The global insurtech sector has reached an all-time high in 2021, having surpassed total funding for 2020 in the first half of the year at £5.2bn. This boom signifies the increasing demand for quick, easy and fair cover, which consumers have come to expect across the financial services board. But it also speaks to a declining acceptance of the traditional insurance landscape – one that is characterised by outdated legacy systems, a lack of provider trust and transparency and an unwillingness to adopt AI and data to its full extent.
So why have big-name insurers, often with multi-billion pound revenues, been so slow to come round to this trend?
Oliver Kent-Braham is the co-founder and co-CEO of Marshmallow. He leads Marshmallow alongside his twin brother Alexander, after founding the insurtech business in 2017 with business partner David Goaté, now CTO.
Marshmallow started out as a digital-first, licensed insurance carrier, with the aim of offering customers cheaper, fairer and faster products. Using technology, AI and data, their mission is to reduce and one day eliminate the distress caused by accidents and disasters.
What has been the traditional company response to financial technology innovations nationally?
Technology has changed the way huge parts of the financial services sector operate in recent years – from banking and payments to investments and pensions. As disruptors emerge, incumbents across the board are beginning to more meaningfully adapt and evolve in order to remain competitive, encouraging more widespread innovation. However, the insurance sector – a famously outdated and inflexible industry – hasn’t kept pace.
To counter this, we use the most detailed data and AI tailored to the needs of our customers, to most effectively explore all customer segments and ensure they’re getting the fairest deal. Unlike incumbents using outsourced providers, we have in-house engineers and product teams, meaning we can flex to our customer’s needs rapidly.
How has this changed over the past few years?
It’s no wonder that consumers are now flocking to tech-led insurance businesses for their cover, as insurtechs, by nature, bring with them the promise of up-to-date systems and mobile round-the-clock customer service. Whereas prospective insurance customers were once put on hold to a service adviser for minutes (sometimes hours), insurtechs are able to respond in less than two minutes. Similarly, if existing customers want to make changes to their policy, insurtechs enable them to speak with an online operator rapidly at any time of day, compared to being restricted to working hours.
Is there anything that has created a culture of change inside the company?
The world has shifted in a way that has caused an increased reliance on technology, an already existing trend that was only accelerated by the pandemic. This has impacted us in two ways: firstly, like most businesses, we’ve changed our ways of working so that teams that are hundreds of miles apart can collaborate effectively. But also because it’s caused us to grow exponentially: as a result, we’ve grown our headcount by over 200% in the last 12 months.
As we scale, we want to ensure our culture evolves at the same rate. So far, our culture of agile decision making, test and learn mindset and empowering teams is what has driven the scale of growth and it is critical that this remains. Our values of transparency and collaboration have created a high-performance environment, and we are committed to hiring only the very best talent that can thrive and develop that environment.
What fintech ideas have been implemented?
Merely implementing technology is a minimal survival condition and not enough to truly thrive within the sector. Unlike traditional providers who attempt to build on a base of tech from the 1980s and 1990s, technology has been at the fundamental core of everything we’ve done since we began. Because of the way our systems and teams are built, we can quickly flex and adapt, building new products and patching or updating ones that aren’t working as they should. In this way, rather than being an insurance company with excellent technology capabilities, we see ourselves as a world-class, tech-first business providing better outcomes for all.
What benefits have these brought?
By tackling these outdated approaches, we’ve been able to provide insurance that is responsible, fair and fast to ultimately transform the industry into one that works for everyone. Consumers have come to expect a high level of service and convenience, which we believe old insurers aren’t able to offer. We anticipate tech-led providers will continue to gain market share for as long as they continue to adapt to customer’s needs.
Do you see any other industry challenges on the horizon?
It’s not necessarily a challenge, but the whole sector will undergo a seismic shift when the FCA introduces new regulations which will do away with the “loyalty penalty” in January. Whereas insurance providers have typically penalised customers for remaining with them, this change will force providers to offer existing clients the same terms at renewal as new ones – expected to save UK customers a total of £4.2bn over the next decade. It’s not yet clear exactly how this will impact the industry, but providers will certainly need to alter their offering as well as the way they communicate with their customers.
We see it as a huge opportunity, as we are obsessed with giving the best customer experience. As we open into new products and markets, this will only continue to grow.
Can these challenges be aided by fintech?
Absolutely. Fintech allows processes to be automated and more accurate, which is something we embraced from day one. Primarily to gain trust: if insurtechs can quote prospective customers more democratically at the beginning of their policy, we can better challenge incumbent providers. But we recognise there is also a marketing job to be done here, as customers typically gravitate towards recognisable, big name insurers. They are aware of this too, and continue to leverage this to their advantage. But as tech-led providers continue to make the case for fairer insurance and prove their worth with lower quotes, we expect the tide will turn.
Final thoughts…
It’s an exciting time to be an insurtech. Interest in the insurtech market has seemingly reached an all-time high, with the sector innovating in increasingly unexpected ways. Our data set and team structures have allowed us to embed purpose into the sector and differentiate ourselves against big-name traditional providers – the foundation upon which Marshmallow was built and will continue to grow.
