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10 Insurtechs for Dramatic Cost Savings

Winning insurtechs tap into the key challenges that insurance carriers are facing. In this post, the second of seven different flavors of winners in fintech insurance: insurtechs that drive dramatic cost savings.

Although emerging markets are witnessing significant growth, most mature markets are saturated and experience margin pressure. This will show little or no change in the years to come.

Insurers are looking for ways to operate more efficiently in every major part of the costs column: in claims expenses, costs of operations and customer acquisition costs.

Technology purchases and investments by insurance carriers will further explode in these areas. And so will the number of fintech solution providers that want to cater to that need.

Learn from digital pure players

Technology definitely eroded the barriers to entry. Successful pure-play digital insurers know how to leverage technology to defy the conventions related to cost drivers that incumbents still work with. According to McKinsey research, incumbents for instance are not able to operate profitably with fewer than 1 million policies. They hardly seem to benefit from scale economies, and for incumbents the costs of using broker channels barely differ from using digital channels.

“The difference with pure-play digital insurers like InShared could not be bigger,” says Irene van den Brink, director of business development at InShared, the first fully digital insurer player on the Dutch market. In only five years, it achieved 10% market share in online car insurance, the highest NPS score in the market as well as the lowest cost ratio. “We run 500,000 policies with a core team of only 35 FTE [full-time employees]. But the scalability becomes even clearer when I tell you that 1 million policies could be managed by just a few more FTE and not the doubling of FTE you would see in a traditional model. With our digital model, we have proven to run a portfolio of P&C (non-life) at a 10% cost level, where we see that more traditional direct players have a cost level between 20% and 30% and broker models even higher than that. And this is just the beginning: Adding volume to our operations means we can go as low as 75 to 8% expense ratios, leveraging the full potential of a digital model.”

Apart from how digital new entrants leverage technology, we believe that two other factors are essential that explain the difference with incumbents.

First, having started from a clean slate, digital new entrants lack the complexity of a wide product portfolio, multichannel operations and having to comply with existing processes and IT infrastructure. Second, they understand this and stick to it. Successful digital new entrants are complexity-averse by nature. That is why they succeed in scale economies where incumbents don’t, and that is why they succeed in keeping their cost base that much lower. This is where many incumbents go wrong. Van den Brink says: “Virtually every insurance companies has embraced the need for a digital solution. But merely adding a digital channel or an app is not the way forward. In fact, this only adds costs and increases complexity in the IT landscape, it adds databases, systems and the links needed become an even bigger spaghetti.”

This is important to keep in mind when implementing fintech solutions to achieve substantial cost savings. The fintech solutions should address the root cause; they should dramatically reduce the complexity of current operations.

See also: Top 10 Insurtech Trends for 2018  

Go where the money is

Insurers spend between 60 and 80 cents of each euro of premium on claims. This means ample opportunities for fintechs that provide innovative solutions that reduce this amount. Think of solutions for improved claims management and fraud detection. Due to insurance fraud, 60 billion euro is lost each year in Europe and the U.S. alone. Of all fraudulent claims, 65% go undetected. Insurers spend no less than 240 million euro annually to tackle fraud.

10 insurtech solutions that dramatically reduce such costs

Everledger is using the technology behind bitcoin to tackle the diamond industry’s expensive fraud and theft problem. The company provides an immutable ledger for diamond ownership and related transaction history verification for insurance companies, and uses blockchain technology to continuously track objects. Everledger has partnered with different institutions across the diamond value chain, including insurers, law enforcement agencies and diamond certification houses across the world. Through Everledger’s API, each of them can access and supply data around the status of a stone, including police reports and insurance claims.

