A plethora of start-up companies across the globe is disrupting the nice, quiet, steady progress of the insurance industry, offering niche products that aim to meet the needs of millennials in new and exciting ways. ITIJ takes a look at the latest offerings, asking how industry bodies can support further development and what is on the cards for insurers
Start your engines
ITIJ 201, October 2017
One name that has been popping up regularly of late in this arena is Startupbootcamp Insurtech, a global insurance accelerator working alongside a portfolio of well-known insurance companies to, in its own words, ‘foster disruptive and collaborative insurance innovations’. So far, its carrier partners include Zurich, Admiral, Allianz, Munich Re and Swiss Re. When its partnership with Zurich was announced in March, the insurer’s head of business transformation said: “From what we have seen so far, this year’s selection of start-ups have some really innovative approaches to improving how the insurance industry works for customers [and] how to increase operational efficiency. For us, it’s great to work with start-ups that are solving industry problems with propositions and services our customers desire.”
Also popping up on our radar is CPPGroup plc (CPP), a provider of international assistance services that recently acquired Blink Innovation Limited, which describes itself as offering real-time resolution flight interruption insurance ‘in the background’. It aims to provide ‘a seamless experience for customers by solving their problem and enabling them to complete their journey at no additional cost with no claims process to negotiate’. Commenting on the purchase in March this year, Blink’s CEO Paul Prendergast said: “There is a great deal of technology crossover with CPP’s existing customers and products, and we are looking forward to working with the team to develop new insurance and assistance solutions.”
In Cape Town, South Africa, Hepstar – which specialises in the distribution of travel insurance via third party websites – was recently selected as a partner of start-up accelerator Plug and Play, based in Silicon Valley in the US. Hepstar’s chief operating officer Claudia Snyman said that her firm was ‘really excited about this opportunity’, stating: “Plug and Play provides a great opportunity to showcase our capabilities to some of the largest players in the travel sector.” Kevin Wang, head of travel for Plug and Play, added: “With regards to new modes of distribution for the travel insurance market, Hepstar’s strategy may be exactly the answer carriers and airlines are looking for. Hepstar’s insurance products offer highly specific travel coverage which captures ancillary revenue for our travel partners.”
April this year saw the launch of Coverontrip, a specialised digital distributor of travel insurance based in Madrid, Spain, which claims to provide ‘a fully digital client-oriented value proposition, with a highly personalised innovative product design, inviting travellers to be members of a unique community based on a social collaborative platform’.
In the UK, meanwhile, insurance broker Hood Group has launched its own Innovation Lab, which it hopes will drive the development of insurance products, services and solutions. Gavin Dobson, head of marketing at the company, explained the reasons behind the move: “Insurance in its current state isn’t truly serving today’s customers and certainly won’t work for the next generation. Right now, it’s simply a necessity people feel they have to have rather than want. We don’t see why insurance can’t become something that people willingly buy into as a service that helps them live their lives, helps stop things from going wrong or makes the annoying things in life go away.” The Innovation Lab, he continued, will identify, evaluate, design, prototype and launch new personal lines products and services.
Another exciting innovation that caught our eye is SPIXII, a London-based company founded by three friends who have created an insurance-focused chatbot with geolocation enabled. The SPIXII app creates a WhatsApp-style chat on the user’s phone, asking questions to figure out what kind of insurance they need, as well as interfacing with other apps in order to ascertain what the user is doing. If a traveller is in a ski resort, for example, SPIXII will inform the user whether or not their travel insurance covers extreme sports, and offer them the possibility of purchasing the necessary additional cover. Renaud Million, one of the three founders of SPIXII, said in 2016: “Chatbots will become your helpers, saving you time when ordering food, clothes, buying products, even complex ones like insurance. Technology is everywhere and chatbots are an elegant way to make it accessible to everyone.”
Last year also brought the launch of San Francisco-based Trov, which offers on-demand insurance for gadgets when a customer needs it, entirely via smartphone. Claims, according to the company, are ‘as easy as sending a few text messages’. The branding is certainly attention-grabbing: “Protect your awesomeness. Get your Trov.” The language of the millennial, without a doubt.
Trov is underwritten by AXA Insurance UK plc, showing once again how the old guard and new entrants are teaming up, and that rather than being a case of ‘out with the old and in with the new’ for the insurance industry, it’s more a case of taking the best of both worlds and combining them to offer customers relevant, compliant products in more modern ways.
