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INSURTECH: you will never insure — or be insured — the same way as before

Insurtech is currently one of the most dynamic and exciting sectors: more than $2,6bn were invested in the industry last year, three times the amount invested the year prior. Corporate insurers such as Axa, Allianz, AIG or Aviva are creating inhouse funds to identify the most promising innovations in the field. The landscape is fast evolving: unicorns like Blablacar or Airbnb push traditional actors to develop new insurance models that go beyond transportation and housing, and draw from IoT, big data, or gamification to transform the insurance industry overall.

Three trends are transforming insurance and traditional insurers.

Don’t speak about insurtech, speak about insurtechS!

While traditional insurance was focused on a few sectors and bundle products, new practices and technology have segmented the industry in three ways:

  1. A segmentation in model, with an increased separation between product ownership and product consumption. With the adoption of shared economy practices, you no longer use a car that is yours, but one you have borrowed – which begs the question: who pays for the insurance?
  2. A segmentation in application: insurtech is going beyond traditional transportation or housing insurance products, to include new wearables or peer-to-peer practices or even prevention rather than protection services;
  3. A segmentation in technology, with insurtech start-ups choosing specific verticals such as data analytics, claim acceleration tools or customer engagement to support more traditional insurance activities.

These segmentations mean traditional insurance actors are faced with new challenges to respond to new consumptions habits, as well as applications. But this also means new business opportunities.

Mastering personalised insurance

Consumers are less and less willing to pay bundles, and increasingly asking for personalized services. This means that insurers can no longer solely rely on market trends to develop new insurance products. They now need to be more lean and creative in their packages. Failure to do so would result in losing clients, but traditional actors have in fact been very good at embracing insurance curation: they are making the most of new health tracking devices to provide premiums to fit customers, or offering discounted auto insurance for customers using telematics devices to track safe driving. All-in-one policies are also starting to emerge, thanks to highly personalised digital risk assessment.

For corporate insurers, insurtech is a way to climb the food chain

Corporate insurers’ interest in insurtech is easily justified: from data analytics and lifestyle apps allowing client service personalisation, to hardware supporting preventive action rather than corrective ones (to detect fire for instance), the addedvalue of insurtech is immense. Beyond these evolutions, insurtech is also revolutionizing customer service, with information security systems or digital processing making insurance/client relations more seamless.

Insurtech gives incumbents the opportunity to get directly exposed to their client rather than go through brokers. Bypassing intermediaries ultimately makes coverage more affordable for consumers and more profitable for the providers. As such, corporate actors and insurtech startups should not see each other as competitors, but rather as complementary actors. For insurtech companies, the path to customer acquisition is more likely than not going through corporate insurers.

As such, increased collaboration between insurtech and corporate insurers are likely to be beneficial to both parties. There are two existing challenges however: first, the traditional regulation and barrier to entry; second, and more importantly, the issue of privacy. If personalized insurance services can lower the financial cost, it remains to be seen how consumers will react to the collection of sensitive information. Insurance and insurtech companies will therefore have to work together to guarantee that their customers’ data is collected and managed in a secure and safe way. And for that, cybersecurity startups may have some answers.

By Antoine Baschiera, CEO at Early Metrics

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