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6 Minutes of History From 2016

We knew that 2016 would be big.

To capture the flavor of the pace and magnitude of change, I wrote a series of blogs where I likened the dramatic shifts in insurance technology to what happened during the original Italian Renaissance, when education, money, art and science combined to create quantum leaps forward and redefined trade and the economy, the social scene and technological advancement.

So here we are at the end of 2016, and I think we can make a case that 2016 was not only pivotal and groundbreaking but that it was historic on the scale of a Renaissance. At no time in the history of insurance can we find one year that includes this many game-changing events AND a rapid pace of continuing advancement.

My thinking is that if the 525,000 minutes of 2016 were actually historic, then perhaps they deserve their own six-minute look back. To keep things short, I’ve split the 2016 trends into one-minute discussions.

Insurtech — From independent ideas to industry-wide imperatives

Do you remember where you were when you first heard the term “insurtech”? Its first connotations were regarding those out-in-the-stratosphere ideas from independent tech and insurance startups as an extension of fintech regarding important-but-not-disruptive ideas in insurance. You may have heard the term “insurtech” in 2015, but it certainly went mainstream in 2016 as its own vertical focus separate from fintech.

Conversations around insurtech grew, but, more importantly, the influx of capital that advanced the proliferation of startups and greenfields based on new tech capabilities and business model disruption were unprecedented — bringing insurtech from its fintech roots into a completely mainstream, independent, industry-wide wave of innovation. Many traditional insurers and reinsurers hopped on the insurtech wave and showed interest in capturing their own slices of the creative pie. From accelerators like the Silicon Valley Insurance Accelerator (SVIA), Global Insurance Accelerator (GIA) and Plug and Play to the first InsureTech Connect meeting in Las Vegas in October with more than 1,500 executives in attendance, insurtech became the “hottest” thing in the industry, giving insurers of all sizes and lines of business pause to consider their strategies. Even S&P recognized the impact of insurtech as having “a complementary place in the traditional insurance world, despite remaining uncertainty in the industry about how it will function on a wide scale.”

See also: The Insurance Renaissance, Part 5  

The insurance industry may never have had this much activity, excitement and concern on the promise and potential of insurance disruption and reinvention.  From the launch of Lemonade, Slice, Haven Life and more insurers and MGAs, the shift to a customer-centric rather than product-centric view is creating a customer experience not unlike the Amazon experience. 2017 will continue to see existing insurers and reinsurers looking to stand up a new brand and business model to capture the next generation of customers and position for growth.

Emerging technology engages insurers

What emerging technologies are we seeing as having made an impact in 2016 with real operational impact? There is artificial intelligence (AI) and machine learning. There are new sensors and their ability to capture the unseen aspects of operation and life. Protective technologies in vehicles, property and health are growing. There is live streaming data and video from smart phones and drones. Data’s organizational and visual capabilities are improving with new tools.

We could drone on.

But the reality is that the mobile, connected and ethereal digital world is using real-time data to gain insight and manage, reduce or eliminate risk in the physical world to a greater degree than ever before. There used to be “an app for that.” Now, there’s a sensor for everything on the Internet of Things. The world is fast becoming an omni-channel portal into daily life. The distance from “emerging technology” to mainstream tech usage is measured in months, not years, shattering Moore’s Law.

Emerging technologies span a diverse realm for insurers — if you consider that new technology can be worn on a wrist, flown pilotless through the sky or operate entirely within the digital networks of processors and servers. It’s no wonder that an insurance renaissance is in full swing. The space age has given way to the digital age, where it seems like anything may be possible — it just takes imagination, creativity and thinking outside the traditional box. Digital technologies have penetrated previously untapped data mines, allowing machine failure to be predicted and prevented; human risk to be captured and calculated; and insurer risk to be managed, mitigated and eliminated, creating a new value proposition, new products and new services for customers.

