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Insurtech: A Golden Opportunity For Insurers To Innovate: March 2016
Insurtech: A Golden Opportunity For Insurers To Innovate: March 2016
com/us/insurance
March 2016
2 top issues
The insurance industry has Three of the biggest drivers of disruption • Startups – With easy access to open
remained much the same for more include: source frameworks, scaled cloud
computing and development
than 100 years, but over the past • Customer expectations – The On-Demand, technology barriers to
decade it has seen a number of widespread adoption of new consumer entry have been lowered. New players
exciting new innovations and new technologies in all industries has that have the ability to innovate
business models. created new needs for and expectations quickly are taking advantage of
of insurance solution and interaction the opportunity to fill the gaps that
channels. incumbents have not.
• Pace of innovation – So far, As part of PwC’s Future of Insurance
incremental innovation has helped initiative1, we’ve interviewed numerous
insurers meet most new customer industry executives and have identified
expectations. But, with the demands six key business opportunities (illustrated
of the shared economy, usage-based below) that incumbents need to take
models, internet-of-things (IoT), advantage of as they try to meet customer
autonomous cars, and wearables, needs while improving core insurance
they have an opportunity to do more functions.
radical innovations and experiment
with new business models. In this
context, customers have a need for new
insurance solutions, and established
carriers (i.e., incumbents) have
an opportunity to provide tailored
products and services for different
segments.
1 http://www.pwc.com/gx/en/industries/financial-services/insurance/future-of-insurance.html
3 top issues
Because FinTech offers substantial Figure 1: DeNovo FinTech companies* - Total Funding
promise to take advantage of
emerging opportunities, funding 4,000
Funding ($m)
indicates how incumbents may 2,000
leverage FinTech to address their
specific business challenges. 1,500
1,000
The insurance-specific branch of FinTech,
InsurTech, is emerging as a game- 500
changing opportunity for insurers to
0
innovate, improve the relevance of their 2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
2012 Q4
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
offerings, and grow. InsurTech, has seen
funding in line with FinTech investment
overall, and we expect investments to
Source: PwC Denovo *Selection of relevant companies for Banking Services, Capital Markets, Investment
increase as new players and investors Services, Insurance, and Transactions and payments Services
enter the space.2
2 DeNovo
4 top issues
Figure 2: DeNovo InsurTech Companies* Funding Figure 3: DeNovo Early Stage InsurTech Companies* activity
1200 350
1400 300
1000 250
Funding ($m)
Funding ($m)
800 200
600 150
400 100
200 50
0 0
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015
Source: PwC Denovo *Selection of relevant companies for Insurance Intemediaries, P&C, Life Insurance Source: PwC Denovo *Selection of relevant companies for Insurance Intemediaries, P&C, Life Insurance
and Reinsurance and Reinsurance
5 top issues
Incumbent Insurers
Leverage existing Utilize new approaches Enable the business
data and analytics to to underwrite risk and with sophisticated
generate risk insights predict loss operational
Customer Market & business
capabilities
environment
Source: PwC
Business Opportunities – Internal View
6 top issues
As Figures 2 and 3 show, activity around 1) Meet changing customer • USAA has invested $24M in Automatic insurance by leveraging social
early-stage InsurTech companies also has needs with new offerings Labs, a telematics platform that claims media data.
generated considerable buzz. Moreover, Customer now expect personalized it will “connect your car to your life”
experienced insurance executives have and provides a full suite of integrated Some large insurers have decided to
insurance solutions. One size simply
joined startups, including Insureon and apps (including wearables). develop startups in-house. For example:
does not fit all anymore. Usage-based
Lemonade, to help them develop new models are partially addressing these • MassMutual is using internal resources
types of products and services, like small • In the life sector, Sureify has developed
expectations, but the sharing economy to build Haven, a new, stand-alone,
business aggregators and peer-to-peer a platform that allows insurers to
also is challenging existing, more direct-to-consumer business.
