InsurTech: At the crest of a digital revolution?

How InsurTechs are driving innovation with flexible digital products built on data that puts customer experience at the centre

The insurance industry is at the crest of a digital revolution. New players are applying innovative technologies such as: Artificial Intelligence (AI), Internet of Things (IoT), robotics, and Blockchain, to deliver customer centric solutions. Far from the complicated processes of traditional players, these challengers offer fast and simple digital products built on data and analytics that put customer experience at the centre. As one of the most prominent examples, Lemonade, the US’s largest InsurTech, uses AI and chatbots to allegedly speed up the application and claims process for home insurance to 1.5 minutes and 3 minutes respectively. As suggested in our 2017 FinTech review, InsurTech have been fuelling these kinds of innovation in the insurance space with incumbents lagging behind in adopting new technologies.

In a previous blog post, we stated that customer experience within the insurance industry is considered “lacking”, with rail networks being the only sector ranked lower. A lack of differentiation between insurers has also allowed InsurTechs to poach customers that feel little loyalty, accounting for an industry with one of the highest churn rates. According to PwC, nine in ten insurers fear losing business to InsurTech firms, with IBM finding 81% of outperforming insurance businesses are working with or have invested in InsurTechs. Other industries impacted by digital disruption, including the highly regulated banking industries, have recognised the opportunity in partnering with, acquiring or even providing initial funding for prospective start-ups. Will incumbents in the insurance industry follow suit?

In this post we will run through some of the most interesting innovations from InsurTechs and show how putting customers first makes them successful.

Flexible insurance

InsurTechs have been benefiting from consumer desire for more flexible insurance policies outside the annual premiums offered by traditional players. For instance, Tillit, a Norwegian based InsurTech  providing insurance for electronics, dynamically prices insurance premiums so that price changes slightly each month based on the claims ratio of the insurance product. This hopes to deliver savings directly to the customer, meaning Tillit follows a “limited profit model” something most businesses won’t be keen to adopt.

Another example of flexible policies lies in the car insurance industry, where firms such as Metromile, Paydrive, and Cuvva allow consumers to pay as they drive. The solutions have proved popular in urban areas across the US and Europe where they benefit in-frequent or low-mileage drivers. However, a key differentiator from traditional providers comes from Metromile’s improved data it delivers. Through a plug-in device, mileage data, trip insight and car health are collected and reported back in a customer friendly app. In an industry where car health is only checked infrequently the solution puts the customer in control, deepening the relationship between consumer, provider and car.

Healthcare – breaking barriers

Another industry ripe to be left behind by digitally savvy offerings is healthcare. In a December 2016 interview with the Financial Times, AXA’s CEO Thomas Buberl said,

“Technology companies may attack us on motor insurance, but they will mostly attack us in health. If we do nothing, then in five years they’ll run us over. They will break down the barriers between pharma and device companies, and between doctors, hospitals and patients.”

A strong and clear warning and one that we can see becoming a reality. Previous research by KAE found that UK patients were least satisfied with booking an appointment through the NHS. It’s therefore unsurprising to have seen a growth in services offering online doctors that claim to allow patients to receive appointments and prescriptions within hours. What may be more surprising, is how willing consumers seem to be to pay for this improved customer service. Sites such as Push Doctor enable pay-as-you-go appointments at a base rate of £20 per 10-minute consultations, adding price for extra time, enabling flexible usage outside of monthly premiums. Incumbents such as Vitality now offer mobile apps that book video consultations within 48 hours, including evenings and Saturday mornings. As with car insurers, many of these apps allow patients greater access to their health records in an industry where arguably data delivery is the most important. Perhaps InsurTechs can succeed in distributing health data where governments and other bodies have failed.

Healthcare – driving data delivery and inclusion

So far data delivery in healthcare has been galvanised by wearable tech, which enables consumers to actively improve their health and track results. Studies by Zebra, the technology solutions provider, show that 95% of patients are willing to share their health metrics, collected from wearables, with their healthcare providers, a potential game-changing attitude to future healthcare delivery. Already this is being tapped by US insurers, with customers at UnitedHealthcare able to elect to wear a Fitbit activity tracker and share their data with the insurance company. This claims to give the most active participants as much as US$1.5K per year towards their healthcare expenses. Oscar, an InsurTech based in New York, offers its subscribers a free Misfit Flash, a fitness tracker, and gifts them US$1 in Amazon credit per day if they hit their personalised step goals.

A move to digital services can also enable previously underpenetrated markets to access healthcare more easily. US based HealthSherpa connects individuals with health coverage and provides individual healthcare to both part-time employees and retirees. The service has proved popular with gig-economy workers that wouldn’t be covered under company policies and as of December 2017, over 1M people have been enrolled.

An interesting example from the UK is ‘Bought by Many’ which allows patients with rare conditions to band together in an online community to bargain for discounts on insurance from established companies. This has proven especially popular in travel insurance, as it now allows patients with medical needs that may have been priced out of traditional offerings to receive cheaper bundled travel insurance.

Digitally-savvy offerings

The results of tapping the underpenetrated with simple digital solutions can not be underestimated. ZhongAn, a Chinese InsurTech, has benefited from a mobile friendly market selling 5.8BN policies to 460M customers from 2014-2017, numbers most incumbents would be proud of. The firm claims to use AI and big data to offer cheaper, simpler insurance. Much of the firm’s success is attributed to its marketing efforts with quirky insurance products; during the 2014 World Cup, it sold “binge drinking” insurance, which paid out if football fans watching a game needed medical attention because of heavy consumption of alcohol. In truth, the firm entered at a perfect time for a Chinese market moving into a mobile-only world with the booming popularity of WeChat, WePay and AliPay. The solution enabled millions of otherwise uninsured customers to easily access simple policies. As other markets, such as India, look to become more mobile, incumbents will need to keep up with InsurTechs offering savvy propositions, lest they get left behind by a new type of giant such as ZhongAn.

Digitisation and data or miss out

However, it’s not all bad news for incumbents; after a slow start, the insurance industry appears to be catching up with innovation through partnerships. Allianz’s Global Digital Factory has launched its own incubation lab, in a similar effort to Google’s, to work with start-ups to develop innovative solutions. At risk of losing out to more nimble InsurTechs, traditional players must realign to create customer centric digital experiences, access underserved markets and deliver increased data or partner with those that can. With record levels of VC investment flowing into InsurTech in 2017, buzz around the space is huge, and all eyes will be on what these investments and partnerships will deliver.