Tag Archives: u.k.

Insuring What You Want, When You Want

DIAmond Award winner Trōv is one of the most widely referred to cases when speaking about disruption in the insurance sector. But what is Trōv exactly about? What is the business model? How successful is it? Trōv’s founder and CEO Scott Walchek will share his vision in a keynote presentation at DIA Amsterdam, this May. To warm up, I interviewed Scott last week.

Trōv is the world’s first on-demand insurance platform for single items. It is a mobile app that allows users to insure whatever, whenever. It empowers customers to insure “just the things you care about” for whatever period you prefer. Trōv users simply snap a picture of a receipt or the product code of a product. This creates a personal digital repository for all things tangible. For selected items, Trōv offers a quote to insure each individual item. Customers can then simply “swipe to protect” to purchase the insurance. It is equally simple to “swipe to unprotect.” With Trōv, long contracts are not necessary. Even the claims process is automated with the use of chatbots and available on-demand on a smart phone.

Trōv is founded by Scott Walchek. Scott is a successful technology entrepreneur. Over the past 25 years, he built companies such as Macromedia, Sanctuary Woods, C2B Technologies and DebtMarket. He was also a co-lead investor and founding director of Baidu, China’s largest search engine.

Scott is also one of the 75 thought leaders who contributed to our new book “Reinventing Customer Engagement. The next level of digital transformation for banks and insurers.”

What inspired you to create Trōv?

Scott: “At some point I realized there is an enormous latent value in the information related to the things people own. From obvious things such as receipts and warranties to actually having an overview of what you own and what the current replacement value of each item is. We want to curate ways to turn this into value for consumers. From keeping information on items up to date to, for instance, arranging insurance for these items.

We’re a technology company, not an insurance company. We’re new in this space. So I started with testing our first ideas about a proposition and the assumptions behind it with several senior executives of large P&C insurers such as AIG and ACE. What I assumed is that at the end of the day the core metric of success is the ratio of insurance to actual value. The better this ratio, the better the balance sheet.

Of course, this is an oversimplification, but everyone agreed that in essence this is how over the past 200 years value in insurance is created. Now, what is remarkable is that insurers do not really know what consumers own, and what the exact value of these goods is … What if they did know? This would disrupt markets. It would lead to much better risk assessment driven by real knowledge of the true value of what people really own.”

See also: Insurtech: The Approaching Storm  

Trōv’s main target users are millennials, a target segment that most incumbents find very difficult to reach and engage with. Why does Trōv strike the right chord among this generation?

Scott: “We’re in the Australian market for a year now and entered the U.K. market a few months ago. Around 75% of our users are aged between 18 and 24. It appears that we are successful in tapping into the specific needs of this group. We do this by explicitly tapping into four key millennial trends. The first is “on-demand.” We can see that from how millennials consume entertainment, shopping etc. Services need to be now, 24 hours a day, on my device. The second trend is, “Don’t lock me into a lengthy contract.” We enable micro-duration. Customers can turn their insurance on and off as they see fit. In practice, they hardly do. But it is about the psychological benefit of being able to do so. The third is what we call “unbundled convenience”: “Let me choose what to protect, the things I really care about.” The fourth is: “people/agent optional.” Millennials want to engage with their smartphone without having to talk to an actual person.”

Trōv is based in the San Francisco Bay Area. But you decided to launch first in Australia and the U.K. Why there?

Scott: “Ha ha – there’s a linear story and a non-linear story to that! The linear story is that microduration is still new to the industry, so our hypothesis requires testing. The regulatory environment is important if you want to get to market fast. Australia and the U.K. have a single regulatory authority versus the 56 bodies in the U.S. But we’re also in the process of filing in the U.S. The non-linear story is that I just happened to meet Kirsten Dunlop, head of strategic innovation at Suncorp Personal Insurance, at a conference in Meribel in France. She immediately understood the strategic impact of Trōv, and that is when it took off.”

