Insurtech investments attack the personal lines’ insurance value chain

Insurtech investments are targeting the personal lines’ insurance value chain in product development, client acquisition, underwriting, and claims management in the insurance value chain, a new Conning study shows.

Technology is creating the need for, and enabling the development of, entirely new personal lines products, and disruption-minded innovators are pushing change in traditional personal lines product offerings, according to the Conning study named Emerging Business Models in Personal Lines Insurance - Innovation-Based Disruption.

"The technologies are rooted in mobile and digital—but include a wide range of categories, with fundamental changes in communication, data availability, and computation. Underlying these changes are several critical enabling technologies, from connectivity to analytics to artificial intelligence," said Alan Dobbins, a director, Insurance Research at Conning.

Product Development

Growth of the sharing economy created by the explosion of mobile apps is creating new personal lines exposures. Capital is flowing into this market to address emerging needs, according to the study.

Consumers are showing an increasing interest in products and services delivered ‘on demand’. Technology is giving consumers command of when, what, and how much they consume.

Products building on blockchain technology may address this trend by providing instant and verifiable notification of any rental/sharing transaction and change of custody.

Companies are emerging whose niche is to aggregate data. In addition, the use of sensors allow for the creation of policies that are more closely aligned with use.

With increasing data available through sensors and connected devices, there is a potential for individualized policies covering a broader array of risks—maybe moving coverages on and off.

Policyholder Acquisition

The elements of the personal lines value chain receiving the greatest attention from tech-led innovation are policyholder acquisition and the customer interface, according to Conning.

Startups from outside the industry are drawn by expense ratios that average 26 percent of net premiums, seeing the potential for further disintermediation with a better acquisition platform.

This is setting up a battle for control of the customer interface. Price comparison puts an emphasis on low-cost approaches — and that puts an emphasis on scale — which will prompt consolidation.

Risk Analysis

Technology is pushing the risk analysis function in new directions. Both the types of data available for analysis (usage-based, sensors, visual data, online data trails) and the advanced analytical tools emerging to process/analyse these data are taking underwriting and risk assessment to new levels.

With increased information sharing, the behaviours of individual policyholders will play a greater role in determining risk.

Efforts to improve the way data is analysed are allowing analytics firms — with emerging tools such as machine learning capabilities — to create new insights into the risk presented by a potential policyholder.

Data mining and monitoring not only allow insurers to price policies more accurately, but also may enable them to modify customers’ behaviour. Ubiquitous sensing and connectivity have the potential to move insurance away from paying for accidents and more toward loss prevention.

Claims

Finally, new technology is focused on improving the quality and speed of claims handling, through predictive analytics, engaging the stakeholders in the process, and bringing in new data sources and capabilities.

Investment indicates that the key areas of focus are on increasing speed and transparency.

Steve Webersen, head of Insurance Research at Conning, said: "Digital capabilities and the arrival of new competitors carving off pieces of the insurance value chain may well drive a significant restructuring of the industry. For personal lines insurers, the key will be trying to figure out which parts of this evolving system are areas where you provide the most value and how you are going to connect to the customer."

You can find out more about the developments in insurtech by participating in the  InsurTECH Europe conference in London on October 3rd.

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