

The convergence of life and health insurance and application of artificial intelligence combined with health tech and genomics is creating an opportunity to transform the life and health insurance market. We hope to see survival rates improving, tailored insurance solutions, an inclusion-based approach and reduced costs for insurers.

Marine insurance is also experiencing a shift due to technology

In the marine space, the ability to use available information from a multitude of sources to enhance underwriting, risk selection and pricing and drive active claims management practices is reshaping one of the oldest insurance lines. Concirrus, a U.K.-based startup, launched a marine analytics solution platform to spearhead this opportunity.

The emergence of the full stack digital insurer

Perhaps reflecting the challenges of working with incumbents, several companies have decided to launch a full-stack digital insurer.

We believe that this model can be successful if executed in the right way but remain convinced that a partnership-driven approach will generate the most impact in the sector in the short to medium term.

“A surprise for us has been the emergence of full-stack digital insurers. When Lemonade launched in 2016, the big story was that it had its own balance sheet. In 2017, we’ve seen a number of other digital insurers launch — Coya, One, Element, Ottonova in Germany, Alan in France, for example. Given the structure of U.K. distribution, we’re both surprised and not surprised that no full-stack digital insurers have launched in the U.K. (Gryphon appears to have branded itself a startup insurer, but we’ve not had confirmation of its business model).” – Chris Sandilands, partner, Oxbow Partners

Long term, what will a “full stack” insurer look like? We are already seeing players within the value chain striving to stay relevant, and startups challenging existing business models. Will the influence of tech giants and corporates in adjacent sectors change the insurance sector as we know it today?

Role of MGAs and intermediaries

Insurtech is threatening the role of the traditional broker in the value chain. Customers are able to connect directly, and the technology supports the gathering, analysis and exchange of high-quality information. Standard covers are increasingly data-driven, and the large reinsurers are taking advantage by going direct.

We expected to see disintermediation for simple covers, and this has started to happen. In addition, blockchain initiatives have been announced by companies like Maersk, Prudential and Allianz that will enable direct interaction between customers and insurers.

However, insurtech is not just bad news for brokers. In fact, we believe significant opportunities are being created by the emergence of technology and the associated volatility in the market place.

New risks, new products and new markets are being created, and the brokers are ideally placed to capitalize given their skills and capabilities. Furthermore, the rising rate environment represents an opportunity for leading brokers to demonstrate the value they can bring for more complex risks.

MGAs have always been a key part of the value chain, and we are now seeing the emergence of digital MGAs.

Digital MGAs are carving out new customer segments, channels and products. Traditional MGAs are digitizing their business models, while several new startups are testing new grounds. Four elements are coming together to create a perfect storm:

  1. Continuing excess underwriting capacity, especially in the P&C markets, is galvanizing reinsurers to test direct models. Direct distribution of personal lines covers in motor and household is already pervasive in many markets. A recent example is Sywfft direct Home MGA with partnerships with six brokers. Direct MGA models for commercial lines risks in aviation, marine, construction and energy are also being tested and taking root.
  2. Insurers and reinsurers are using balance sheet capital to provide back-stop to MGA startups. Startups like Laka are creating new models using excess of loss structures for personal lines products.
  3. Digital platforms are permitting MGAs to go direct to customers.
  4. New sources of data and machine learning are permitting MGAs to test new underwriting and claims capabilities and take on more balance sheet risk. Underwriting, and not distribution, is emerging as the core competency of MGAs.

Customer-driven approach

Three of the trends driving innovation that we highlighted at the start of the year centered on the customer and how technology will allow insurers to connect with customers at the “moment of truth”:

  • Insurance will be bought, sold, underwritten and serviced in fundamentally different ways.
  • External data and contextual information will become increasingly important.
  • Just-in-time, need- and exposure-based protection through mobile will be available.

Over time, we expect the traditional approach to be replaced with a customer-centric view that will drive convergence of traditional product lines and a breakdown of silo organization structures. We’ve been working with Clickfox on bringing journey sciences to insurance, and significant benefits are being realized by those insurers supporting this fundamental change in approach.