Because the Trōv concept is so new to consumers, it must be extremely interesting to learn what exactly strikes the right chord …

Scott: “Customers just love the experience. Our NPS is +49. However, we’re learning every day. With a completely new concept such as Trōv, it is impossible to know exactly what to expect, honestly. It turns out that Trōv reveals new consumer insights. There is still a significant number of valuables that our audience wants to insure but that we cannot provide a quote for, for instance. Although more than 60% never turn off an insurance, the ability to switch an insurance on and off turns out to be an important psychological benefit. This appears to be category-dependent. Sporting goods are switched on and off more often than smartphones and laptops.

We’re constantly measuring and improving every step of the funnel. From leaving Facebook to downloading the app, to registration, to actual swipes. We will share concrete numbers on uptake and conversion rates at DIA Amsterdam. But to already share two big learnings: We designed Trōv for use on smartphones, but, much to our surprise funnel figures multiplied when we decided to add a web interface. And we are actually even attracting better-quality customers.”

In Australia, you decided to partner with Suncorp, in the U.K. with AXA and in the U.S. with Munich Re. What are the success factors of a partnership between an insurtech and an incumbent?

Scott: “At the end of the day, it is about relationships and people. We understand their internal challenges. Everyone agrees that real knowledge of individual insured goods and the actual value of those goods improves the loss ratio. But we need to figure out how this works exactly through experimentation. This requires internal dedication, throughout the whole organization, starting at the top. It is not about conducting small pilots, but the willingness to experiment while going all the way, invest for several years and learn as we go what insurance will look like in the future and how consumers want to engage.”

What are your future plans and ambitions with Trōv? We can imagine that Trōv could also be an interesting partner for retailers and producers of durables. With Trōv, they could seamlessly sell insurance …

Scott: “We have three lines of business. The first is what we call “solid.” This is about expanding the Trōv app geographically, covering more categories and continuously developing the technology. Trōv will be launched in Japan, Germany and Canada shortly. Then there is “liquid”; offering white-label solutions to financial institutions, for instance in relation to connected cars and homes. The third line of business is “gas”; basically Trōv technology embedded in other applications; insurance as a service. This could be attractive for all sorts of merchants, telco operators etc.”

See also: Understanding Insurtech: the ABCs  

This would make Trōv even more part of the context in which consumers makes decisions about the risk they are willing and not willing to incur. And it also taps into the exponential growth of connected devices, similar to how machine-to-machine payments are increasingly taking place …

Scott: “Yes. What we’re now doing with Trōv is really the beginning. Trōv is about providing our customers with exactly the protection they want, exactly when they want it. With more and more connected devices and sensors and new data streams everywhere we can make the whole experience so seamless they don’t have to do anything at all.”

Is the Era of Aggregators Ending?

A conclusion concerning insurance aggregators (aka comparison portals) in the Accenture Distribution and Agency Management Survey is: “Irrespective of insurers’ views on the role of aggregators, it seems they are here to stay.”

This conclusion is supported by many others, but I venture to doubt it . The aggregator business may be nearing a tipping point.

There are (normal business) threats like:

  • heavy competition (usual in a successful and booming market)
  • takeover by the insurers (ending neutrality, a key issue for a serious comparison offer)
  • high cost of acquiring customers (apportioned to the customers)
  • pressure on product development (requiring cheaper derivatives of existing products, producing less transparency for the customer and making the process of buying insurance even more complex)

Maybe those can be overcome but I see a more fundamental threat for aggregators. 

Comparability

Comparison of coverages and premiums is possible because of the standard insurance products we have in all markets. Products were already quite standard, but the aggregation business has forced them to become even more comparable.

See also: The New Age of Insurance Aggregators  

Insurance, which generates little interest among buyers and which has price as the main buying parameter, might have lived happily ever after as a mature, not innovative market, but….

The New Insurance Is No Insurance

Forced by extreme pressure and pushed by new technology, a new type of service is being deployed: The insurance industry will move from claims handler to claims preventer.

Creating a safer environment for the customer and his/her beloved and belongings; optimizing prevention via smart vehicles, homes and people; analyzing the residual exposure and insuring only the part that is worthwhile to transfer — this is where insurance is headed.