OutShared recently launched the CynoSure digital insurance platform, a complete head-to-tail digital insurer-in-the-box. CynoSure is a SaaS solution that covers the back-office system-of-record to all front-end web and app interfaces. For instance, with CynoClaim (one of CynoSure’s key modules) more than 60% of all claims can be managed automatically, resulting in lower costs as well as increased customer satisfaction. The platform can be used for both new market offerings and the renovation of established operations migrated to the platform. Results of the first implementations are promising: as much as a 50% decrease in costs and 40% increase in customer satisfaction. CynoSure takes six to nine months to implement, whether it is new or a migration – quite spectacular in the insurance industry, as well. (InShared is powered by OutShared)

EagleView Technologies provides aerial imagery, data analytics and geographic information solutions. Thanks to a fleet of 73 aircraft (and drones) that capture images on a year-round basis, EagleView’s library contains more than 250 million images spanning 12 years. This provides the most comprehensive current and historical view of properties available. Insurers use the library, data and visualization tools for instance to identify pre-existing conditions and estimate storm damage to roofs, leading to better decision-making in claims adjusting. In most cases, it is not necessary anymore to visit the site. In addition to these cost reductions, faster closing of claims leads to increased customer satisfaction

Enservio software uses demographic and other information to estimate the value of contents in a home. The software is, for instance, used to settle claims. Imagine a house being destroyed by a hurricane. The software allows the insurance company to reduce time-consuming negotiations, to eliminate discussions and to pay the claim three times faster.

Lexmark health insurance solutions provide carriers with the tools to expedite claims processing, simplify communications and reduce costs. The solutions extract data from claims forms with an accuracy rate of 90% or more, eliminating most manual data entry and boosting straight-through processing. Specific content management solutions integrate with legacy systems to provide health insurance document management for unstructured content in any form – paper, email, web forms, faxes, print streams and industry-standard formats – giving instant access to for instance claim adjusters.

AdviceRobo solutions use a machine-learning platform that combines data from structured and unstructured sources to score and predict risk behavior of consumers. AdviceRobo, for instance, provides insurers with preventive solutions applying big behavioral data and machine learning to generate the best predictions on default, bad debt, prepayments and customer churn. Predictions are actionable because they are on an individual level.

Shift Technology leverages data science to detect and model weak and strong signals of fraud, including fraud by organized gangs.
Shift Technology has developed algorithms to model data analysis of insurance policies and insurance claims, and external data while integrating the expertise of insurers. To be implemented and configured, the solution requires limited technical or financial investment. The solution is provided in a SaaS model and charged based on the volume of claims processed. The platform is used by general insurance companies as well as other actors in the insurance ecosystem, such as expert networks.

Not really insurtech, but too interesting not to include: PartsTrader is an online car parts marketplace that U.S. insurer State Farm is using to dramatically improve the repair process.

Repair delays caused by parts ordering issues result in millions of dollars in rental vehicle expenses daily across the industry, and high parts costs are reducing the number of vehicles that can be repaired. Using PartsTrader addresses both problems. The objective is to improve parts availability, quality, order accuracy, competitive pricing and process efficiency.

The LexisNexis Intelligence Exchange data platform allows insurers, among others, to review an incoming claim, for instance against claims made with other insurers, resulting in faster settlement of genuine claims and coordinated investigations of suspicious claims. The platform also detects potential insurance fraud; e.g. misrepresentation and non-disclosure of relevant facts, and lapsing of a policy in the second or third year due to, for instance, deliberate churning by an agent.

QuanTemplate is a cloud platform to analyze, report and communicate bespoke insurance information between parties. The software is built for the complex, collaborative world of the wholesale reinsurance markets. The users can manage their whole workflow within one app.

The platform reduces time and cost spent on reporting and analytics, while increasing speed and transparency.

See also: Global Trend Map No. 7: Internet of Things

The Internet of Things potentially has a huge impact on claims – by preventing an incident or by warning so that the damage doesn’t get worse. Connected devices provided by companies like Nest deploy sensors and Wi-Fi technologies to detect and report things like a leak under the sink before a pipe burst or to automatically shut off the stove when someone leaves home – so that house owners can handle burning toast before it becomes a burning toaster and insurers can avoid hefty claims later. Liberty Mutual and American Family Insurance already teamed up with Nest to decrease costs.

Similar preventive measures are promoted in ever-more-connected cars.