Interesting ideas that were launched or gained traction this year include Kasko, which provides insurance at point of sale; Cytora, which enables analysis of internal and external data both structured and unstructured to support underwriting; and Neosurance, providing insurance coverage through push notifications at time of need.

See also: Core Systems and Insurtech (Part 3)  

Partnerships and alliances critical for success

As discussed above, we believe partnerships and alliances will be key to driving success. Relying purely on internal capabilities will not be enough.

“The fascinating element for me to witness is the genuine surprise by insurance companies that tech firms are interested in ‘their’ market. The positive element for me is the evolving discovery of pockets of value that can be addressed and the initial engagement that is received from insurers. It’s still also a surprise that insurers measure progress in years, not quarters, months or weeks.” – Andrew Yeoman, CEO of Concirrus

We highlighted three key drivers at the start of the year:

  • Ability to dynamically innovate will become the most important competitive advantage.
  • Optionality and degrees of freedom will be key.
  • Economies of skill and digital capabilities will matter more than economies of scale.

The move toward partnership built on the use of open platforms and APIs seen in fintech is now prevalent in insurance.

“We are getting, through our partnerships, access to the latest technology, a deeper understanding of the end customers and a closer engagement with them, and this enables us to continue to be able to better design insurance products to meet the evolving needs and expectations of the public.” Munich Re Digital Partners

Where next?

Key trends to look out for in 2018

  • Established tech players in the insurance space becoming more active in acquiring or partnering with emerging solutions to augment their business models
  • Tech giants accelerating pace of innovation, with Chinese taking a particularly active role in AI applications
  • Acceleration of the trend from analogue to digital and digital to AI
  • Shift in focus to results rather than hype and to later-stage business models that can drive real impact
  • Valuation corrections with down rounds, consolidation and failures becoming more common as the sector matures
  • Continued growth of the digital MGA
  • Emergence of developing-market champions
  • Increasing focus on how innovation can be driven across all parts of the value chain and across product lines, including commercial lines
  • Insurers continuing to adapt their business models to improve their ability to partner effectively with startups — winners will start to emerge

“As we enter 2018, I think that we’ll see a compression of the value chain as the capital markets move ever closer to the risk itself and business models that syndicate the risk with the customer — active risk management is the new buzzword.” – Andrew Yeoman, CEO Concirrus

We’re excited to be at the heart of what will be an unprecedented period of change for the insurance industry.

A quick thank you to our partners and all those who have helped and supported us during 2017. We look forward to working and collaborating with you in 2018.

How to Create a Blue Ocean in Insurance

In the last few years, insurers have raced to capture the massive opportunities created by new technologies and have learned to turn the threat of insurtech startups into smart collaborations. The result has been the avoidance – so far – of any significant loss in revenue and profitability.

Nevertheless, not only does technology continue to progress rapidly, but the American and Chinese tech giants, with their global ambitions, pose new challenges to the industry. Policyholders have come to expect the same level of convenience and engagement from their insurers, and some observers even start to fear that, in their ruthless march to global domination, those giants may encroach into insurers’ territory.

Insurers have a window of opportunity to leverage their consolidated customer base, deep industry knowhow and solid balance sheets to strengthen their competitive position. Look at what happened to Google Compare, an auto insurance aggregator launched in U.S. and U.K. that has been far from successful.

To pursue long-term profitable growth, insurers should start focusing on opportunities for non-disruptive market creation, as well. Most of us, including insurers and insurtech startups, have come to equate technology with disruption, where a market is created by a new solution that displaces an existing one. Look at the KYC technologies that are replacing the need for face-to-face interactions.