There are huge opportunities for the insurance provider that is willing and able to shift to:

  • Real customer-centricity
  • Customer engagement with continuing advice and loyalty programs
  • Long policy life-cycles, away from aggregator dominance and costs
  • New products and services
  • New earning models
  • A safer and greener environment

All will result in customized and optimized interactive protection and insurance services for the complete household. There will be one-to-one services, on the road to living services (see also Fjord Report).

Non-Comparability

So what’s to compare in one-to-one services and products? In living services?

Of course, customers will need some guidance in this new world, as well. But it’s going to be a completely different ball game than the relatively easy “matching and ranking.”

The Peak

There is so much going on, to develop and to learn that this new world will take some time and the mass market has to follow, adopt and adapt. Therefore, I believe the aggregator business has not reached the peak YET.

But, in my opinion, for aggregators the sky is not the limit, and they are not here to stay. At least not in their current modus operandi.

See also: Understanding Insurtech: the ABCs  

Ultimately

The U.K. seems ahead with close to 70% aggregator-involvement in car. So there’s a fair chance that the U.K. will be leading in reaching the peak, as well.

Technology is developing very quickly, and prices are falling rapidly. Tech companies, OEMs, consumer electronics giants, telcos, media and utilities are already rolling out worldwide their connected devices and ecosystems. Millennials and other digital natives do expect continuous connected value added services in return for their effort and data.

Revolution will come suddenly and from unexpected sources.

Why Aren’t Brokers Vanishing?

The Loch Ness Monster. Area 51. The grassy knoll. To the list of the world’s great unsolved mysteries can be added a further conundrum — the continued success of the insurance broker.

For years, traditional brokers have labored under the Sword of Damocles that is disintermediation, be it from direct players, comparison sites or even from traditional bank-assurers. And for some parts of the market, those fears have been fully justified. In the U.K., for example, direct insurers have risen from nothing to control 41% of the personal lines market (ABI, 2015). And it has been estimated that comparison sites now account for more than a third of U.K. motor policies.

This has had some inevitable consequences, with many smaller/High Street brokers giving up the ghost and a wave of (often very poorly executed) consolidation sweeping the lower end of the market, as players have turned to scale benefits to counteract dramatic falls in income. And this was before Silicon Valley threatened to unleash a tsunami of further disruption onto the industry’s shores.

And yet the broker survives and, in the commercial lines sector in particular, prospers. As Mark Twain might have said, rumors of their demise have been much exaggerated.

Why is this?

Well, the cynic might argue that the archaic nature of the insurance industry itself has helped shield the market from the sort of Big Bang reform that struck the banking industry 30 years ago. Anyone remember open outcry? Wander around Lime Street today, and you will still see brokers, collars turned up against the wind, off to pitch their wares armed only with a bulging and brightly colored Manila folder wedged hopefully under one arm. Some might say that the industry’s biggest single barrier to entry for new entrants is the fact that it remains so stubbornly paper-based!

However, I would argue that the real reason for the broker’s survival lies in a simpler and more prosaic truth.

See also: Friday Tip For Agents & Brokers: Your Best 30 Seconds  

Trust.

Hardly earth-shattering, I know. But in my experience those outside the industry — and even those inside it, at times — consistently underestimate the extent of the trust that clients place in their broker and the strength of the relationship that springs from this. In few other industries, for example, can often relatively junior individuals leave one shop for another, reasonably confident in their ability to take a couple of million dollars of brokerage across the street with them.

For a product that is often said to be sold rather than bought and that has become, for the vast majority of businesses, relatively standardized, this sense of loyalty to the broker is somewhat counter-intuitive. But that is to ignore the very different psychology and motivations of the corporate buyer, who sees the value of insurance in insulating against shocks, keeping the management team out of court and “de-risking” new initiatives, unlike the consumer, for whom insurance is a grudge purchase where price is the overriding factor.

Because of this corporate dynamic, brokers often occupy a privileged position at the top table, alongside a company’s accountants, bankers and lawyers. Accompany a company on a meaningful claim, and the strength of that position gets enhanced even further. And with the emergence of new risks such as cyber, and with the world today ever more complicated, unpredictable and unstable, then the need for a trusted adviser to help you protect your shareholders, employees and clients from whatever might be thrown at them and navigate the complexities of the market becomes more important than ever. Small wonder, therefore, that commercial lines brokers have proved so resilient.