New and innovative businesses launches

Disruption makes use of plug-and-play ideas and technologies. Traditional insurance organizations were tightly wound balls of string, operating everything within that ball. Connections were immovable. Processes attempted to be neat and tidy, but they were always struggling with the “messiness” of adaptation. Today’s insurtech resembles Legos in insurtech’s ability to fulfill conceptual opportunities. Imagine a pile of sensors, another pile of devices and yet another “pile” of data streams. Then ask yourself, “What can your mind dream up today?” In 2016, businesses were busy dreaming up enough disruptions to disturb the sleeping giants of insurance.

Slice made a mobile app that integrates with a hybrid homeowner/commercial product. Lemonade used an AI bot to act as agent on a peer-to-peer insurance platform. Haven Life (launched in 2015 but entered 33 new states in 2016) reconsidered how data streams could improve the life underwriting experience for term life.  And then there were new distribution options with companies like Ask Kodiak, Insurify and PolicyGenius — to name a few — deconstructing and redefining the insurance value chain/business model.

Just like building with Legos, there seem to be no end to the combinations of startup and greenfield businesses that can launch using new business models, technologies and great ideas across all aspects of the insurance value chain to meet new customer needs, expectations and demands. This is one area where 2017 will certainly trump 2016 — we may only be seeing the beginning of the innovation wave — but expanding from venture-capital-backed to existing insurers standing up their own greenfield and startup businesses.

Reinsurers invest in insurtech and startups

With the reinsurance market having excess capital, reinsurers took big moves to be major players in insurtech — from investing in technology companies to new startup insurance and MGA businesses. In addition, many are looking at all the disruption around and within insurance and developing, incubating and testing new insurance products to take to market, either directly or through customers or partners.

Consider reinsurers’ investment in Trov, Lemonade, Root and Slice; Munich Re’s investment and focus on mobility and autonomous vehicles; or XL Group and the establishment of XL Innovate, a specialized venture capital fund pursuing investments in financial technology, new opportunities for insurance underwriting and related analytics, globally. Swiss Re, Hannover Re, Odyssey Re, Maiden Re and others are rapidly making moves as well.  Consistently, these investments are in new operational models, new products or meeting new risks — creating a path to underserved or new markets.

See also: Insurtech: One More Sign of Renaissance  

As noted in a recent article, all this insurtech activity is raising the expectation on the importance of reinsurance capital to support new business models and back technology startups. In the process, insurtech startups are looking to disrupt the risk to capital value-chain in insurance by deconstructing and collapsing the value chain and by cutting out primary carriers or brokers, as well as costs, and placing the risk directly with reinsurers, leveraging unused capital. We expect to see increased activity from reinsurers that will likely begin to look at partnering with existing insurers/customers to collaborate on new products and with emerging technologies or by standing up a new brand or greenfield, continuing the deconstruction of the traditional insurance value chain.

Cloud goes mainstream

In 2016, the case for core system platform in the cloud reached the tipping point — from a nice-to-have to a must-have. Its logic has grown as capabilities have improved and cost pressures have increased. Though cost is a consideration and modern functionality is important, rapid industry change is fueling a renaissance in insurance models. The startup insurer or the greenfield insurance concept needs a system solution built for rapid deployment. New products often need new processes, making cloud capabilities a catalyst for creative product development. Nothing can make an insurer feel more cutting edge than moving from idea to rollout in the short timeframes that cloud solutions provide.

Many insurers are taking advantage of the same pay-as-you-use principles as consumers themselves. They are sharing system solutions with cloud-based technology. They are paying as they grow, with agreements that allow them to pay per policy or pay based on premiums. They are using data-on-demand relationships for everything from medical evidence to geographic data and credit scoring. They use technology partners and consultants in an effort to not waste time, capital, resources and budgets.

Insurers are rapidly moving to a pay-as-they-use world, building pay-as-they-need insurance enterprises. This is especially true for greenfields and startups, where a large part of the economic equation is an elegant, pay-as-you-grow technology framework. They can turn that framework into a safe testing ground for innovative concepts without the fear of tremendous loss, while having the ability grow if the concepts are wildly successful. The window of opportunity is open to insurers that wish to prepare their business models, products, processes and systems to embrace the pay-as-you-go culture

This makes cloud a nearly-universal solution, fitting the needs of both startups and traditional insurers with plans for growth and expansion. In 2016, cloud became a mainstream option — an imperative for insurers needing a competitive edge.

