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August 1, 2017

7 need-to-know things about emerging market Insurtech

Insurtech has gained massive funding, and is set to continue to grow in years to come.

By Tom Ball

Innovation is sweeping across all industries and perhaps influencing none more so than financial services, with Fintech now well established across the world. No stone is being left unturned, not even the almighty boulder that is the insurance industry, one of the oldest in the world and one that many think is a prime target for the current wave of technological innovation. This is where Insurtech comes in.

Those working within Insurtech are engaged in the pursuit of new uses for cutting edge technologies that will increase the efficiency of the industry. It is also thought that significant savings can be made through the revolutionising of archaic processes and systems.

Some areas in which Insurtech is rapidly taking hold are SaaS platforms for insurance coverage and payment, wearable activity trackers, in-car monitoring systems, and customer-facing apps. Other big driving factors have been Artificial Intelligence (AI) and the Internet of Things (IoT), helping the sector to haul in $711m funding last year, according to an Accenture study.

CBR has compiled a list of the 7 most important things that you need to know about the Insurtech industry, because chances are you will hear a lot more about it in years to come.


1. Underwriting

Underwriting is at the core of insurance, it is the signing and acceptance of liability, and the guarantee of payment in the event of damage or loss, and Insurtech is able to hone this industry foundation.

The chief ability Insurtech has to revolutionise underwriting is the way in which technologies can be harnessed to gain a superior level of data pertaining to the customer. The recording of data for example can be handled by IoT devices; these could be fitted in cars for example, and channel vast sums of data to inform the tailoring of a policy.

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This provides the insurer with an outstanding advantage, as previously the customer has had total control of their own information, causing a lack of transparency for the insurer.


2. Usage-based insurance

We are entering an age in which everyone expects infinite opportunity for customisation, one in which things are owned outright and committed to far less often. This example could apply to mobile phones for instance, with people eager to access early upgrade opportunities to constantly be at the forefront of technology trends.

In light of this altering style, Insurtech aims to offer policies that are fluid, and not subject to the same terms regardless of changes in the situation. Trackers also come in to play in this example, as for instance when driving, and policy could flex based on details such as the distance travelled, and the efficiency of the vehicle. While this predominantly seems like a benefit for the insurer, it could also result in a policy improving depending on the constant stream of data. This form of insurance could potentially mean only purchasing insurance when you need it, resulting in major savings, and blockchain technology could play a key role in this.

3. Blockchain

Major, disruptive use cases are constantly being theorised for blockchain technology, but it would be the ideal tool for streamlining many of the physical, arduous processes that the insurance industry remains reliant upon.

Testing of the use of blockchain for insurance is currently underway, with a prime case delivered by American International Group (AIG) and the tech behemoth IBM. These companies are at work on creating a smart insurance policy, in this instance, the two companies are seeking to create a polic that can manage international coverage.

The companies have so far completed a pilot of the project that involved a multi-national policy for Standard Chartered Bank PLC. This blockchain based process allows for the sharing of real-time data, a crucial requirement for revolutionising the industry.

4. IoT

While we have already mentioned instances in which monitoring devices can be installed to provide a constant stream of complex data to better inform the insurer, this technology could transform insurance end to end when you consider that a great deal more than just cars can be monitored in this way.

For example, with a range of smart appliances already within homes, it is feasible that devices could monitor your home from a physical security stand point. This could place the home-owner in a better position in the event of a break in, with technology recording exact details of entry. Fire would also be an obvious insurable threat that could be monitored more accurately.

This technology could also come into play for policies regarding instances of catastrophic risk, tapping into information spanning the weather seismic activity. Major shipping vessels could also be fitted to provide more accurate visibility.

Wearables for health are also becoming extremely prevalent, and lead to health insurers allowing health premiums to be considerably lower for the customer.

5. Insurtech is growing fast

While you may not have heard a great deal about this new industry yet, it is much more than just a real thing, as it is making huge gains as new technologies are developing and investors begin to see the potential for the industry to become entrenched in modern society.

As touched upon in our introduction, Accenture released information on the booming industry and how it has been energised by IoT and AI. These technologies alone have been pegged as responsible for $711 million in funding into Insurtech last year alone, equating to 44% of the investment in the industry.

The total spending on Insurtech is amassing into multiple billions, with the industry boom carrying from year to year, and according to KPMG we can expect this progress to continue.


Top 7 things you need to know about Insurtech

6. Insurance is changing for good

The new technologies that are being linked to insurance use cases are causing the entire industry to change in the way it approaches risk in the world.

Traditionally insurance has been reactive, predicting the potential for disaster to strike an important asset, be it a container ship, or a town that is on a likely hurricane route. With the massive amounts of data that can be harvested by IoT, and potentially communicated using blockchain, insurance is becoming more preventative.

READ MORE: Blockchain could save financial services $20 billion, say execs

More detailed information on drivers will provide more accurate policies that may even exclude the most dangerous drivers from accessing use to vehicles, while devices for monitoring human health could better indicate a deteriorating state of health, and prevent more serious illness, injury or even death.

These changes are all ultimately streamlining the insurance industry, and making the process fairer and more efficient for both the customer and the insurer that has long been at a disadvantage based on a lack of data.

7. UK Insurtech startups to watch

Cuvva is the one I have seen emerge the most time while reading about the innovative impact of Insurtech. This provider offers a mobile app that you can use to enter your registration number and a few other details including approximate value of the car and picture. You are then provided with an instant quote.

Brolly is another hot option in the UK, and this one is using AI technology, the current technology trend frontrunner. The app offered by this provider is an example of where insurance streamlining can occur, as it works to reduce expensive renewals by locking your insurance in place.

IoT is truly at the core of the Insurtech boom, and the London based Insurtech startup Neos provides IoT enabled hardware within the home linking to building and contents cover. The technology means you can get immediate assistance following a fault in the home or a break in.


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