The tie-ups between old-school firms like Swiss Re, Zurich and Munich Re and the new era of start-ups show that working together is the way forward. As Simon Hood of Hood Group explained, there’s a need to bring in new talent from outside the insurance industry, as well as encouraging existing staff to get involved. Inevitably, some ideas won’t work – ‘if some don’t fail, then I’ll question whether we’re pushing the boundaries hard enough’, said Hood. But it is only through fresh approaches to old problems that the insurance industry will keep pace with the development seen in other sectors of late. As such, billions of dollars are now being ploughed into the insurtech start-up arena each year. AXA alone has an international, dedicated insurtech and fintech investment fund of €230-million called AXA Strategic Ventures, which invests in start-ups all over the world. Meanwhile, its Innovation Labs in Shanghai and San Francisco ‘detect innovation’ and ‘identify talented entrepreneurs, emerging trends and new customer needs’. Allianz and Aviva have accelerator funds, too, explained Manjit Rana of Ingenin at the 2016 International Travel & Health Insurance Conference, stating that insurtech has become the biggest concept in the global insurance marketplace in the last few years.
Telemedicine is another area where insurers are utilising technological breakthroughs to reach their customers more effectively. It has been used for some time by health insurers, and now travel insurers are getting on the bandwagon. Greg Lawson, head of travel insurance and assistance for the UK’s Collinson Group, said that the ability to offer customers access to an English-speaking doctor wherever they are in the world is ‘a hugely attractive prospect for both holidaymakers and those on longer-term overseas assignments’: “From an insurer’s perspective, there is the possibility of cost savings of as much as 50 per cent for outpatient management, especially in North America. Columbus Direct will be trialling a telemedicine solution this summer, using the data and engagement to evolve a leisure travel and IPMI telemedicine proposition across Collinson.”
In the airline and online travel agent sectors, data science and optimisation software are helping to segment the products offered to prospective customers within the booking path, increasing conversion rates and driving upsales where appropriate. Lawson pointed out that insurers can and should take advantage of the wealth of information the booking process offers to meet customers’ needs. “Using customer and booking data, more relevant travel insurance products (as well as pricing) can be presented,” he explained. “For example, if a single traveller is flying to Zurich mid-week overnight, it may be possible to conclude through analysing the client database, trends and inventory that they are likely to be a business passenger, and so present a suitable product, e.g. travel insurance plus business travel or gadget add-on.”
A recent report from Frost & Sullivan, which forecasts the progression of the global insurtech market, found that technologies such as artificial intelligence, machine learning and the Internet of Things have the power to gift insurers much more useful insights into customer behaviour, improving efficiency and processes, as well as enabling them to put their product in front of the customer at the right moment.
The Association of British Insurers (ABI) told ITIJ that identifying and developing new technologies that will offer customers a better experience and improve how a business operates are both key areas of competition for insurers, as they help drive forward innovation and encourage the development of new services. Matt Cullen, the ABI’s head of strategy, noted that while start-up businesses are often at the heart of this, increasingly they are getting financial backing and operational support from long-established insurers who see the benefits of collaboration. Certainly, that opinion is backed up by recent announcements from the industry.
In its inaugural quarterly InsurTech Briefing, published in May, Willis Towers Watson Securities highlighted the potential for the $100-billion small business insurance market to experience transformative digital disruption. This new research analyses how the industry is incorporating emerging technologies into existing processes to target friction costs, as Rafal Walkiewicz, CEO of Willis Towers Watson Securities, said: “As incumbents face pressure from entrepreneurial businesses targeting friction costs within the traditional insurance value chain and the continued influx of alternative capital into the (re)insurance sector, it is important for industry leaders to demonstrate an open mind, embrace innovation and invest in potential applications.”
With new opportunities, though, come new risks, and with the focus on the potential uses of big data and the sharing economy, there needs to be public confidence in how personal details will be used and handled. “The ABI is working with regulators and policymakers in Europe and the UK to help ensure that the new data protection regulations coming into force in 2018 will support customer-focused innovations in uses of data,” said Cullen. “We want the new data regulations to strike the right balance between offering appropriate levels of protection for individuals’ details, without restricting the access to core information that the insurance industry needs to offer the best possible service.”