This, though, exposes the mystery — the classicists among you might even say Hamartia — that lies at the heart of the broking model. The value provided by a good broker is almost entirely in the advice she gives — diagnosing where your risks are, identifying which risks should be transferred and which retained, designing placement strategies, helping put in place active risk prevention and mitigation strategies, getting claims paid, etc. And yet brokers are typically paid via commission for placing the risk, arguably the least value-added and most transactional part of what they do. Particularly in today’s market, where underwriters are falling over themselves to cut rates to secure market share and where, in the words of one former colleague of mine, “my twelve-year-old son could place an offshore energy policy right now.” Her words, not mine!

It is the perfect illustration of someone negotiating over the price of the saddle but giving the horse away for free.

The real problem with commission, of course, is the potential misalignment of interests it creates between brokers and their clients. At the most basic level, in any normal intermediary-based industry, the better deal you get for your client, the more you might expect to be paid. In the insurance industry, however, the more the client pays, the more commission the broker makes. Even stranger, it is paid for by the insurer even though the broker supposedly acts on behalf of the client. The risk of perverse incentives abounds.

That’s not all. Commission is also a pretty blunt way of linking effort to reward. The work involved in renewing a policy with the same insurer, for example, is a fraction of that required to set it up, and yet the same commission rate applies. Similarly, the effort required to place a $20 million policy is not hugely more than that involved in placing a $10 million one, and yet one will pay double the other. Some clients eat up huge amounts of time pursuing a contentious claim and yet will pay the same commission rate as a far more straightforward client with little claims activity. It is hard to see how this doesn’t create a cross-subsidization effect between the simpler, less demanding clients and the more complex, challenging ones, to the detriment of the former.

Further complicating the picture is the fact that the economics of this tried and tested model have become increasingly challenged by the precipitous fall in the rating environment over the past few years, particularly outside the more volume-based classes. Commission is all well and good for brokers when prices are holding firm, but in a market where rates are falling 20% to 30% a year, as they have been in the aviation and energy markets, for example, brokers are suddenly faced with having to do the same, if not more, work for less money and with the prospect of worse to come.

But brokers are nothing if not resourceful. Diversification has allowed some to grow their income by shifting their value proposition to providing a broader risk consultancy offering and cross-selling additional services. Consolidation and automation have taken supply out of the market and released significant efficiency savings. And, perhaps most importantly, ever more elaborate ways have been found to extract value from the market through sophisticated placement strategies, providing analytics and consulting expertise and taking on parts of the insurance value chain in return for a fee. And while brokers have rightly been very careful not to replicate the structures and practices that landed them in hot water with Eliot Spitzer not so long ago, I would speculate that, for the larger brokers at least, income generated from the market is proportionally larger than it was pre-Spitzer.

While the broking community’s inventiveness is to be lauded, the risk is that they start eroding the very foundations of their continued success. The more that clients feel that their broker is more concerned with selling them additional consulting or software services than worrying about their core program, the more revenues that they perceive their brokers to be pulling out of the market beyond their core commission, the more blurred the lines become between where brokers end and where insurers begin, then the more clients may start to question the value their broker is adding and whether the broker is truly acting in their best interests.

See also: On-Demand Insurance: What’s at Stake  

But then, perhaps clients have the market they deserve? Certainly, few apart from the largest and most sophisticated clients have agitated to move their brokers onto fee-based remuneration structures that more clearly link the actual effort involved and value created — as they do for their other professional advisers who largely bill in terms of time and access to relative tiers of expertise. And stories abound of clients not playing fair, rewarding a cut in the premium with a proportionate fee reduction rather than rewarding their broker’s efforts — small wonder that brokers have been happy to let things lie.

Perhaps these things are simply far too entrenched to change? Particularly where all parties feel happy with the relative trade-offs. But I wonder if there isn’t potentially a certain mutual convenience in the broker’s cost being, if not quite invisible to the client, then at least one step removed in that most never have to sign an actual check. It must almost feel like the broker’s service is free….