In reality, as pointed out by Professors Kim and Mauborgne in “Blue Ocean Shift,” the sequel to their global best seller “Blue Ocean Strategy,” a focus on disruption is limiting and leaves half the opportunities to create growth and markets off the table. The key is to realize that we do not necessarily need to destroy an existing market to create a new one. While disruption sets out to better solve an existing problem faced by current customers, non-disruptive innovation creates “blue oceans” by targeting noncustomers of the industry or solving “brand new” problems.

See also: On-Demand Insurance: Ultimately a Bust?  

Take BIMA, which is creating a blue ocean by offering affordable microinsurance products to the “bottom of the pyramid.” BIMA, which was established in 2010 in Ghana, has rapidly gained scale and is now bringing microinsurance to 24 million customers across Asia, Latin America and Africa. More than 90% of its customers live on less than $10 per day, and three-quarters are accessing insurance for the first time.

Developing countries have economies that are generally based on farming and agriculture and require a wide range of insurance products from health and life, accidental death and disability, agricultural and property insurance, to catastrophe cover. In those countries, microinsurance already covers around 135 million people,  but that represents only around 5% of the entire market potential. Growth is expected to be between 8% and 10% a year for the next years.

Similarly, microinsurance can be marketed in developed countries to reach the underserved segments of the population who struggle to afford more comprehensive products.

However, microinsurance is not just a reduced-cost coverage for low-income customer segments in both emerging and developed economies; it is an entirely new way of selling insurance and creating demand. In fact, consumers who can afford traditional covers may not perceive the need for insurance until an event occurs or an intermediary stimulates such awareness. They are often unaware of the need or just the possibility to insure against a specific risk; insurers submit complex and cryptic contracts requiring a lengthy and cumbersome purchasing process that individuals are not able or willing to follow.

Not surprisingly, recent studies report that millennials are the most underinsured generation and are the least likely to have any health, rental, life and disability insurance. Millennials are just one of the segments of the so-called “connected generation,” an immense blue ocean opportunity also including Generation Y and the Silent Generation, Baby Boomers, and Generation X, who are shifting to mobile purchase habits. Empowered by technology, all these individuals look for authentic services that they can access across multiple platforms and screens, whenever and wherever they need. Their protection gap is estimated at more than $3.5 trillion.

The key to selling insurance to the “connected generation” is to reach them with the right proposal through engaging touchpoints on a device they swipe, tap and pinch thousands of times a day: their smartphone.

Helping insurers to unlock this blue ocean opportunity with a customer-centric mobile insurance proposition is the mission of Neosurance, the start-up that we cofounded and that created the first virtual AI-based insurance engine.

Neosurance stimulates the protection need “pushing” the right cover at the right time on customers’ smartphone, thus triggering an emotional and impulse purchase for a small-ticket item. Insurance purchase becomes a “rational impulse,” and the transaction is completed at the “point of need” rather than at the traditional “point of sale.” This is possible because the customer experience is entirely paperless and takes less than 20 seconds.

See also: The Insurance Renaissance Rolls On  

Neosurance relies on a partner-friendly “plug and play” SDK easily embeddable in any app, allowing carriers not only to target their captive audience but also to tailor their insurance proposition to the front-ends and customer journeys of their community partners. In doing so, insurers (and reinsurers) can maximize customer engagement by protecting people’s common interests and passions and build a holistic ecosystem of digital communities to create a blue ocean of uncontested demand.

In the future, as insurers learn to leverage the massive amount of data they collect and to analyze it through context, psychographic and behavioral profiling, more blue ocean opportunities will be generated. In particular, carriers will be able to upgrade their role throughout the end-to end customer journey from that of a simple “payer” to that of an active “player,” multiplying customer touchpoints, boosting satisfaction and ultimately creating opportunities to cross-sell insurance and non-insurance products and services.

This article was originally published on InsurTechNews.com. It was written by Andrea Silvello and Luciano Pezzotta.

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.

Big New Role for Microinsurance

Connected insurance is the next “big thing.” It will be enabled by the IoT, big data and artificial intelligence. Health, home and motor insurance are three pillars of this connected, evolving landscape. Microinsurance comes as a transversal opportunity that can help close the protection gap while allowing carriers to propose customer-centric products and services.

