By Sam Evans, Managing Director of Eos Venture Partners
It’s an exciting time to be involved in the InsurTech sector. Having spent many years working with the largest global insurers on their growth strategy it’s refreshing to now be involved with the smallest players in the sector. It’s my belief that we are entering a sustained period of innovation in the insurance sector which will result in a truly transformational change to the way insurance is perceived, distributed, bought and used by society. This innovation will be driven in the main by these small, agile and innovative new businesses.
Recent figures released by CBI Insights show that InsurTech investment in the UK has tripled in 2016, making the UK the fastest growing InsurTech market globally. With a number of strategic partners like Startupbootcamp and London and Partners committed to driving further growth, and support from the regulator, it’s clear that London will become an increasingly important InsurTech hub going forward. However, InsurTech centres are springing up in many markets, with the recent push in Cologne a good example, interesting new businesses are launching across the world.
Where will the focus be in 2016 and 2017?
Recent experience shows that innovation is occurring across the value chain, many of the new entrants are focused on personal line products but commercial lines are also experiencing disruption.
In the last quarter we have seen new start ups launching new products, changing the way products are designed and managed, leveraging data to drive insurance, innovating the claims space, building new distribution channels leveraging AI, transforming the underwriting process, leveraging technology to better inform insurance decisions, aggregating information to help optimise insurance coverage….the list goes on and demonstrates the pace and scale of change.
The five key themes we believe will drive change are highlighted below:
- Connected technology
Leverage solutions that allow insurance products to be tailored based on individual behaviour (eg smart home technology, telematics, social networks & wearables) and provide access to new customer segments through digital connectivity. Neos is a great example of how connected home technology can be bundled with a home insurance policy to create a solution that both prevents accidents and protects the customer in the worst scenario.
- Disruptive distribution
Business models that enable enhanced customer engagement across both sales, renewals and claims including access, education, awareness, comparison, transparency and ease of use. An example of new distribution is Spixxi, who are leveraging AI in the form of a chatbot to deliver a whole new customer experience.
- Product development
Innovative products and solutions that allow users to tailor the product to their needs and may also open up new customer segments, including flexible pricing, real time insurance, consolidation, planning, pooling and peer to peer insurance. True innovation from a product perspective is less common, one interesting example is InsureStreet, that will replace the traditional home rental deposit with an insurance policy.
- Data & Analytics
Technology solutions that allow real time recommendations and pricing, behavioural analytics, smarter risk selection and use of aggregation and portfolio tools. One of the businesses leading this field, is Digital Fineprint who use social media data to enhance the insurance process and optimise an individual’s insurance portfolio.
- Efficiency drivers
New tools and techniques that drive efficiency and cost savings through use of artificial intelligence, machine learning, simplification and web based work flow solutions. The main driver of profitability for insurers is claims. RightIndem highlights the potential for driving significant efficiency improvements through transforming the claims process from an analogue to a digital process.
Who is driving the change?
We are seeing new ideas and businesses coming from all areas. Often the most successful teams combine experience in the traditional insurance markets (and therefore understand the problem) with technology capability to drive new ways of working. What is really exciting is the applications being developed for insurance from adjacent technology areas, for example, facial analytics capability and medical diagnostic tools leveraging 3D cameras.
These new entrants need support from the traditional players in the sector and it’s encouraging to see an increasing focus from many insurers on the innovation agenda and understanding how best to engage with these small businesses. Understandably there are challenges given the size and cultural differences, insurers are not always set up to embrace change. A collaborative approach that focuses on strategic partnerships and alliances is likely to be the best model in the medium term.
The potential for change is unlimited, as the sector matures and develops, attracting more and more talent, innovation will continue to blossom. One of the most exciting parts of our involvement in this journey is meeting entrepreneurs who ask ‘why can’t it be done like this’ and suddenly you are looking at a whole new way of providing insurance.
There is a nice mix of enablers, working to improve and enhance the current industry model and increasingly true disruptors fundamentally changing the way insurance is managed. We look forward to continuing to play a small part in this evolution.
Eos Venture Partners is an independent vehicle to help support and drive innovation and growth in InsurTech. In partnership with RAW Capital Partners we provide a combination of seed and growth stage funding with advisory support for leading InsurTech innovators.Contact Eos today