As the digital transformation wave sweeps across different industries, the antiquated finance and insurance industries have started to evolve. For the past three years, the development of internet, data science, and artificial intelligence has ignited the engine of fintech. And many entrepreneurs and startups are now ready to disrupt the $5 trillion insurance industry and launch the insurtech era.
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With the evolution of the internet and mobile device industry and data analysis science, and the breakthrough of artificial intelligence (AI), the idea of making insurance industry more convenient, transparent, on-demand, or customization, has become a reality. And this trend has spread through the Bay area, New York, London, Berlin, Singapore, and Beijing. According to McKinsey Digital Insurance, insurtech investments climbed to $2.7 billion in 2015. More than half of the deals occurred in the US. In Europe, more than 150 startups are causing this disruption. And in China, insurtech company Zhong-An, backed by Jack Ma (chairman of Alibaba), Pony Ma (chairman of Tencent), and MingZe Ma (chairman of Ping An Insurance Co of China Ltd), is ready to file a $1.5 billion IPO in Hong Kong. Insurtech disruption has emerged across all lines of insurance, throughout the value chain, and around the world.
To assist you in navigating the insurtech landscape, here is an overview of six major Insurtech categories.
- Digital Brokers
Digital brokers provide comparison and brokerage services for existing insurance products via online portals or mobile apps. These startups were the earliest to emerge within the insurtech market, gaining considerable attention from the public. Well-known examples are Clark (Germany), CoverFox and Embroker (US), BIDU (Brazil), and WeFox (Switzerland). While these ventures recommend products for consumers, they do not underwrite any insurance products on their own and are therefore not able to customize their insurance offerings for consumers.
- Insurance Cross Sellers
Cross-selling insurance was the next trend to emerge after digital brokers. These insurtech ventures mainly rely on e-commerce websites, including shopping, travel booking, etc., to provide insurance covering consumer purchases. For example, Simplesurance provides shipping and return insurance services for many shopping websites. From their shopping cart, consumers can select an insurance option and complete the purchasing steps right there with no additional insurance paperwork. Shop owners increase revenue as consumers have more confidence to complete the purchasing. Even B2B supplementary websites have started to embed similar solutions for customers. Snapsure, massUp, and Pablow are a few examples.
- Peer-to-peer Insurance
Peer-to-peer (P2P) insurtech ventures aim to return insurance premium fees to the consumer if no claims are filed. However, rather than underwriting the insurance themselves, many P2P ventures partner with existing insurers. The most well-known P2P insurtech venture is the German company Friendsurance. Customers are grouped together in insurance pools, and if no pool member files a claim for the whole year, all members will receive a refund of up to 40% of the premium fee.
- On-demand Insurance
On-demand insurtech startups challenge current insurers by solving a significant pain point of insurance for consumers. These startups give consumers far more flexible options to decide when, where, or for which items to enable insurance protection, and allow consumers to switch this insurance off and on, differing dramatically from traditional subscription-based products. Customized options enabled by mobile apps make this approach more customer-driven and transparent, a disruption to many traditional players in the insurance market. For instance, Trov, a UK micro-insurance venture, allows users to purchase insurance for specific items, such as cameras or GoPros. Slice, a US venture, gives homeshare (such as Airbnb) hosts a service to buy home insurance policies for their desired durations. MetroMile, a US vehicle insurance venture, targets at low mileage millennial drivers and offers an on-demand pay-per-mile driving insurance.
- Digital Insurers
Digital insurers digitalize the entire value chain, disrupting incumbents from risk carrier to broker to CRM. Moreover, with the cutting-edge technology and big data analysis available in this fast-growing digital era, digital insurers can offer a larger variety of insurance products and services on their websites or mobile apps than previously possible. For example, the health insurance industries in the US and Germany have improved their services by leveraging data analysis and digitalized insurance solutions. As previously mentioned, fast-growing insurtech leader Zhong-An offers comprehensive solutions for consumers and business customers with its large variety of services and coverage, including health, accident, traveling, shopping, digital devices, etc. BIMA, another startup, provides similar solutions for emerging markets.
- Insurance software
As a result of the rapid developments in insurtech, corresponding services and software have become a blue ocean. Some companies, such as Zenefits, have started to provide insurance data analysis services to firms to facilitate personalized insurance solutions. Fraud recognition and prevention is another topic covered by emerging insurance software. And the growing demand for software for claims reporting, customer service, and insurance management has spawned startups such as Snapsheet, Insurgram, and Outshared.
With the rapid emergence of insurtech investment and new ventures, are legacy insurance firms ready for the coming digital transformation? You can keep an eye on the development of insurtech and fintech in the coming years to better answer this question.
InsurTech – the threat that inspires – Mckinsey
Digitalization in Insurance – The Multibillion Dollar Opportunity – Google and Bain & Company