But connected insurance is mainly about people: how to reach and engage with them in an efficient way while connecting their risks with their insurance cover. I refer to connected insurance as: any insurance solution based on sensors for collecting data on the state of an insured risk and of telematics for remote transmission and management of the data collected. This definition can be applied in all the sectors from motor, house and health to life and industries. So you have this great capacity to register, deposit and analyze data that comes directly from the users, giving the insurer new insight into actual behaviors and lifestyles:

  1. You have the impact on the insurance bottom line that comes as a result of specialization.
  2. You’ve got frequency of interaction with the customer that puts the insurer much closer but is less invasive than before. In other words a new, customized and more efficient digital customer experience.
  3. You create knowledge, a key issue for insurers, which have more data on risks and their customer base.
  4. You get to improve lifestyles in the long run, with positive externalities for a sustainable society.

See also: 5 Innovations in Microinsurance  

In this innovative landscape, microinsurance is a transversal opportunity for insurers to get closer to their clients, offering the right coverage at the right time.

Above, you can see a good matrix that shows how some of the players are positioned on the market based on their sales approach and their distribution model. You’ve got the group in the lower left corner that has more of a standard pull approach regarding their customers and has stand-alone solutions, in most cases based on their own mobile app solutions. I am of the opinion that integration with partners in a plug-and-play approach is much more efficient in reaching potential customers out there.

By looking at the lower right corner, you can see how there are many solutions of this type but still using a pull commercial approach. Now the interesting part is when you start to mix the two sales approaches (between pull and push) and you get the well-known Asian insurer Tokio Marine, which has been on the market with its microinsurance solutions since 2010.

And finally we get to the upper right corner, where you can see the logo of Neosurance, the insurtech startup that I co-founded a little over a year ago. I personally believe that it’s really well-positioned based on the criteria that I find to be particularly relevant on the market today: selling microinsurance via push notifications that are sent to the user in an intelligent way thanks to an artificial intelligence machine learning system. Plus you’ve got great reach through the use of existing communities (they have their own mobile applications) with users that have homogenous interests.

We must consider a statement regarding the industry that has proven true for the last decades: “Insurance purchase is not exciting; insurance is sold not bought!”

The average attention human span has been dropping: from 12 seconds in 2000, to 8 seconds in 2013. We’re slowly transforming into pretty goldfish, happily living in our bowls.

So the insurer has to address the current context, which has dramatically changed with the arrival of mobile and then smartphone technology. Get the customer’s attention by using the same channels that they use and talk to them in their language.

Insurance should adapt to the customer’s habits and environment. The best way to do that in my opinion is by selling microinsurance that has a short duration with a push approach. Know what the customer needs before he or she does! Then you’ll be able to give the right insurance coverage, when the clients need it, directly on their smartphones. The trick here is being able to avoid annoying the customers with offers that do not interest them directly, in the wrong moments. To avoid that ,you would need to use a system that can give you insight into the lifestyle and preferences of the users.

A good microinsurance solutions has to be able to create a seamless digital customer experience by reading and interpreting customer behaviors and emotions. The aim here is to create a win-win situation for customers and insurers alike. And push microinsurance has just what it takes. For customers: always close at hand when they need to be protected, with the possibility of buying personalized microinsurance on the spot directly from the smartphone. For the insurer, it’s still very much uncharted territory to be explored but can also raise profitability levels significantly while avoiding moral hazard. This comes as a consequence of having a digital salesforce that sells insurance in a smart way because of AI and machine-learning capabilities and can reach the connected generation right where they like to spend most of their time: on their smartphones.

See also: Microinsurance Has Macro Future

Recent studies reported that millennials are currently the most underinsured generation and are the least likely to have health, rental, life and disability insurance.