Besides, you need to be careful what you wish for. There is an interesting read across here to the U.K. wealth management industry, where recent regulatory reforms have banned advisers from earning commissions from whichever provider they recommended to their client, to eliminate the risk of advisers placing/churning business to the highest fee payer and for earning trail commissions for little continuing effort. Instead, if clients want discretionary advice, they now have to pay their adviser an up-front fee that will typically run into the thousands of pounds and then pay further fees every time they transact. In theory, this makes sense, and the money that the providers were paying to the intermediaries by way of commission should have been handed back to client in the form of price reductions, leaving them no worse off once they had paid for advice. In practice, of course, this has created a windfall profit for the providers and left an advice gap at the heart of the British wealth management industry, because many clients have balked at the prospect of cutting a check for a couple of grand even though they were happy to pay this, and probably much more, when the adviser’s costs were discretely embedded into the cost of the product. No wonder clients, brokers and insurers in the insurance industry have largely preferred to stick with the status quo. The law of unintended consequences looms large.

Where does all this point, therefore, when considering the sustainability of the broking industry in the face of the changing market dynamics they are now facing? I would make a couple of suggestions.

Firstly, there is probably a large swath of medium-sized commercial lines business where the economics simply do not justify the continued provision of brokerage advice and services on the same basis that this has been supplied in the past. Radically different operating models will be required, probably leveraging some of the learnings from the banking world, which has also had to evolve its service model. There is probably an opportunity for AI and robo-advice based models, such as are increasingly being seen in the wealth management world. At one level, this will favor those brokers with large retail/affinity/SME customer bases and strong brands that can leverage existing practices and infrastructure up the value chain. But it also potentially suggests a rich seam of opportunity for disruptors armed with weapons-grade analytics and innovative distribution strategies.

Secondly, when it comes to larger, international companies or non-standard, more complex risks, the importance of the trusted broker relationship is not going to change. In fact, as I have argued elsewhere, the world’s greater uncertainty and volatility makes that very simple, human, trust-based relationship more important than ever. Insurers will continue to pay for this distribution — they have no choice. And new entrants, who think that a roomful of MIT graduates and a piece of smart tech can dislodge a 20-year relationship forged in the white heat of a ugly claim, will find out the hard way how wrong they are. In this part of the market, they are far better served focusing on providing solutions to back-end operational efficiencies and supplying discrete tools and services.

However, what is likely to change is what the client’s trust-based relationship with the broker is built on. Being able to navigate your way around a wine list, procuring Center Court tickets at Wimbledon and being an excellent transactional broker may have been enough to win and retain business in the past but just won’t cut it in the future. Clients now need a far more holistic, technical and analytically based approach to helping them understand, manage and mitigate their exposures. The placement will become a hygiene factor for most, if indeed it isn’t already.

The challenge for the brokerage community — and by extension for the sustainability of trusted relationships with clients — is whether brokers are equipped to meet their client’s rapidly shifting requirements from either a capability, a tools or an organizational perspective.

Many brokers simply don’t have enough people with the highly technical, analytical and consultative skills that they need if they are to provide the advice that their clients are increasingly likely to require. This implies the need for a far more strategic and thoughtful approach to long-term resource planning to ensure that people with the right sort of qualifications and attributes are being attracted to the organization and the right sort of skills developed in those who are already there. Some of their people will be able to make the necessary transition to this new world; others, sadly, won’t. And while this may create a short-term opportunity for some players to attract displaced talent and, with them, their loyal clients, over the longer term they are likely to end up saddled with the cost but without the income, unless they, too, can acquire or build these skills.

With this change in capabilities comes a potential change in organizational design, as brokers will need to go from wearing all sorts of hats as they typically do today — sales rep, relationship manager, program designer, placement expert, claims fixer etc. — to acting as a sort of overall risk adviser who then brings in expertise and tools, drawn from specialized teams, as and when they are required. This, in turn, implies quite a significant cultural shift for many brokers, who often guard their client relationships jealously and are wary of exposing them to a colleague who might screw things up.

I realize that for many this sounds like absolute heresy, and no doubt some players will seek to make a virtue of their brokers continuing to operate across a broad front. But to me it feels like an almost inevitable consequence of the world’s increasing complexity and the impossibility of any one person having the depth or range of technical expertise needed if they are to meet their clients’ evolving needs. It can surely be no coincidence that almost every single other professional services industry has evolved in this way?