The US National Association of Insurance Commissioners, meanwhile, has formed an Innovation and Technology task force, which is responsible for ‘increasing the regulatory know-how’ of carriers’ insurtech strategies. Ted Nickel, president of the Association, commented on the need for regulators to keep up to date with what the industry is doing: “Insurance regulators have a critical role to play in supporting innovation. This includes working with individuals and companies creating new product offerings and services to meet consumer expectations, while ensuring consumers are adequately protected.”
The UK’s Financial Conduct Authority (FCA) has also recognised the challenges of bringing potentially disruptive products to market, and has launched an innovation hub through which it helps new or non-regulated businesses to understand the regulatory framework. Its ‘regulatory sandbox’ allows businesses ‘to test innovative products, services, business models and delivery mechanisms in a live environment’. In a recent address to the Leeds Digital Festival, Christopher Wollard, executive director of strategy and competition at the FCA, pointed out that innovation promotes competition in the interests of consumers, and that regulation has a part to play in ensuring the right conditions exist for that competition to flourish.
The British Insurance Brokers’ Association (BIBA) recently formed an innovation working group, whose aim is to foster innovation in the industry. Group chair Vivek Banga said: “Insurtech is often associated with external disruptor threats and yet Accenture found it to be more collaborative than banking, with 70 per cent of global investment in this field looking to enhance existing propositions rather than directly compete with the insurance industry. But we can’t afford to stand still and have much to learn from working closely with the latest, innovative technology-fuelled start-ups.
“As brokers and the custodians of customer experience, it’s vital that we fully embrace insurtech’s potential, channel our creativity and stay at the forefront of developments. Establishing a cross-industry innovation working group is a great way to ensure we continue to communicate and collaborate to the benefit of our collective customers, and I’m delighted to be asked to chair such an important initiative.”
Keeping up with the times
The overwhelming feeling from the experts ITIJ spoke to for this article seems to be that insurers need to make their policies available to clients at the exact moment they need them, while making them easy to purchase and simple to claim on. Eos Venture Partners, an independent insurtech investor with offices in London, Guernsey and Philadelphia and affiliates in Palo Alto and Hong Kong, recently published an article that asked: ‘Why can’t insurance work in the same way as Amazon – easy, seamless, one-click, no hassle, managed through your mobile and regular updates?’ And it seems that insurers are listening, and responding well.
A new home insurance product from UK-based Aviva is in its pilot phase at the moment, but its premise is that no questions need to be answered, because applications will be autofilled using social media information. The Eos article said: “Data availability and technology are enabling ‘blind rating’ of risks by insurance companies, providing guaranteed acceptance and prices to customers through direct or broker-assisted channels. Our view is that many relatively simple personal lines products will evolve over time to … interactive models.” Instead of the standard fixed term that policies offer now, they will instead adapt to a kind of ‘hop on, hop off’ model, whereby a customer can activate the policy as they need it. For annual travel insurance customers, this could be a real money-saving game, as they only activate their policy when they are planning their trip abroad, and the value for their insurers is immense, as it solves the problem of companies not knowing where their annual policyholders are going and when, giving them a better ability to track them in the event of an emergency.
For insurers willing to take a deep breath and dive into this brave new world, the rewards could be well worth the risk – it is only by meeting customers’ needs in this way that travel insurers are going to stay relevant and grow their businesses. And customers are going to be ever more willing to utilise the latest technology – research from CenturyLink EMEA, an IT services company specialising in digital transformation, indicates that consumers are becoming more comfortable with taking advice from robots when it comes to insurance matters. In a survey of over 1,200 UK adults, conducted by Censuswide, it was revealed that one in four customers would either definitely or possibly trust an automated robotic service such as a chatbot to provide advice on a personal matter concerning insurance.
Jay Hibbin, director of insurance and financial services at CenturyLink EMEA, commented: “It is interesting to see the growing trust that consumers have in robotic advice for insurance matters, particularly that almost a fifth (19 per cent) would trust automated advice just as much as they would [advice] from a human. Businesses must take note of the views of consumers and adapt their strategies to reflect this shift in the way buyers like to receive their services.” Insurers – you have been told! ■
Coming next in our tech series, ITIJ takes a look at the steps travel insurers are taking towards developing apps that customers can use to make their lives easier.