December/January is usually the time to predict key trends for the year to come, and so it goes with the insurtech sector as well. Most lists focus on the latest sexy technologies and applications, but after a year, we find these have hardly gained any traction, so cannot really be considered “trends”. To call something a key trend, new and innovative isn’t enough. It requires adoption at scale. We therefore decided to take a different approach, resulting in quite a different kind of list.
It’s also the perfect time to think of New Year resolutions. Being consultants for several blue chip insurers, speaking at conferences and attending boardroom meetings, we meet insurance executives on a daily basis. Consequently, we have a fairly good idea about what’s at the top of their agenda, as well as the pace in which change will take place, and in turn what insurtech solutions are most likely to fit into those plans. These insights resulted in our Top 10 Insurtech Trends for 2017, illustrated by some awesome insurtechs that joined us at the previous DIA event.
Massive cost savers in claims, operations and customer acquisition.
Already a major trend of course, but one that will gain even more importance in 2017. Quite a few insurers face combined ratios that are close to 100, or even exceed that number. Digitising current processes is absolutely necessary for operational excellence and to cut costs. Digital transformation of insurance carriers started in 2015, really took off in 2016, and will be mainstream by 2017 and beyond. Virtually every insurer, big or small, that takes itself seriously will continue to look for ways to operate more efficiently in every major part of the costs column: in claims expenses, costs of operations and customer acquisition costs. Technology purchases and investments by insurance carriers will further explode in these areas, as will the number and growth of insurtechs that cater to that need.
With OutShared’s CynoClaim solution, more than 60% of all claims can be managed automatically, resulting in lower costs as well as increased customer satisfaction. Results of the first implementations: up to 50% decrease in costs, 40% increase in customer satisfaction. The solution takes 6-9 months to implement, whether it’s from scratch or a migration of established operations to the platform, which is quite spectacular in the insurance industry.
A new face on digital transformation: engagement innovation.
At the end of the day, digitised processes and a lower cost base are table stakes. It’s simply not enough to stay in sync with fast-changing customer behaviour, new market dynamics and increasing competitiveness. No insurer ever succeeded in turning operational excellence into a competitive advantage that’s sustainable over the long-term, and that’s something really differentiating. More and more carriers realise that engagement innovation is the next level of digital transformation. From a customer point of view, this isn’t about a new lipstick or a nose job but about a real makeover. Engagement innovation not only includes customer experience, but customer-centric products, new added value services and new business models too. Insurtechs that really innovate customer engagement for incumbents have a great 2017 ahead.
Amodo connects insurance companies with the new generation of customers. With Amodo’s connected customer suite, insurers leverage on digital channels and connected devices such as smartphones, connected cars and wearables to acquire and engage new customers.
Amodo collects data from smartphones and a number of different connected consumer devices in order to build holistic customer profiles, providing better insights into customer risk exposure and customer product needs. Following the analysis, risk prevention programmes, individual pricing as well as personalised and “on the spot” insurance products can be placed on the market, increasing the customer’s loyalty and customer lifetime.
Next-level data analytics capabilities and AI – to really unlock the potential of the Internet of Things (IoT).
Many insurance carriers have started IoT initiatives in the last few years. In particular, in car insurance it’s already becoming mainstream, with Italy leading the pack. Home insurance is lagging and health, and life insurance is even more behind. All pilots and experiments have taught insurers that they lack the right data management capabilities to cope with all of these new data streams. Not just to deal with the volume and new data sets, but more importantly to turn this data into new insights, and to turn these insights into relevant and distinctive value propositions and customer engagement. Insurtechs that operate in the advanced analytics space, machine learning and artificial intelligence hold the keys to unlock the potential of IoT.
2016 DIAmond Award winner BigML has built a machine learning platform that democratises advanced analytics for companies of all sizes. You don’t have to be a PhD to use its collection of scalable and proven algorithms thanks to an intuitive web interface and end-to-end automation.
Addressing privacy concerns.
To many consumers, big data equals Big Brother, and insurers that think of using personal data are not immediately trusted. Quite understandable. Most data initiatives of insurers are about sophisticated pricing and risk reduction really; cost savers for the insurer. However, the added value of current initiatives for customers is limited. A chance on a lower premium, that’s it. To really reap the benefits of connected devices and the data that comes with it, insurers need to tackle these data privacy concerns. On the one hand, insurers need to give more than they take. Much more added value, relative to the personal data used. On the other hand, insurers need to empower customers to manage their own data, because at the end of the day it’s their data. Expect fast growth of insurtechs that help insurers cope with privacy issues.
Traity (another 2016 DIAmond Award winner) enables consumers to own their own reputation. Traity uses all sorts of new data sources, such as Facebook, Airbnb and LinkedIn, to help customers prove their trustworthiness. Munich Re’s legal protection brand DAS has partnered with Traity to offer new kinds of services.
Contextual pull platforms.
Markets have shifted from push to pull. Yet, so far, most insurers have made hardly any adjustments to their customer engagement strategies and required capabilities. In 2017, we will see the shift to pull platforms as part of the shift to engagement innovation. Whereas push is about force-feeding products to the customer, pull is about understanding and solving the need behind the insurance solution and being present in that context. Risk considerations made by customers usually don’t take place at the office of an insurance broker. Insurers need to be present in the context of daily life, specific life events and decisions, and offer new services on top of traditional products. Insurtechs that provide a platform or give access to these broader contexts and ecosystems help insurers to become much more a part of customers’ lives, be part of the ecosystem in that context and add much more value to customers.