VitalHealth Software develops cloud-based eHealth solutions in particular for people with chronic diseases such as diabetes, cancer and Alzheimer’s. The company was founded 10 years ago by, among others, Mayo Clinic. The impact is huge because chronic diseases account for the majority of healthcare costs. VitalHealth Software features include care providers participating and collaborating in health networks, gaining web-based access to shared, protocol-driven disease management support based on established clinical guidelines, seamlessly integrated to and accessed from within existing electronic health records. Clients and partners of VitalHealth Software include top five health insurance carriers in Latam, Europe and China, eager to improve patient care and health costs management simultaneously.

All solutions that we featured in this blog have one thing in common: On the one hand, they contribute to significant cost savings, but on the other hand they improve customer engagement. Combining the two should be a leading design principle in digital transformation efforts.

Nest, OutShared, Everledger, AdviceRobo and VitalHealth Software are among the insurtechs that will showcase their innovative solutions at DIA Barcelona.

In our next post, we will focus on the third flavor of winners in fintech insurance: insurtechs that play new roles in the value chain. So stay tuned!

You can find the article originally published here.

‘Digital’ Needs a Personal Touch

The insurance claims process is rapidly being transformed from analog to digital as industry economics and customer expectations demand it and as technology enables it. Not only does digitization provide impressive cost savings and satisfy the expectations of a growing number of “always connected” consumers, but it delivers a host of other benefits. Insurtech providers of many types have emerged seemingly overnight to provide a dizzying array of new technologies to support claims innovation within established carriers and enable new insurance entrants at the same time.

See also: Let’s Keep ‘Digital’ in Perspective  

Examples include:

  • CCC Information Services, a leading U.S. information provider to the automotive, insurance and collision repair industries, is working to combine auto injury causation software with telematics expertise and overlaying casualty claims management assets to meet the needs of the rapidly transforming auto insurance claims industry.
  • DropIn provides an on-demand, live video platform for more precise underwriting, speeds claim resolution, enhances damage estimate accuracy and reduces indemnity and loss adjustment expenses. Users can access streaming video and high-resolution photos captured directly by customers or via a crowdsourced independent contractor network using commonly available insurtech tools, such as smartphones and drones, to achieve insight into the complexities of auto and property damage for enhanced decision-making.
  • EagleView provides aerial imagery, data analytics, property data and GIS solutions related to millions of residential and commercial properties for local and federal government agencies as well as the infrastructure, insurance, solar and construction sectors.
  • Livegenic provides cloud-based, real-time patented video solutions to property and casualty insurance organizations connecting every part of the claims ecosystem. The Livegenic platform streamlines communication between in-house and external adjusters, appraisers, contractors and policyholders, provides field video loss documentation capabilities, and delivers customer self-service solutions.
  • OnSource provides insurance companies with claims and underwriting photo inspections through intuitive smartphone apps and a mobile website. Policyholders and claimants use self-inspection apps, Instant Inspection’s chat website or its managed network of thousands of photo field inspectors and quality assurance analysts.
  • PartsTrader, an automated repair parts bidding and procurement platform, connects thousands of collision repair shops with repair parts suppliers of all types to reduce the cost and cycle time in the $15 billion U.S. repair parts market segment. The PartsTrader platform allows repair shops to search and compare multiple suppliers at the same time and to work with suppliers competing for their business.
  • Snapsheet uses proprietary technology to optimize virtual auto physical damage claims operations, giving insurance adjusters the tools they need to provide a seamless experience to their claimants.
  • WeGoLook, in which Crawford recently acquired a majority interest, provides on-demand field inspection and verification services. Using its web and mobile platform the company empowers a 30,000-plus mobile workforce, known as Lookers, to collect and verify information and fulfill custom tasks for businesses and consumers alike in insurance and other verticals.

While this is all good news – and inevitable – what is at risk of being overlooked in this rush to a more efficient, streamlined claim process are the individuals who buy and use insurance services and at critical times require the reassurance and comfort of a personal touch.

Auto claims are a case in point. Many claims processes, mainly those that take place in the background, are well-suited to the cold efficiency of technology, automation and digitization. But the auto claim is frequently preceded by a totally unexpected, disorienting and sometimes traumatic accident. This is the moment when the consumer most needs and depends upon the insurance carrier….and a human touch.

