Insurance is an industry ripe for disruption. Around the world, insurers are struggling with myriad challenges including low level of consumer trust, high competition, a low interest rate environment, shrinking profitability and legacy issues.
Addressing these problems and creating opportunities for growth can be difficult – as many ‘solutions’, especially those involving technology can be complicated, expensive and high-risk.
Most insurers struggle to leverage existing data to deliver deeper insights, and it is only recently that some have recognised they need help.
And this is where insurtech companies come in.
Fintech companies specialising in insurance have behavioural analytics and advanced data analytics capabilities which can help these larger insurers gain a deeper understanding of behavioural trends and insights into individuals. This allows for the development and creation of much more customised solutions or fast-tracking customer service.
This is essential – because customers are demanding more personalised service, in the same way they demand from banks. Insurers have traditionally struggled in this respect as they have so few ‘touch-points’ with their insurers – typically only once a year at renewals or at stressful occasions such as claims.
We have seen in recent years how insurers have been left looking slow and cumbersome as pictures of storm damage are going viral on social media while claims assessors have yet to get out of the front door.
While many Insurtech companies are looking to capitalise on this situation by offering unique products and services and competing with traditional insurers, others see an opportunity in helping them solve their problems – in this way, Insurtech operators gain access to existing distribution systems and customers. Without this access, most Insurtech companies would not be able to scale their businesses in a meaningful way.
It is a win-win scenario and one we believe will continue to expand in the coming years.
While our recent Pulse of FIntech report on Q2 shows that the US is clearly leading the way in Insurtech, with 60 percent of VC-backed deals, Australia is increasingly seen as an attractive place to test customer focused activities.
This presents an opportunity to increase Australian involvement in Insurtech and encourage companies to pilot in Australia. Being a testing ground for prototypes or activities to be rolled out means our local insurance industry will also innovate much faster than if these technologies were piloted elsewhere and brought over.
This was seen when Trov – an Insurtech start-up app letting users insure individual items – was founded in US but first rolled out in Australia. Insurance giant Suncorp has now taken a $5m stake in Trov.
Increasingly, traditional insurance companies overseas are also creating their own venture capital funds in order to invest in Insurtech companies.
Insurtech is young and will evolve over the coming months and years. In the near term, investments will most likely focus on finding meaningful ways to engage customers across online and mobile platforms. Insurtech has the ability to harness technology from a wide range of other industries and make it applicable to Insurance. We will see technology including wearables, robo-advisors and automated system processes streamlining the insurance industry.
I believe that while insurance may have come later to the fintech space than other industries, momentum for change is growing and we are pleased to play our part in helping participants along the Insurtech journey.