VitalHealth Software, founded among others by Mayo Clinic, has developed e-health solutions, in particular for people with chronic diseases such as diabetes, cancer and Alzheimer’s. Features include all sorts of remote services for patients, insurers and care providers collaborating in health networks, access to protocol-driven disease management support. All seamlessly integrated with electronic health records. VitalHealth Software is used by insurers that are looking to improve care as well as reduce costs at the same time. Among others, OSDE, the largest health insurer in Argentina, and Chunyu Yisheng Mobile Health, a fast-growing Chinese e-health pioneer with around 100 million registered users that is closely linked to People’s Insurance Company of China (PICC).
The marketplace model will find its way to insurance.
Marketplaces – we already see the model emerging in banking, and insurance will follow fast. Virtually every insurer offers a suite of its own products. Everything is developed in-house. More and more carriers realise that you simply cannot be the best at everything, and that resources are too scarce to keep up with every new development, or cater to each specific segment. In the marketplace model, insurers basically give their customers access to third parties with the best products, the most pleasant customer experience and the lowest costs. The market place business model cuts both ways: customers get continuous access to the best products and services in the market, and costs can be kept at a minimum through connecting (or disconnecting) parties almost in real-time to key in on new customer wishes and anticipate other market developments. In 2017, we’ll see all sorts of partnerships between insurtechs and incumbents that fit the marketplace model.
AXA teamed up with the much praised 2016 DIAmond Award winner Trōv to target UK millennials. Trōv offers customised home insurance by allowing coverage of individual key items rather than a one-size-fits-all coverage set with average amounts.
A new ecosystem emerges. With parties who capture data (think connected devices suppliers), and parties that develop new value propositions based on the data. Insurers will have to cooperate even more than they’re currently doing with other companies that are part of the ecosystem. When an insurer wants to seize these opportunities in a structural way, it’s no longer only about efficiently and effectively organising business processes – it’s also about easy ways to facilitate interactions between possibly very different users who are dealing with each other in one way or another.
Again, banking is ahead of insurance. For our new book, Reinventing Customer Engagement. The next level of digital transformation for banks and insurers, we spoke to many executives in banking as well. German Fidor Bank has set up an open API architecture called fidorOS, enabling fintechs to develop financial services themselves on top of an existing legacy system. Citi says that “any financial institution that doesn’t want to rapidly lose market share needs to start working in a more open architecture structure”.
The Backbase omni-channel platform is based on open architecture principles. It leverages existing policy administration systems capabilities and adds a modern customer experience layer on top. Creating direct-to-consumer portals and giving the opportunity to integrate best-of-breed apps as well as improving agent and employee portals. Swiss Re, Hiscox and Legal & General are some of the insurers that use the Backbase platform.
Blockchain will come out of the experimentation stage.
When Goldman Sachs, Morgan Stanley and Banco Santander decided to leave the R3 Blockchain Group, many thought this was proof that blockchain technology apparently wasn’t as promising as initially expected. The contrary is true. It’s not uncommon to join a consortium to speed up the learning curve and then drop out and use the newly acquired knowledge to build your own plans and gain some competitive advantage – especially with a technology as powerful as blockchain. We believe a similar scenario will not take place in the B3i initiative launched by AEGON, Allianz, Munich Re, Swiss Re and Zurich. Thinking cooperation and ecosystems are just much more in the veins of the insurance industry. Plus, there are plenty of use cases that cut both ways: improve operational excellence and cost efficiency as well as customer engagement, which is good news for the insurtech forerunners in blockchain technology.
Everledger tackles the diamond industry’s expensive fraud and theft problem. The company provides an immutable ledger for diamond ownership and related transaction history verification for insurance companies, and uses blockchain technology to continuously track objects. Everledger has partnered with all institutions across the diamond value chain, including insurers, law enforcement agencies and diamond certification houses across the world. Through Everledger’s API, each of them can access and supply data around the status of a stone, including police reports and insurance claims.
Use of algorithms for front-liner empowerment.
Algorithms that are displacing human advisers generate headlines. Robo-advice will for sure impact the labour market’s landscape. From a cost perspective, this may seem attractive, but from a customer engagement perspective, this may be different. To relate to their customers, financial institutions need to build in emotion. Humans inject emotion, empathy, passion, creativity, and can deviate from the procedure if needed. Banks and insurers need to create a similar connection digitally. With so many people working at financial institutions, there’s also an opportunity to create the best of both worlds. We see the first insurers that deploy robo-advice to empower human front-liners. This is resulting in better conversations, higher conversion, and finally greater solutions for customers.
AdviceRobo provides insurers with preventive solutions combining data from structured and unstructured sources, and machine learning, to score and predict the risk behaviour of consumers (for instance, predictions on default, bad debt, prepayments and customer churn). Predictions are actionable because they’re on an individual customer level, and support front-liners while speaking to customers.
Symbiotic relationship with insurtechs.
Relationships between insurers and insurtechs will become much more intense. All the examples included in the previous nine trends make this quite clear. Insurers will also look for ways to learn much more from the insurtechs they’re investing in. Whether it’s about specific capabilities or concrete instruments they can use in the incumbent organisation, or whether it’s about the culture at insurtechs and the way of working. We see an increasing number of insurers that are now using lean startup methodologies and who have created in-house accelerators and incubators to accelerate innovation in the mothership.
The Aviva Digital Garage in London and Singapore are perfect examples. They’re not idea labs, but the place where Aviva runs its digital businesses. Varying from MyAviva to some of the startups Aviva Ventures invests in – all under one roof to build an ecosystem and create synergies on multiple levels.
These 10 insurtech trends set the stage for the digital insurance agenda. They reinforce the need to connect insurance executives with insurtech leaders, which is basically our mission. It helps us to create an agenda for DIA 2017 Amsterdam that’s in sync with what insurers need and what the latest technologies can provide.
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– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Main image: Rawpixel.com