The real complexity is that this will be an evolutionary change, as the technical and analytical demands of clients in different classes and different parts of the world and even within the same classes and parts of the world will vary. This implies that the successful brokers will be those who can effectively operate two models in parallel, as they mirror their clients’ own evolution.

This would tend to favor the larger brokers, who have both the resources and the scale to develop a more sophisticated relationship-management-based service model alongside their existing one, hire and develop people with the right skills mix and develop the analytics they need based on huge amounts of data.

See also: Is It Time to End the Annual Policy?  

Smaller, more niche brokers and MGAs, too, should be more able to develop their offering because of their narrower focus and ability to target their investments to their advantage. The people who may struggle are those caught somewhere in between, with all the cost of managing this transition (potentially on a global scale) but without the scale to be economic or the investment capital and data to be effective. Further consolidation of those lacking the resources or culture to embrace this new world is inevitable.

One thing is for sure. If history has proved one thing it is that brokers are remarkably good at morphing their offering to reflect their clients’ changing demands and dreaming up new ways to grow their income, whatever obstacles are thrown in their way.

In this, I am somewhat reminded of Louis XIV’s minister of finances, Jean-Baptiste Colbert, who once described the art of taxation as being “in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.”

On that basis, the broking community might want to consider running for office!

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

Matching Game for InsurTech, Insurers

What is it with InsurTech startups and insurance companies?

To any outsider, it’s very clear that InsurTechs and insurers make for very odd bedfellows. InsurTechs are quite ephemeral. They sprout up with the sweet rains of venture capital funding and die as their funding dries up. They are nimble and innovative. They aspire to be the next Google — ready to disrupt the establishment in the best “moon shot” tradition.

Insurers, on the other hand, tend to be corporate immortals, often measuring their tenure in centuries. Their processes appear fixed and hidebound, handed down from ages gone by. Their speed of innovation is positively glacial, and their customer proposition has “rock of Gibraltar” stability. Insurers are the very establishment that InsurTechs are seeking to disrupt.

Opposites attract — or so they say.

The fear of disruption

The insurance industry has seen an ever-growing demand for “creativity,” “disruption” and new digital technology since 2013. AXA was one of the first to declare its intent to become a digital insurer. In April 2014, the company established a lab in Silicon Valley and announced its tie-up with Facebook. At the time, everyone in the industry was waiting in trepidation for the market entry of the tech giants such as Amazon, Google, Facebook, Samsung and Apple. The fear was that those companies would sweep away the traditional insurers in an Uber-like tech tsunami.

Well, the tide came in, but it was no tsunami. Google breathlessly launched into the motor insurance compare market in March 2015. Just a year later, it unceremoniously departed. The industry heaved a collective sigh of relief because there was little or no impact. Yet the tech giants linger and remain the insurance industry’s boogie man.

See also: An Eruption in Disruptive InsurTech?  

Follow the money

The presence of the tech giants has created a created a rush to fund new InsurTech startups. Many of the leading insurance firms have set up VC funds focused on InsurTech. AXA is, again, one of the more notable in this area, providing funding to the tune of €230 million over the last 18 months. VC funding for InsurTech startups has increased 250% year-on-year, from $750 million in 2014 to $2.65 billion in 2015. For insurers, they get financial rewards and get to be at the forefront of any industry disruption if the technology takes off.

But many insurers see the need not only to fund innovation but also to “do” innovation. Hence, we’ve seen a steady stream of insurers around the world establishing innovation labs, collaborative spaces, digital garages and centers for digital disruption. Time will tell if these are fundamental drivers of strategic change or are unmasked as simply “window dressing” for the market.

Widening the net

The InsurTech “boot camp” is another recent phenomenon that has opened up a wider range of innovative startups to the insurance industry. These camps are a cross between an accelerator program, a beauty pageant and a reality TV talent show. For the small price of some equity and the added incentive of some up-front “pocket money,” the InsurTechs get to rub shoulders and gain insights from industry mentors and leading insurers. These boot camps are quite grueling, as they extend over several months. Competition can be fierce, with the best of the best InsurTech teams pitted against each other. The participants get to hone their solution pitches, demos and financial plans for the gathered insurance brotherhood and their fellow InsurTechs. Yet some InsurTech teams are frustrated by the insurers’ lack of urgency and their naïve view of how much effort is really required to make an innovation alliance work.