So, what’s the magical combination for winning their attention? The key is to reach them with the right message, at the right time, on a device where they swipe, tap and pinch 2,617 times a day: their smartphone. Moreover, millennials are just the tip of the iceberg: The “connected generation” is the single most important customer segment. Empowered by technology, they search out authentic services that they use across platforms and screens, whenever and wherever they can.

We believe in a new distribution paradigm for the insurance sector: to stimulate the emotional need of protection, when the insurance coverage is not compulsory. Our artificial intelligence engine delivers a push suggestion at the right time with the right offer to provide a simple solution to this protection need, a promise easy to understand and convenient to purchase. We work with insurers and reinsurers to create insurance propositions while developing a streamlined purchasing process.

All Insurers Must Become Insurtechs

Insurance is finally changing. It cannot but do so, to stay competitive in a technology-driven world. Customers’ ever-increasing expectations, together with the increased importance of digital channels, are forcing all players to adapt.

But major insurance players struggle to meet customers’ demands for the ease of use, transparency and accessibility that they already have it in other sectors, like banking and shopping. Customers want insurance coverage tailored to their needs, via the channel they prefer. But insurers don’t seem very able yet to take advantage of this opportunity. Rigidity and complexity, that’s what customers often associate with insurance coverage and insurers in general.

Insurtechs provide a fresh alternative to the incumbent’s model of doing business in today’s and tomorrow’s connected world. A deep collaboration between incumbents and insurtechs is necessary.

Incumbents should embrace the solutions put forward by insurtech startups, which are legacy-system-free, resourceful and creative but usually lack in-depth knowledge about the insurance sector. Whether the result of a partnership is risk reduction, cost optimization or context-based pricing, the advantages are becoming clear for incumbents.

See also: Top 10 Insurtech Trends for 2017  

To cite Matteo Carbone, an insurtech thought leader, to stay relevant in the future insurance companies must themselves become insurtechs. And how better to do that than by working closely with the newcomers?

Push mobile microinsurance is a very good example of how insurtechs have found a solution. This new approach to selling insurance manages to address existing challenges by using digital (mobile) channels for communication, registration, payment of premiums and claims processing (claims submission and claims payouts).

I believe that the potential of microinsurance to revolutionize the insurance sales process is very high. It could help reduce the protection gap in developed countries for several types of risks, and it can be a way to target millennials with limited financial education and low trust in traditional intermediaries.

The main scope of microinsurance is to deliver innovation to customers who seek it. At the same time, it helps the insurer get more insight on the individual client. Microinsurance can also be considered a form of micro-financing because it offers low-cost coverage for a limited period, and its applications could be huge.

Investments in microinsurance will continue to climb because of the rising amount of data available out there and the ability to analyze it in a way that brings added value to both insurer and customer.

Consider microinsurance as a concrete way to handle usage-based needs by covering specific risks for specific durations. As with all financial services lines of business, insurance providers are leveraging sophisticated data and insights to provide highly personalized products to meet consumers’ increasingly specific expectations. The sharing economy demands niche products, and only those products that are relevant to users’ usage and behavior patterns will remain successful.

Italy represents the worldwide leading-edge experience in car insurance innovation and, thanks to the use of the black boxes, which started 10 years ago, the Italian market is the only market worldwide where auto insurance telematics is already mainstream. There are almost five million active black boxes in the country, and the penetration is higher than 16% of all cars. This (from some points of view) incredible performance has been possible thanks to the collaboration between insurers and tech companies.

Due to this extremely successful experience with car insurance, Italy represents a “Silicon Valley” for the evolution of innovation in the insurance industry.

My company, Neosurance, provides a virtual insurance agent for customers, who are not only under-insured but are also unaware of their potential needs for coverage. Neosurance, like an insurance agent, knowledgeable and capable, stimulates the protection need by offering the right coverage at the right time on the customer’s smartphone, stimulating an impulse purchase of small-ticket insurance.

See also: How Insurtechs Will Affect Agents in 2017  

Solutions like ours can bring the insurance sales process to the next level, potentially transforming every old insurance company into an insurtech.