insurance models. All of this indicates that underwrite life insurance based on
traditional insurance products. New
investors and the industry are eager to lifestyle data inputs they obtain from 2) Enhance interaction and
players are able work from a clean
get on board with early stage startups in wearables. build trusted relationships
slate and leverage a variety of available
order to meet the six areas of opportunity resources to fill market gaps. For example: • In the peer-to-peer space, Lemonade Established carriers have to manage
we illustrate above and describe in detail claims to be the world’s first peer- increasing customer expectations and
as follows. • Metromile, a startup, has developed a provide seamless service despite their
to-peer carrier, but other companies
customer- (rather than risk-) centric large and complex organizations. In
like Guevara and InsPeer have been
value proposition for occasional contrast, new market entrants are
exploring variations of the same
drivers. It offers a low base rate and not burdened with large, entrenched
model. Bought by Many, a startup
then charges a few cents per mile bureaucracies and typically can more
that uses social platforms in its go-to-
driven. Metromile also offers an app easily provide a seamless customer
market strategy, helps individuals join
that provides personalized driving, experience – often using not just new
or even create affinity groups, as well
navigation and diagnostic tips, and technology but new service concepts.
as find insurance solutions for their
can even remind drivers where they
specific needs across different product For example, self-directed robo-advisors
parked. Furthermore, the company
lines. Of note, leading Chinese insurer are convenient, 24/7 advisors that
has entered into a partnership with
Ping An has partnered with Bought provide ready access to information
Uber that allows drivers to switch from
by Many to create personalized travel that can empower consumer decisions
personal to Uber insurance.
7 top issues
about financial planning and investment • In order to become a B2C player in It offers simple life, personal accident, 4) Leverage existing data and
management. And, investors have taken the digital small business market, and hospitalization insurance products analytics to generate risk
notice: ACE Group has recently taken a 24 on a pay as you go (PAYG) basis for insights
percent ($57.5M) stake in Coverhound, a set time period (usually just a few Established insurers traditionally have
• Northwestern Mutual’s acquired which enables customers to directly months). Policyholders can obtain a had the advantage over prospective
Learnvest, a leading robo-advisor with compare coverage options and pricing pre-paid card and activate and manage newcomers of being able to leverage many
an estimated value of $250+M. from various carriers. their policy from a mobile phone. years of detailed risk data. However,
• Other robo-advisors, such as data – and new types of it – now can be
3) Augment existing • AXA has acquired an eight percent
FutureAdvisor, have been part captured in real-time and is available from
capabilities and reach with stake in Africa Internet Group for
of important deals, while others external sources. As a result, there are
strategic relationships EUR75M, opening new opportunities
(including Betterment, Personal new market entrants who have the ability
The insurance industry historically has for the company in unpenetrated
Capital and Wealthfront) have raised to generate meaningful risk insights in
included intermediaries, service providers markets.
funds above $100M. very specific areas.
and reinsurers. In most cases, the carrier
has led the business relationship because New B2B2C entrants also are helping
Moreover, disintermediation and the • Several internet of things (IoT)
of its retail market position and scale. forge mutually beneficial relationships:
emergence of new online channels is companies, including Mnubo, provide
occurring in all lines of business: However, companies increasingly are • Zenefits was one of the first to create analytics that generate insights from
peers. Accordingly, joint ventures and new channels to connect insurers, sensor-based data and additional
• The Chicago-based startup Insureon partnerships are a good way to augment brokers, employers and employees. external data sources like telematics
has created an aggregator that existing capabilities and establish and real-time weather observation.
specializes in micro and small symbiotic relationships. For example: • Flock, which features broker managed The promise of the better risk
businesses. It taps into existing profit benefits where plans can be designed assessment and management resulting
pools that personal and commercial • BIMA Mobile has partnered with to cover a range of options from from this model is likely to appeal to
carriers are trying to reach. mobile telecoms companies to provide enrollment to life events, offers what personal and commercial carriers.
life insurance solutions to uninsured it says are “absolutely free” HR and
segments in less developed countries. benefits solutions.