Perspectives on the Pace of Change

The world recently lost John Glenn, a famous American astronaut and long-time U.S. senator. Glenn was born in 1921, only 18 years after the Wright Brothers tested flights at Kitty Hawk. He lived to pilot jets, was the first person to orbit the earth in a spacecraft, then later flew on two Space Shuttle missions at the age of 77. His life is a great example of the growing pace of change — in a world that moved from mechanization to digitization.

See also: A Renaissance, or Just Upheaval?  

Yet as much as changed in Glenn’s lifetime, today’s advancements are eclipsing all of them in pace and disruption. The systems that create knowledge through data and analysis are truly powerful forces that will ignite perpetual improvement and a new world of connected living. Insurance, once concerned with risk management on a large scale, will be focused on learning and understanding risk down to an individual policy-level, with a craving for more knowledge as it becomes available. If 2016 proved to be an insurance renaissance fueled by insurtech, it is very likely that 2017 will provide us with an even greater shift in the midst of an industry rebirth.

How much will change?

We have all of 2017 to find out!

Insurance Disrupted: Silicon Valley’s Map

With $5 trillion in premiums, an incredibly low level of customer satisfaction, aging infrastructures, an analytically based, high-volume business model and a “wait until we have to” approach to innovation, insurance is now fully in the sights of the most disruptively innovative engine on the planet, Silicon Valley. The tipping point for insurance is here.

More than 75 digitally born companies in Silicon Valley, including Google and Apple, are redefining the rules and the infrastructure of the insurance industry.

Inside the Insurance Tipping Point – Silicon Valley | 2016

It’s one thing to listen to all of the analysts talk about the digitization of insurance and the disruptive changes it will bring. It’s quite another to immerse yourself in the amazing array of companies, technologies and trends driving those changes. This post is the first of a series that will give you an inside look at the visions, culture and disruptive innovation accelerating the digital tipping point for insurance and the opportunities that creates for companies bold enough to become part of it. (Join us at #insdisrupt.)

Venture firms are catalysts for much of Silicon Valley’s innovation, and insurance has their attention. Frank Chen of Andreessen Horowitz sees software as rewriting the insurance industry, AXA insurance has established an investment and innovation presence here. Others, including Lightspeed VenturesRibbit Capital and AutoTech Ventures, are investing in data and analytics, new insurance distribution plays and other technologies that will change the shape of insurance.

New business models: MetromileZenefitsStride HealthCollective HealthClimate Corp., Trov and Sureify, are using technologies to redefine and personalize insurance and the experience customers have with it.

Rise of the Digital Ecosystem – Expanding the Boundaries of Insurance

Digital ecosystems are innovation catalysts and accelerators with power to reshape industry value chains and the world economy. They dramatically expand the boundaries within which insurance can create value for customers and increase the corners from which new competitors can emerge.

Silicon Valley is home to companies acutely aware of how to establish themselves as a dominant and disruptive platform within digital ecosystems. That includes Google, which is investing heavily in the automobile space with Google Compare and self-driving vehicles and has acquired Nest as an anchor in the P&C/smart homes market. Fitbit is already establishing health insurance partnerships. And let’s not forget Apple. The Apple Watch already has insurance-related partners. Apple has clear plans for the smart home market and has recently launched AutoPlay, its anchor entry into the auto market. There are rumors that Apple plans to develop an iCar. And that’s just what we know about.

There are a host of other companies placing digital ecosystem bets in Silicon Valley, as well: GE, which is driving the Industrial Internet of Things; Parstream, with an analytic platform built for IoT; the IoT consortiumJawboneEvidation HealthMisfit Wearablesicontrol NetworkGM and its advanced technology labcarvi; and DriveFactor, now part of CCC Information Services.

Then there are the robotics companies, including 3D robotics, the RoboBrain project at Stanford University and Silicon Valley Robotics, an association of makers.