See also: InsurTech Start-Ups: Friends or Foes? 

A new hope

All of this activity has not been lost on governments wanting to push a “clever economy” strategy, creating sovereign incubators for the development of new or exotic financial services products and business models. The Singapore and U.K. governments are leading exponents of this new way of thinking and have spawned a wave of innovation emulators from Australia to Germany. These innovation-friendly government policies generally encompass a mix of:

  • Seed funding for startups;
  • Provision of “collaborative” spaces;
  • Incentives for the establishment of innovation labs; and
  • Regulations fostering the flexibility/tolerance to try new things in public that may fail.

Breaking new ground, the Monetary Authority of Singapore (MAS) has launched its own innovative boot camp: the Singapore FinTech Festival. It’s a coordinated way to accelerate innovation for the whole financial services industry, drawing on FinTech and InsurTech talent from around the world. Singapore is putting its money where its mouth is, funding a “Hackcelerator” competition as part of the festival. This competition will run 10 weeks, starting in September 2016, and it has more than $500,000 of funding and prizes to be shared — no equity required! All the teams need to do is be in the top-20 at solving at least one of 100 problem statements set by the organizers.

In a similar vein, Singapore insurer NTUC Income has announced its own InsurTech accelerator program. It’s offering funding of S$28,000 apiece for 12 top InsurTech startups. Again, no equity required. The program runs from January to March 2017.

If this trend continues, boot camps will be out of business — at least in their current, equity-gobbling format.

But where are the traditional insurance tech vendors?

In all this activity, where are the insurance legacy tech suppliers (LegTechs)? Many of the traditional consulting firms are doing quite well, tying up with some of the boot camps. But those vendors that were selling mainframe systems, software development services and the like, where are they? The answer for the most part is nowhere — the land of digital transformation. Perhaps it’s indicative of the level of mistrust between insurers and their LegTechs that insurers “go direct” to the innovation source. Perhaps it’s the fear that the innovation will too quickly be commoditized by these vendors and spread to insurers’ competitors. Whatever the case, LegTechs are being cut out of the conversation.

This is a big mistake.

LegTechs are better at partnering. They typically understand the innovation process and have a product mentality, which would really help package what InsurTechs have to offer. There is also an alignment on maximizing profit on technology with a common view of pervasively selling into the market. As a consequence, the LegTechs have a large, well-established, tech-savvy salesforce ready to carry the InsurTechs’ message to the market. This is one of the most decisive reasons why InsurTechs should partner with LegTechs. The final reason is that LegTechs are a goldmine of useful resources. They have an army of developers, lab space, sandpit environments, technology centers of excellence and distinguished engineers/architects with decades of experience — all of which would rapidly bring robust InsurTech products to market.

See also: InsurTech Boom Is Reshaping Market  

For LegTechs, there are also many attractions. Systematic partnering in this way would inject innovation and an entrepreneurial spirit they badly need. InsurTechs would provide an outlet for some of the LegTechs’ brilliant engineers, giving them an opportunity to dabble with the heady challenges of a startup while maintaining their security. This would definitely boost retention and attraction of this scarce talent pool. Finally, the LegTechs could get into new growth areas rather than stagnate on a declining commodity technology business.

The bottom line

Change is the only constant in an industry fiercely trying to catch lightning in a bottle. The lyrics from the Pokémon song are really quite apt for this current stage: “You teach me, and I teach you,” as I doubt we can “catch ‘em all.” We have a vision but have yet to stumble on the magic formula for repeatable innovative disruption. We hope we’ll find it in InsurTech’s perfect match. Or, perhaps, it has already happened but we just don’t know it. In any case, with boot camps, hackcelerators, insurers, VCs, governments and LegTechs all at hand, our visionary InsurTechs will soon deliver further breakthroughs. Let’s hope their beauty and passion rub off on an old industry.

This article originally appeared in InsurTech News.