I love insurance, and I’ve dedicated my career to the innovation introduced by insurtech. 2017 was a year full of insurtech discussions for me:
- My two insurance think-tanks focused on insurance IoT; aggregated more than 50 organisations (insurers, reinsurers, institutions and tech players) between Europe and US, with hundreds of executives involved in more than a hundred workshops (almost 350 hours).
- I shared 170 posts on LinkedIn and learned a lot from the hundreds of comments received. The count of followers grown of 70k new people. I was lucky to meet some in person around the world.
- I took 187 flights to discuss insurtech in 35 cities in 15 different countries, a unique opportunity to shape my ideas from different perspectives.
- I gave insurtech keynotes and discussed on the stage at 40 conferences.
- I did my first insurtech investment: Neosurance.
- In the last months of 2017, I wrote (together with my friend Andrea Silvello) my first insurtech book, All the Insurance Players Will Be Insurtech, which was published in the first few days of 2018.
I put together in the book all the foundations of my insurtech thoughts; the elaboration of many discussions I had since I published my article, ‘Will fintech newcomers disrupt health and home insurance?’ in August 2015. There are some typos (in the last chapter, it says a ‘million’ where it should have said ‘billion’, and you will find some others); and a review of my five insurtech predictions published around Christmas 2016:
- Exit. Prediction: not everyone will prosper. Although many amazing insurtech companies are seeing great results and scaling up, and many will continue to enter the field, some will surely leave the game. Result: I was dreaming of an insurtech unicorn’s exit. Well, dreams become reality sometimes: Well Zong An – the Chinese full-stack insurtech – made its IPO with a $10bn evaluation in fall 2017. Also, Travelers acquired Symply Business for $400m. On the other hand, Guevara left the game in the second half of the year. This winnowing down, a Darwinian “survival of the fittest”, should ultimately strengthen our industry.
- Reconversion. Prediction: This is the other side of the moon. I saw many initiatives doing a great job putting together fantastic teams and a sexy equity story, some raising relevant capital, yet their business models look (to me) not sustainable from an insurance perspective. I don’t want to claim that not one of them could succeed – history has already shown how skepticism can be wrong – but I’m expecting to see some of those players use their great skills and the funding raised to radically change their business models. Result: In spring 2017, Trov did a round of financing of more of $40m with an evaluation higher than $300m, but from what we heard from the CEO at different conferences, the company is focusing its efforts on a back-end system that insurers can use on their customer base, rather than on growing its customer base and portfolio of on-demand risks. Also, Zenefits went through a difficult 2017, stepping back from the brokerage business, and started to license its technology as a SaaS (software as a service) player.
- Connected insurance. Prediction: My two cents are on any insurance solution that uses sensors for collecting data on the state of an insured risk and on telematics for remote transmission and management of data on the insurance value chain. A crazy prediction? Let’s consider the most mature use case: auto insurance telematics in Italy, which represents one of the best practices globally. In the country, I’m forecasting more than 7.5 million cars connected with an insurance provider by the end of 2017 (compared to 4.8 million cars connected at the end of 2015). Result: In line with expectations, Italy’s insurance telematics policies had reached seven million by the end of the third quarter 2017, according to the IoT Insurance Observatory.
- Culture shift. Prediction: Incumbents are becoming increasingly more interested in debating innovation and solidly testing new approaches, including collaboration with startups. I expect to see this new breeze surround old-style insurance institutions, with a growing awareness on how all the players in the insurance arena will be insurtech players. Result: A board member at one of the largest global reinsurers recently summarised the essence of insurance as assessing, dealing and accepting risks using the latest technologies. That’s one sign that the industry is coming around. We saw 3,800 more signs at InsurTech Connect, the world’s most prestigious insurtech conference. In 2016, the conference had 1,200 participants. In October 2017, it sold out with more than 3,800 attendees. Andrea and I were there onstage, witnessing the incredible energy of many insurance professionals, regulators and startups.
- Sustainability. Prediction: Many value propositions are bundling risk covers and services, thus allowing the insurer to influence behaviours and prevent risk, contributing to the sustainability of the sector. In the next few months, I expect to see some insurers becoming more relevant in the life of their clients, acting as partners and not simply as claim players. Result: The speeches of top insurance executives show the sector’s ambition to go in this direction. A slide projected on a wall is just that, however – in the field, we see very few examples of implementation.
What will happen over the next few years? Unfortunately, I damaged my laptop a few days ago, so the crystal ball for the 2018 predictions is also not working. Yet, I want to provide my middle-term view about the most popular buzzword at the end of 2017: Amazon activity in the insurance sector.
One size doesn’t fit all
I predict Amazon will not disrupt the insurance sector. I believe it will do something – especially around insurance coverages on the products it sells – but it will not be able to touch the core of the insurance profit poll on commercial lines, but also on personal lines (auto, property, life, health). My view is based on two main beliefs:
- One of the key elements of being a successful insurer is underwriting discipline, as recently highlighted by Mario Greco, and by some famous Warren Buffett quotes of the past. I believe underwriting discipline conflicts with the culture of any tech giant. They could buy insurance companies or hire talented people to close the gap of insurance knowledge, but their corporate culture doesn’t fit with insurance business fundamentals.
- The second aspect is about insurance products that consider only distribution activity. Each market has its own particular characteristics, and a one-size-fits-all approach doesn’t work; it’s the opposite of social media or internet businesses. I’m talking about what the customers want (need) to buy in the different markets, and how they want to buy it. I don’t want to discuss the distribution of life insurance – the usual push product that needs to be sold – where the digital channel at global levels represents less than 1% of the new sales. Instead, let’s take the example of the personal line auto insurance. The UK auto insurance market is controlled by online distribution: this market was dominated by face-to-face distribution in the mid-80s, and over a few years there was a shift to the direct purchase by phone, and some years after those volumes migrated from the phone to online. I remember 10 years ago the discussions with insurance executives I was advising: Their assumption was that all the Western European markets would follow the UK evolution path in a few years. After 10 years, the auto insurance distribution in Europe continues to be dominated by old, traditional channels. You can argue the fault was in the execution of the local carriers … well, let’s consider the European branches of the UK carriers. UK insurance groups developed the experience and the technology in the UK to run this approach amazingly, yet not one of their European branches was able to replicate this success in other markets. I don’t believe that things can’t be changed – I believe there are a lot of opportunities to do things in a different way – but one-size-fits-all doesn’t work, and I’m skeptical about the tech giants’ ability to deal with those local insurance characteristics. Let’s imagine a tech giant deals with that from their office in Silicon Valley or the European hub in Dublin. I believe this weakness will emerge as soon as they dirty their boots in insurance distribution (or more steps of the value chain).
It’s an interesting time to be in the insurance sector, and I’m pretty confident GAFA (Google, Amazon, Facebook, Apple) and BAT (Baidu, Alibaba, Tecent) will not disrupt this sector.
– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image by Zapp2Photo, Shutterstock.com