Customer Engagement and Experience – New Digital Rules, New Digital Playbook.

When your customer satisfaction and trust is one of the lowest in the world and companies like Apple and Google enter your market place, it’s really time to pay attention. There is a customer value-creation and design led innovation culture in the valley unrivaled in the world, and the technology to back it up. Companies like Genesys, and Vlocity are working on perfecting the omni channel expereince. Hearsaysocial and, declara, are working on next gen social media to help customers and the insurance industry create better relationships. Many of the next generation of insurance products will be context aware, opening the door to new ways of reaching and supporting customers. Companies like mCube and Ejenta, are working to provide sensor based insight and the analytics to act on it. TrunomiBeyond the Ark, and DataSkill via cognitive intelligence are developing new innovative ways to use data & analytics to better understand and engage customers. Lifestyle based insurance models are being launched like Adventure Adovcates and Givesurance, And some of digital marketing automation’s most innovative new players like Marketo, and even Oracle’s Eloqua are rewriting and enabling a new digital generation of marketing best practices.

Big Data and Analytics – Integrated Strategies for the New “Digital” Insurance Company

The techno buzz says big data and analytics are going to affect every business and every business operation. When you are a data- and analytics-driven industry like insurance that deals with massive amounts of policies and transactions, that buzz isn’t hype, it’s a promise.

The thing about big data and analytics is that when they are used in operational silos, they provide a tactical advantage. But when a common interoperable vision and roadmap are established, analytics create a huge strategic advantage. That knowledge and the capability to act on it is built into the DNA of “born digital” entries into the insurance market like Google.

The number of companies working on big data and analytics within the valley is staggering. We have already discussed a few in the Customer Engagement section above. Here are a few more, In the area of risk: RMS is building its stable of talent in the big data spaceActian is delivering lightning-fast Hadoop analytics; Metabiota is providing epidemic disease threat assessments; and Orbital Insights is providing geo-based image analysis. In the areas of claims and fraud, PalantirScoreDataTyche and SAS are adding powerful capabilities for insurance. Improved operational effectiveness is being delivered by Saama Technology, with an integrated insurance analytics suite; by Prevedere, with data-driven predictive analytics; by Volumetrix, with people analytics; and by Sparkling Logic, which helps drive faster and more effective decision making.

Insurance Digitized | Next Generation Core Systems

With insurance boundaries expanding, integration with digital ecosystems, increasing reliance on analytics and the demand for personalized and contextualized outcome- and services-based insurance models, core systems will have huge new sets of requirements placed on them. The requirement for interoperability between systems and data and analytics will grow dramatically.

Companies like GuidewireISCS and SAP are building a new generation of cloud-based systems. Scoredata and Pokitdoc are bringing new capabilities to claims. SplunkSymantec and FireEye are addressing emergent cyber risks. And companies like Automation EverywhereOcculus RiffSuitable Technologies and Humanyze are enabling the digitally blended and augmented workforce.

The latest investment wave includes artificial intelligence, deep learning and machine learning, which core systems will need to incorporate.

Surviving the Tipping Point – Becoming One of the Disruptive Leaders

This is a small sampling of the technologies, trends and companies just within Silicon Valley that are shaping the digital future of insurance. The changes these will drive are massive, and they are only the tip of the iceberg.

An Insurance Tech meetup group open to all the insurance-related companies within Silicon Valley was just announced by Guillaume Cabrere, CEO of AXA Labs, and already has 64 members. For established companies to survive the tipping point and thrive on the other side of it requires more than handing “digital transformation” off to the CIO or marketing team. Success requires a C-Suite that has become an integral part of the community and culture building the digital generation of insurance companies.

For technology companies and next-generation insurance companies, success requires building partnerships with established and emerging players.

This blog series is designed to inform and accelerate that dialog and partnering formation. It will include a series of interviews with disruptive leaders from industry and Silicon Valley. If you or your company would like to be a part of that series, please let me know.

Join us for the next Insurance Disrupted Conference – March 22-23, 2016 l Silicon Valley

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ITL readers receive a 15% discount when registering here.