Insurers embrace insurtech challenge

“A few years ago, the insurance sector thought that these start-ups were coming to eat our lunch, now we see them more collaborating and joining us for lunch,” Zurich head of business transformation Antony Elliott, tells Intelligent Insurer.

Zurich is even helping insurtech startups to grow. It is collaborating with accelerator Startupbootcamp, which supports early-stage tech founders to rapidly scale their companies by providing direct access to an international network.

"At earlier stages, you've got much better chances to influence the direction [the start-ups are taking], where it would be advantageous for us as a company," Elliott says.

Zurich participates in the annual selection of candidates and assigns them partners from within the company. The collaboration includes an intensive coaching for three to four months where the start-ups receive advice and technological input from Zurich.

"Some of the start-ups are unaware of some of the complexity and regulations in the market. The exchange can be hugely beneficial," Elliott noted.

Through the exchange between Zurich and the start-ups, the Swiss insurer can also develop new business ideas.

“We see interesting and great collaboration opportunities with start-ups leading to better propositions for our clients,” Elliott notes.

Some of the start-ups Zurich is interested in are focusing on customer interaction, on proposition for millennials or on the back office, looking at how to improve areas such as claims litigation. Investing in them is also seen as a potential option.

Elliott believes that insurtech companies can help the industry become more efficient, effective and customer-centric. New ideas coming from insurtech start-ups can solve many problems and offer opportunities to improve products and increase efficiency.

"I do absolutely think that there is potential,” he says. “Across the industry, a lot can be done better.”

The disruptive insurtech market is growing fast, according to tech publication Geektime’s InsurTech Report from May 2017. In 2016, the number of insurtech startups worldwide grew 31 percent year on year to 364. Insurtech investments jumped 60 percent between 2014 and 2016. Insurtech startups raised $1.8 billion across 179 deals in 2016.

The five main segments are big data/artificial intelligence/analytics, digital insurance, Internet of Things, cyber insurance, and health and wellness. The report identified two main categories of products and services in the insurtech field: Real/time, digitised on-demand insurance services for consumers and new and improved technologies for insurance companies.

Insurers risk becoming irrelevant and disappear if they don’t become lean and modernise their current legacy systems, according to the report. Companies can upgrade their systems either by acquiring insurtech companies or their technologies. Otherwise, insurtech start-ups are likely to take their place.

Not only Zurich is reacting. France’s AXA created AXA Strategic Ventures, an investment fund to participate in the insurtech frenzy. Between its inception in 2015 and January 2017, the fund invested in around 20 start-ups offering technological solutions for the insurance sector. The solutions range from insurance policy sales platforms accessible via smartphone (Policy Genius) to the use of the distributed ledger technology “blockchain” (Blockstream), as well as tools that predict how the prices of online plane tickets will evolve (Flyr).

In 2017, AXA plans to focus on connected health, artificial intelligence, user interface and the use of data. As part of its strategy, AXA Strategic Ventures is opening an office in Hong Kong.

“It is by thinking globally that we will be able to attract innovative entrepreneurs and support their development,” managing partner of AXA Strategic Ventures, François Robinet, explained.

Munich Re is also getting involved and is promoting and supporting insurtech ventures. The German reinsurance giant established Digital Partners in May 2016 and, as of the first quarter of 2017, had established partnerships with nine companies.

Digital Partners focuses on providing capacity, product development, data analytics, back office technology and venture capital financing to emerging insurance and technology companies operating in the distribution sector. Digital Partners seeks to partner with disruptors who are changing the way insurance is experienced by customers and works closely with the broader Munich Re organization to provide expertise and support services to its partners.

“We have several such partnerships in the pipeline and continue to actively explore the market for new opportunities,” said Digital Partners’ CEO Andy Rear said in Willis Towers Watsons’ April 2017 Quarterly InsurTech Briefing.

“Our underwriting is automated, and we are interested in partnerships which enable automated data-gathering and machine learning. In the future, as the business reaches scale we will seek to innovate customer servicing and, in particular, claims,” he added.

Munich Re is also investing in insurtech start-ups via its venture capital arm HSB Ventures. The reinsurer, for example,  led a $29 million funding round for insurtech start-up Next, which targets small businesses with tailored plans.

Munich Re has also led a $45 million funding round by on-demand insurance provider Trov. The start-up enables users to buy insurance for specific products, for specific amounts of time through their smartphones. Users can turn insurance on and off with a swipe and also file claims through the app. Investments by Munich Re also include Bought by Many, which allows individuals with specific insurance needs to get better insurance offers from existing providers through collective buying power. Examples of products include pet insurance for rare breeds and travel insurance for people with medical conditions.

Germany’s Allianz is following a similar approach and has created an entity called Allianz X which identifies, builds and globally scales new business models. During a 100-day program, entrepreneurs work with Allianz experts to develop and market a new business idea from scratch and receive a variety of resources to support their projects.

Among the companies supported by Allianz is BodyLabs, an online lab that assesses body metrics to assign the user a ‘body age’, analyses the data and suggests changes in lifestyle.

Another one is Milebox, an app that rewards users for responsible driving and aims to make roads safer. The app monitors various data such as speed, acceleration, braking behaviour and curve speed during every road trip.

But Allianz is also investing in potential new competitors such as Lemonade, a quickly growing artificial intelligence-focused peer-to-peer insurtech company.

Commenting on the investment, Allianz chief digital officer Solmaz Altin, said that Allianz will do what it can to accelerate Lemonade’s rapid expansion throughout the US and beyond.

Insurtech start-ups like Lemonade are challenging the business model of traditional insurers.

While investment is being made to harness the digital age, there is a growing innovation gap that needs to be plugged, said new Lloyd’s chairman Bruce Carnegie-Brown at the June 15 MMC Young Professionals Forum in London.

“The next wave is already gaining traction, and artificial intelligence and machine learning will change the world as much, if not more, as the agricultural, industrial and digital revolutions that came before it.”

Failure to innovate quickly enough could result in disruption by external forces, he warned. Speaking of his role as a non-executive director of Banco Santander he said the board was as much concerned about the threat posed by Google and Amazon as it was by competition from traditional players within the banking sector.

“Newcomers represent a serious challenge to the London and Lloyd’s market,” he warned.

“How are we going to ensure we own the future of our industry? We must embrace this new technology, we have to put customers at the forefront of what we do and continue to innovate.”