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The Future of Insurance Is Insurtech

The insurance sector has entered a phase of profound transformation. Numerous insurtech startups—around 1,000, according to Venture Scanner map—have popped up to challenge the traditional model.

I believe that we will see a completely changed insurance sector in the medium term. But I’m convinced that insurance companies will still be relevant in the future, or will become even more relevant than they are now, but these companies will have to be insurtechs, or players who use technology as the main enablers for reaching their own strategic objectives.

The reach of this digital transformation goes way beyond the elimination of “the middle man” from a distribution point of view. The direct digital channel dominates very few markets and deals only with compulsory insurance. In the vast majority of markets, a multichannel-oriented customer continues—with variations from country to country—to choose at least at some point of the customer journey to interact with an intermediary. But the digital transformation happening in the insurance industry is widespread and encompasses all of the phases of the insurance value chain, from underwriting to claims.

See also: Insurtech Has Found Right Question to Ask

Every insurance sector player—whether it’s a reinsurer, a carrier or an intermediary—ought to pose this question: How should the insurance value chain be reshaped by using the new technologies at hand? There are numerous relevant technologies that come to mind, including: the cloud, the Internet of Things (IoT), big data and advanced analytics, quantum computing, artificial intelligence, autonomous agents, drones, blockchain, virtual reality and self-driving cars.

To take full advantage of these technologies, there has to be a structured approach that begins with identifying use cases that can have an actual contribution to reaching strategic business goals, then maximizes their effects inside the insurance value chain of each player. Finally, the approach should look at the software/hardware selection or the “make vs. buy” choices. The essential idea is that “one size does not fit all. Each player needs to create customized use cases based on their individual strategy and characteristics.

To date, there are several types of approaches to mapping insurtech initiatives. I have developed my own classification framework based on six macro areas (awareness, choice, purchase, usage, IoT and peer-to-peer (P2P)).

Insurance IoT, also known as connected insurance, represents one of the most relevant and mature insurtech trends.

Connected Insurance represents a new paradigm for the insurance business, an approach that fits with the mainstream Gen C, where “C” means connectivity. This novel insurance approach is based on the use of sensors that collect and send data related to the status of an insured risk and on data usage along the insurance value chain.

Auto telematics represents the most mature insurtech use case, as it has already passed the test and experimentation phase within the innovation unit. It is currently being used in daily work within motor insurance business units. In this domain, Italy is an international best practice example: According to the SSI’s survey for the Connected Insurance Observatory, more than 70% of Italians show a positive attitude toward motor telematics insurance solutions. According to the Istituto per la Vigilanza sulle Assicurazioni (IVASS), about 26 different insurance companies present in Italy are selling the product, with a 16% penetration rate out of all privately owned insured automobiles in the second quarter of 2016. Based on information presented by the Connected Insurance Observatory—a think tank I created in partnership with Ania that brings together more than 30 European insurer and re-insurer groups—the Italian market will surpass 6 million telematics policies by the end of the year.

See also: Insurtech: One More Sign of Renaissance  

Based on this data, we can identified three main benefits connected insurance provides to the insurance sector:

  1. Frequency of interaction, enhancing proximity and interaction frequency with the customer while creating new customer experiences and offering additional services
  2. Bolstering the bottom line, improving insurance profit and loss through specialization,
  3. Knowledge creation and consolidating knowledge about the risks and the customer base


The insurance companies that are part of the Observatory are adopting this new connected insurance paradigm for other insurance personal lines. The sum of insurance approaches based on IoT represents an extraordinary opportunity for getting the insurance sector to connect with its clients and their risks. The insurers can gradually assume a new and active role when dealing with their clients—from liquidation to prevention.

It’s possible to envision an adoption track of this innovation by the other business lines that are very similar to that of auto telematics, which would include:

  • An initial incubation phase when the first pilots are being put into action to identify use cases that fit with business goals;
  • A second exploratory phase that will see the first rollout by the pioneering insurance companies alongside a progressive expansion of the testing, to include other players with a “me, too” approach;
  • A learning phase in which the approach is adopted by many insurers (with low volumes) but some players start to fully achieve the potential by using a customized approach and pushing the product commercially (increasing volumes);
  • Finally, the growth phase, where the solution is already diffused and all players give it a major commercial push.

After having passed through all the previous steps in a period spanning almost 15 years, the Italian auto telematics market is currently entering this growth phase. The telematics experience teaches us three key lessons regarding the insurance sector:

  • Transformation does not happen overnight. Telematics—before becoming a relevant and pervasive phenomenon within the strategy of some of the big Italian companies—needed years of experimentation, followed by a “me, too” approach from competitors and several different use cases to reach the current status of adoption growth.
  • The companies can be protagonists of this transformation. By adding services based on black box data, telematics has allowed for improvements in the insurance value chain. Recent international studies show how this trend of insurance policies integrated with service platforms is being requested by clients. It also shows that companies, thanks to their trustworthy images, are considered credible in the eyes of the clients and, thus, valid to players who can provide these services.
  • If insurance companies do not take advantage of this opportunity, some other player will. For example, Metromile is an insurtech startup and a digital distributor that has created a telematics auto insurance policy with an insurance company that played the role of underwriter. After having gathered nearly $200 million in funding, Metromile is now buying Mosaic Insurance and is officially the first insurtech startup to buy a traditional insurance company. This supports the forecast about how “software is eating the world”— even in the insurance sector.

