What Insurtech is not
In the past centuries the life cycle of a middle class was quite predictable with not so many alternative choices. Graduating from school, getting married, then having children, eventually growing old peacefully. However, just when you least expect accidents to happen, the best-laid plans can be turned upside down. On this occasion, it was customary to buy the life insurance policy in order to minimize risk. A responsible man would make provisions for his wife and children in the case of his death. In turn, the gravity of that agreement made insurers believe in the sacred duty they owed to the policyholders. Despite it being a noble intention, it happened that insurance companies would quit the business before the agreement expired. The lack of virtue ethics exercised by some adds weight to stereotypes which blemished the reputation of the whole industry. Followed by reprehensible sins of the opaque legal records and haughty attitude toward clients, incumbents led to immoral behaviour on both sides of the agreement. Eventually, as the insurance business had accumulated with ambiguous feelings, a change must have happened.
Recent transformations in society, economic and cultural changes, in a relatively short period of time have multiplied possible ways of living. The arrival of new technology and social media on stage made the whole world of difference between the needs of today’s young adults and their parents. Now everything must be “clickable”, there is no time for long-duration plans. Insurance, as a vehicle invented by societies, must have been changed accordingly to the pace of the customers’ lives. Coverage details, claims status, contact with agent, emergency assistance, all should be available at hand. The slogan “Forget everything you know about insurance”, coined by the Lemonade, is a voice of the generation. Less opaque in promises, and more transparent in actions, insurtech companies have worked their way through the burdensome past and overcome it in an effort to regain esteem as the backbone of society.
As the saying goes, honesty is the best policy. It strengthens relationships between people and develops a sense of security too. What is a risk for one person is not a risk for society. The number of bad outcomes is fairly predictable, therefore the risk can be kept under control and mitigated. Thanks to a combination of both, the digital native approach of startups and weight of assets of the incumbents based on centuries-old experience, new products and services are on their way to expand a market. Insurance bureaucracy is taken over by machines that communicate with each other through API’s with a speed that no human would ever achieve. The substitution of the traditional administration for AI and bots is inevitable even for companies like Allianz, MetLife, and Generali, that set up their businesses in the 19th century. The scene from life where actuaries and insurance brokers are overlaid with paperwork instead of being focused on customers’ needs it’s in the past. Digitalization supports risk pooling, according to which policyholders pay premiums to the insurance company for its standing ready to manage certain well-defined risks against which the policies were issued. Big data and machine learning help actuarial sciences to limit moral hazard and selection bias, two main factors that usually stand in the way to achieve the effective pooling of risk.
Top Insurtech to watch this year. Since it was clear that the insurance industry is ripe for digitalization, a bunch of new articles with similar titles appear every year. With every year the landscape of insurtech startups that are popping up is growing. Venture capitalists fund risky projects in order for the startups to come up with disruptive solutions. Kasko offers white-labelled customer journeys, digital quote-offer-bind, policy administration, capturing FNOL (First Notice of Loss) and integrates it into many distribution channels via app or API. Trov cooperates with insurance carriers depending on the geographical region and specializes in handling micro-duration policies by using the app. Simplesurance offers an easy and convenient way to purchase product insurances. Kovrr delivers insights into cyber risk that people around insurance, underwriters, catastrophe modelers, risk officers need to have in order to mitigate the cyber risk that insurance companies are exposed to. Kasko partnered with ACREDIA, Trov is backed by AXA, Simplesurance and KOVRR offered solutions for Allianz. Insurtech startups collaborate with many to connect the entire claims value chain in one ecosystem. However, every brand is unique and each differs from others, insurtech startups have a common denominator.
Insurtech, as every startup, needs customers from the very beginning of its existence. Every iteration in the continuous delivery process relies heavily on the customer’s feedback. From the first release to the last one, startups are constantly learning about the products under development. Engaging customers in the process at the early stage leverages initiatives and brings resilience to local communities. As one from the offered product suite, the insurance policy is a representation of a particular social agreement. It can not be touched, but the sense of its uniqueness must be felt. The first experience of being insured by the insurance company must therefore be that it is founded on mutual trust. Nothing should be withheld or concealed, giving rise to any suspicions. By openly stating simple and transparent ideas, insurtech companies win loyalty and trigger more virtuous behaviour on both sides of the policy agreement. Whether the company is concerned about the climate risk (Zesty.ai), the connection of the low income populations in sub-Saharan Africa (BimaAfya), or shares a clear statement of what will happen with the surplus amount of money, i.e. it is transferred to local high school computer laboratories and charities (Lemonade) or just paid back to customers, as the risk didn’t happen (Friendsurance), these demeanors drag more socially conscious customers, who identify with values of the brand and have a sense of the higher purpose.