Insurtech | Georgina | 20 December 2018
We have seen the pace of change in the insurance industry accelerate tremendously over the past twelve months. The number of insurers currently involved in digital transformation is unprecedented. Disruption in the InsureTech world is fuelling a frenzy of innovation. Ever more start-ups are vying to shape the direction of the customer-centric landscape.
So much churn only serves to muddy the waters. To soothe the waters, we predict the trends, opportunities, technologies and companies which will influence the direction of InsureTech in 2019.
Most Prominent Product Feature: Monthly Goes Mainstream
A standard feature prominent in InsureTech innovations is the pay-monthly model, allowing customers to buy and pay for insurance cover on a month-by-month basis. Aviva’s soon to launch subscription-style insurance product AvivaPlus signifies a recognition that annualised products are increasingly being rejected by some consumer sectors.
This trend towards pay-monthly, we predict, will only increase with competitive pressure from disruptor space innovators such as Wrisk or Cuvva, which prominently feature the convenience of a pay-monthly top-up model.
Traditional insurers are feeling the pressure. Let’s face it, the insurers sell annualised products because this suits them. This was particularly true pre-financial crisis when dividends from invested premiums were an important source of income. Start-ups naturally accept the pay-monthly model because they know that customers demand it but for traditional insurers it hurts.
Hottest Market Opportunity: Into The InsureTech Void
Disruption in InsureTech is the new normal. In the past few years a plethora of entrants have sought to carve out their niche in the disruptive space.
Customer-centric start-ups tend to share common features; app delivery, pay monthly, use of chatbots, quick claims processes and this us likely to continue.
In the analysis of price verses performance, the likes of Lemonade, Brolly, Waggel and their kin are clustered in the typical disruptor space. Thereby seeking to exploit new markets unserved by traditional insurers, targeting lower-tier customers who don’t need the performance levels provided by traditional insurance. These customers are tech-savvy
and happy to have a contemporary and purely digital relationship with their insurer. However, the commonality of their approaches means that they inhibit the same place in the marketplace, only differentiated by the niche territory they have identified.
The market disruption we forecast for 2019 is a rush to inhabit the InsureTech void. With the InsureTech disruption cluster getting ever more crowded, new entrants willing to push the price envelope will emerge. This may lead to the creation of start-ups seeking to meet the as yet unmet needs of yet more specific customer groups. Particularly those niches attracting higher price-points, justifying the potentially higher costs of development.
Those niches could include covers for kidnap and ransom, classic vehicles or identity theft. At the furthest end of the void, some quite exotic niches might also be launched, such as covers against global warming, social media defamation or even alien abduction.
Most Important New Technology: Object Recognition
2019 will be all about the customer. The best technology is unseen but functions to enhance the customer experience. Augmented reality object recognition allows the customer to point their camera-phone at the contents they want to insure. The technology analyses the object, be it a bicycle, tablet, or other insurable item and using AI identifies what it is. Knowing the exact make and model of the object allows for the item to be appropriately valued.
We anticipate that this approach will become the predominant way that contents are estimated and insured and start-ups in the innovation space will be clamouring to introduce it.
No start-up is quite there yet with a full implementation but new entrant Pineapple has the germ of this technology, where it’s app can photograph and recognise objects, then add them to the customers virtual wallet.
Biggest Open Challenge: Political Risk in the Year of Brexit
Political risk insurance is most often associated with emerging markets or countries where doing business presents an apparent political or economic risk dimension. Few small to medium sized business in the UK or continental Europe generally consider political risk outside of the business interruption cover included as part of their property and liability insurance.
We anticipate that in the year of Brexit, with the flashpoint of the gilets jaunes protest movement in France and the rise of popularism across Europe, that the insurance industry will address the challenge of bringing political risk insurance to main-stream European business customers.
Most Asked Question: Do You Have an API?
A central commonality in Insuretech is simplification. Chatbots using a natural language user interface have become a standard feature in customer interaction, is one customer facing example. This ethos of simplification has been seeping through into insurer business operations.
In 2019 we will see medium-to-large insurers increasingly open to Insuretech solutions which simplify their business processes. From data analytics to blockchain, many players across the insurance industry are looking to embrace machine learning, real-time payments, game theory and automation. The three letters to look out for are A, P and I. APIs provide access points for rapid development, where speed to market is increasing in importance.
We foresee “Do you have an API?” to be the most asked question in 2019.
Biggest Business Trend: Getting in on the Action
Despite the gradual encroachment of InsureTech disruptors, many in the UK insurance sector have not felt particularly threatened by the InsureTech disruptors. However, 2019 we will see that change.
We are seeing an increasing rise in the use of tech enablers such as Cover Genius, Endava, and Cyberwrite amongst others, who provide more traditional businesses with the tools to successfully embrace and implement InsureTech solutions.
We anticipate that 2019 will be the turning point when established players are set to fully embrace emergent technologies such as web 2.0/apps, the internet of things, machine learning and big data. The eyewatering cost and risk elements of independently developing new technologies underpins the importance of the tech enablers to deliver technology solutions rapidly enough to meet the pace of change.
Who to Look Out for in 2019: It’s all about the customer
Cuvva and Carma
Angel start-up Carma provides pay as you go car lease by subscription. Their all-in model allows users to lease a car on a month-by-month basis, along the lines of a pay-as-you-go mobile phone subscription. The all-in model includes the vehicle, maintenance and insurance. This is all obtainable via the Carma app.
Cuvva provide temporary car insurance for as short a time as one hour, up to a full month. Accessed via the Cuvva app, allowing users to quickly arrange cover on any vehicle and simply drive away.
Lemonade has already made an impression in North America and will soon be launching into Europe. The impact will be felt across the European marketplaces, where the large UK and continental insurers will be watching with great interest.
Bringing the power of gamification to a wide range of lines, Wrisk are hotly tipped to be the preferred model for general insurance app going forward. One to watch how their approach influences others.
Doing for animal health what Lemonade does for home cover, Waggel are hoping to disrupt the traditional pet insurance model. However, the Waggel app still requires a human to select the appropriate level of cover and pay for it.
Leveraging peer-to-peer networks, Pineapple offer a democratised model, which some argue reflects the fundamental nature of insurance. It is unknown whether the approach will resonate with consumers but concepts of crowd-insurance are knocking at the door of the collective customer consciousness, we are just waiting to see who will make the breakthrough.
From the strength of their market position, Aviva are seeking to bring insurance for the Netflix age to mainstream customers. Launching within the next few weeks AvivaPlus will be watched intensely by the UK insurance industry as a potential model for the future.