8 top issues
• Facilitating this real-time data 5) Utilize new approaches ethical questions. It has the potential to
collection are drone startups, including to underwriting risk and completely disrupt life underwriting,
Airphrame and Airware. Drones predicting loss and places certain responsibility on the
provide the ability to analyze risk with Protection-based models are shifting company to help customers manage
embedded sensors and image analytics. to more sophisticated preventive genetic risks (while being careful about
They also can operate in remote areas models that facilitate loss mitigation actually mandating lifestyle choices).
where it has traditionally been difficult in all insurance segments. Sensors and But, on the whole, managing genetic
for humans to tread, thereby saving related data analytics can identify unsafe risks in advance can benefit both the
time and increasing efficiency. In fact, driving, industrial equipment failure, end-consumer and the insurer because,
American Family’s venture capital impending health problems, and more. if they work together, they can better
arm is investing in drone technology More deterministic models like the ones manage or even avoid long-term health
in order to explore new approaches to that now exist for crop insurance, are problems and associated expenses.
access and capture risk data. starting to emerge and new entrants are
• On the automotive side, Nauto, a San
offering both risk prevention (not just loss
• In the life space, P4 Medicine Francisco- based company, offers a
protection) and a more service-oriented
(Predictive Preventive, Personalized system that provides visual context and
delivery model. For example:
and Participatory) offers insurers telematics with actionable information
better insights that they can apply • The South Africa-based company about driving behavior, including
to life and disability underwriting. Discovery has a partnership with distracted driving. The company claims
Lumiata is offering the potential for Human Longevity Inc. They are that its system can help insurers design
better predictive health capabilities, teaming to offer whole Exome, new pricing strategies and pinpoint
while Neurosky is developing next whole genome and cancer genome areas of premium leakage that they
generation wearable sensors that can sequencing, to its clients in South otherwise may not notice.
detect ECGs, stress levels, and even Africa and the UK. Gene sequencing
brain waves. can identify risks before they manifest
themselves as problems, but also raises
9 top issues
In a time when societal changes, Figure 5: How do insurers deal with FinTech?
technological developments,
and empowered customers
are changing the nature of the We do not deal with FinTech 23%
InsurTech fits in their strategies. We buy and sell services to FinTech companies 16%
The table to the right shows the
various approaches insurers are We set up venture funds to fund FinTech
companies
10%
Action Item: Plan an InsurTech 0% 5% 10% 15% 20% 25%
immersion session for senior
management. This should be an Source: 2016 PwC Global FinTech Survey
sharing of relevant insights on desired • Contributing to InsurTech’s growth • Developing new products and FinTech has become a buzzword,
InsurTech solutions. Subsequently, and development – Venture capital services – Being active in InsurTech but whichever way the FinTech/
FinTech analyst platforms can keep and incubator programs play an can help incumbents discover emerging InsurTech market itself goes, the reality
management up-to-date on the latest important role strategically directing coverage needs and risks that require underpinning it is not a passing fad.
developments and market entrants. key innovation efforts. Established new insurance products and services. Insurers that are actively involved with
insurers can play an active role by Accordingly, they can refine – and even InsurTech in any of the ways we describe
• Partnering to develop solutions – clearly identifying areas of need and redefine – product portfolio strategy. above stand to gain whichever way
Exploration should lead to the opportunity and encouraging/working This will result in the design of new the market moves. They can use their
development of potential use cases that with startups to develop appropriate risk models tailored to underserved capital and understanding of customers
address specific business challenges. solutions. and emerging markets. and the market to both inspire and
Incumbents can partner with startups exploit innovative technologies and
to build pilots to test in the market.
Action Item: Define a strategy to direct Action Item: Take a close look at correspondingly grow their business.
startups’ focus on specific problems, emerging technologies and social
Action Item: Select a few key business especially those that otherwise trends that could be business
challenges, identify possible solutions, might not be addressed in the short opportunities in order to define
and find potential partners. A design term. Incumbents should consider product strategy, determine required
environment (“sandbox”) will help startup programs such as incubators, capabilities, and develop a plan to
boost creativity and also provide tools mechanisms to fund companies, and build a portfolio and seize market
and resources for designing and fast strategic acquisitions. (N.B.: It is vitally opportunities.
prototyping potential solutions. This important to protect intellectual capital
approach also can help establish the when imparting industry knowledge to
baseline and approach to building startups.)
future InsurTech solutions.
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