My Top Tips From EXEC InsurTech

I usually approach conferences with mixed emotions, whether attending, learning and networking or speaking. Ultimately, for me, conferences and events are about connecting people and ideas and moving the debate and understanding forward. To this end, I was delighted to join some great folks over at EXEC Insurtech in Cologne, which for me ticked all the boxes. It had a really interesting mix of folks attending, old and new, a serious number of VCs (AXA Strategic Ventures, Commerz Ventures and many more), There were angel investors and more and, importantly, a whole host of new start-ups, many very early-stage. There were some really great ideas from outside the U.K. market, so new to me personally. And it’s always great to see SPIXII, RightIndem and other graduates from the InsurTech StartupBootcamp in London with Sabine VanderLinden.

See also: InsurTech Boom Is Reshaping Market  

In addition to a number of panels where I was able to share the latest views from the Capgemini 2016 World Insurance Report, I was asked to share some perspectives with the group on InsurTech. I wanted to share the same here.

  1. We are in a bubble. By “we,” I mean, those who are here at EXEC InsurTech and see the opportunity. Not everyone sees the world this way, yet! Many of you know I’m a firm believer that disruption is here and now, coming at us thick and fast.
  2. Stand out. Whatever reports you read, be it the tech journals, insurance news or the traditional annual reports from existing carriers, they all talk to the disruption of the traditional insurance carrier (following the “unbundling” of the banks). There are now hundreds of start-ups in this space. It always amazes me to hear Sabine and theStartup Bootcamp team talk to how many start-ups they talk to prior to shortlisting to their final cohort. Make sure that when you are on stage and you have three minutes to pitch, you stand out. Don’t be the me-too.
  3. There have been no really big failures yet. There is excitement and buzz around what people are up to, where disruption is coming from and what part of the insurance value chain people are attacking (sales, underwriting, distribution, etc.). Given this, there has been record investment in the sector; the prize is huge, with a $5 trillion market opportunity. Matthew Wong and the folks over at CB Insights continue do an amazing  job at tracking deal flow, more than $1 billion so far in 2016. The example nearest to a failure that I called out was Zenefits, given its recent re-valuation. Another one was mentioned from the audience — CSS in Switzerland, I believe, but please correct me if I have this wrong.
  4. Partnering is key.  Given the history, tradition and especially the speed of the industry, my view is it’s best to partner and work with the traditional players as opposed to going all out head-to-head today. This may, of course, change over time. There are some really great examples of partnership already.
  5. Evolution or revolution? This is one of my favorite topics. Unlike banking, where I believe #FinTech has unbundled individual services ofmatthew  a bank, insurance start-ups have taken a different approach. Underwriting, for example, is not a category all unto itself nor one that I have seen folks go after in isolation. All need other parts of the insurance value chain to be successful. There are great examples of start-ups evolving each part of the value chain, across products, distribution, sales, etc. Matteo Carbone put together some good thinking a while back on this with his mental framework covering awareness, choice, purchase and use, as did Venture Scanner here in a series of visuals. For now, we are primarily digitizing and simplifying the existing approach and process.
  6. Product mindset. We simply need to move away from this. It will take generations for a complete mindset change. It will happen, in my view, when start-ups move to an “all risks” or truly customer-centric approach (not just better service experience). My two golden rules here remain: relevance and convenience. At what point does insurance become frictionless?
  7. Every carrier is partnering. Pick your partners carefully. I was talking to one of the start-ups that has now engaged in 30-plus pilots. While this is really encouraging and great for the start-up, every carrier is a) partnering, b) building a lab c) working with an accelerator. Make sure you don’t become part of a badge-collecting journey. Are your and the insurance carrier’s ambitions, culture and outcomes aligned? Make sure we are all walking into these partnerships with eyes wide open and with a clear plan of what happens if a partnership is successful.
  8. AI/data/bots are big and cool. That is all! There are some great use cases and examples developing here. We heard from SPIXII and Insuragram, just two examples of how AI and bots are looking to solve some of the business and engagement challenges.
  9. Don’t be the fad. See #7 and #8. Over the last few years, I’ve seen the rise and rise of big data. Then came digital. Now it’s blockchain and chat bots. My point here is that these are all great technologies. But don’t be the technology looking for a business problem to solve — sage old advice you will hear again and again.
  10. Beware of the silos. Many start-ups are working with global carriers. Just because we work with them in one country doesn’t mean they all talk, are connected seamlessly internally and exchange ideas and key learnings. The same is true for in-country and across lines of business. Many people operate in silo’ed P&L models where you may end up doing multiple different engagements with the same global carrier. Joining the dots may not always be right for you. Think speed! You’re in a relay race. Moving parts of an organization to the start line is often easier than moving the whole team at once. As the saying goes,“think big, start small, act quickly.”
  11. Customers (end customers) need to be ready.  With all these cool new ideas and apps that can disrupt traditional insurance, our challenge is often not whether something can be done but whether customers will be ready. We know it can be done; everything is possible! But there are many reasons why customers take a while, often a long while. Telematics is 25-plus years old, but it’s only now becoming more widely adopted. Even now, take-up is still relatively slow (except in Italy).
  12. Talent. Above all, there is an arms race for talent out there. Bringing together InsurTech and traditional insurers is one of the best ways of ensuring (no pun intended!) that we continue to attract and leverage some of the greatest talent in the marketplace, promoting Insurance along the way as a great place to excel and challenge the status quo.

See also: InsurTech Forces Industry to Rethink

So back to one of my initial comments — what conferences do for me. At this one, particularly, I was delighted to meet with so many folks looking at the market from different angles. Conversations about Europe were especially interesting given the recent U.K. BREXIT decision.

Finally, getting to exchange ideas with Matteo Carbone of Bain and Florian Graillot of AXA Strategic Ventures in person was the icing on the cake. Gentlemen, until next time. My thanks to Robbie Boushery, Moritz Delbrück and the team at Pirate Summit for bringing this all together.

So what do you think? Good sage advice? Something missing? What would you add/remove from my list?

Looking forward to continuing the debate!