In 2016, there were about 190 million registered passenger vehicles on the road in the U.S. More than 15 million auto accidents occurred involving 18.5 million vehicles. Stated another way, about one out of every 10 cars on the road was involved in an accident. On average, every driver can expect to experience an auto accident once every 10 years, most minor in nature but others involving serious injury or even death. Sadly, there were 40,200 traffic fatalities in 2016.

We are never fully prepared, nor do we know exactly what to do when involved in a traffic accident. The experience is unfamiliar and confusing. A battery of questions immediately come to mind – how much is this going to cost me? – was this my fault? – could I have prevented it? – how will I get where I was going? – who should I notify first? – is anyone hurt, including me? And so on.

Historically, a police officer would typically show up, review the scene, ask the drivers several questions, make some notes and direct the vehicles off the roadway to a safe location or if necessary call a tow truck or an emergency vehicle.

Then you would need to follow an often frustrating, protracted claims and repair process; call your agent or carrier; get the car to a body shop, arrange for a rental car; make numerous calls to the shop and the adjuster to see when your car will be ready; and then reach into your pocket to pay your deductible even after paying your insurance premiums faithfully for all those years.

But this scenario will soon be a thing of the past. For one thing, police in many urban markets are no longer responding to auto accident calls. Law enforcement budgets are shrinking, and police officers are busy handling higher-priority tasks such as criminal investigations. We can’t rely on the police always showing up in the future.

Insurance companies are addressing some of their challenges by using new technologies to make the auto claim and repair process simpler and faster. Many carriers offer smartphone apps that include claim-reporting capabilities enabling drivers to take photos or videos of the accident damage at the scene (or later from home) and upload them to the carrier, which assesses the damage and schedules the repair, often in minutes. Some companies are paying drivers electronically on their smartphones and closing out the claim in mere hours.

However, for those who believe that younger policyholders prefer technology to human contact, the recent J.D. Power 2016 U.S. Auto Claims Satisfaction Study reveals that only 7% of millennials prefer digital channels to report their claims and concludes that technology cannot fully replace humans during the claims process, even among millennials.

The one missing piece is what happens immediately after an accident occurs and before your insurance company starts to process your claim. Not everyone has a smartphone, is tech-savvy enough or understands the importance of reporting the accident immediately to the insurance company. Auto accidents can be traumatic. Many people can be involved, in your vehicle and in other vehicles. Differences of opinion between drivers about the facts or what caused the accident are not unusual. Without the presence and authority of a police officer, people are left to cope with all of these issues on their own. And, because almost 80% of vehicles damaged in auto accidents are safely driveable, there’s no logical reason to have to stay at the scene once your information is exchanged with the other driver(s).

See also: Do You Really Have a Digital Strategy?

To address these new realities, innovative programs have emerged to bridge the gap between the accident and the claim report. One such solution is the Collision Reporting Center (CRC). These facilities provide drivers with the assistance, advice and support they need at the critical time following an accident. The CRC is a partnership between local police departments and privately managed reporting centers. The model initially emerged in Canada 20 years ago when the insurance industry and police joined forces to solve a mutual challenge. Today, the operation manages 32 Collision Reporting Centers in partnership with 53 police departments across Canada and serves 80% of the Canadian auto insurance industry. Recently, the operator expanded into the U.S., opening its first Collision Reporting Center in Roanoke, VA, in the fall of 2016, with plans to open several more centers soon.

At the Collision Reporting Center, drivers involved in an accident provide their individual accounts of what happened and other information while professional staff take digital images to document damage. The information is reviewed by an on-site police officer at the CRC and is immediately sent to the driver’s insurance company, where a claim is initiated and processed. Drivers are provided with a customized instructional guide from their own carriers describing what to do next and a private room where they can make a phone call to their insurance company or family members. The Collision Reporting Center provides a comfortable and safe environment, eliminating the need for drivers to wait on the roadway.

As we move toward self-driving automobiles and the elimination of most accidents,, we will see many innovative accident and claim management programs emerge that can bridge the gap between the auto accident and resolution of the claim process. Collision Reporting Centers are an excellent solution to these needs – they provide personalized customer service and a human touch with the power of technology making the auto accident reporting process as non-intrusive as possible into our busy lives.