Why has it taken so long for FinTech to reach the insurance
industry? After all, insurance is no small sector, with plenty of
facets and geographical reach—just the things that FinTech
has already capitalised on in banking,
fund distribution, and
regulation, to name a few. But the fact is that, while
insurance companies are already using various digital tools,
nothing particularly revolutionary has rocked their business models
or rattled the status quo. How come?
Mark Wilson, CEO of Aviva, gave three answers to this question
when he spoke at the Web Summit last month: regulation, risk, and
capital. To paraphrase him: the regulatory environment is tough on
innovators in this area; risk in insurance is far costlier than in,
for example, the taxi industry; and it takes hefty wallets to get
things going in this giant industry.
The quicker answer might also be that it doesn't matter
why—because the disruption is firmly on its way, regardless.
Here's how the term InsurTech's popularity is
looking on Google Trends:
Feel free to formulate any sentence you want using the
phrase "remarkable uptick."
The birth of this field is likely down to the same technologies
enabling RegTech, robo-advisory,
social trading, and so on—big data and artificial
intelligence. (And perhaps the Internet of Things too, in this
case). Mr Wilson spoke of "answering little questions with big
data" in the context of Aviva's digital evolution, and,
mercifully, provided examples: to insure a home, a company needs to
know things like the length of its driveway, to determine its
statistical likelihood of being burgled, and what kind of trees are
on its street, to know how likely it is to flood due to fallen
leaves clogging gutters. (Apparently 6.7 meters is the ideal
driveway length). Or, to insure a car, information about its
driver's habits like the amount of behind-the-wheel-texting
going on comes in handy. These items are gettable with big data, a
process that cuts costs to the tune of 30%, according to Mr
A new ocean means new fish
Of course, not everyone in the InsurTech sea is an enormous and
ancient (though apparently quite agile) whale like Aviva: minnows
like the start-up WeSavvy, a B2B solution that lets health
insurers reward their customers for hitting a certain number of
steps per day (e.g. one euro per 10,000 steps), are vying for
attention as well. WeSavvy's value lies in helping the end-user
engage with, and even affect, his or her insurance, this kind of
customer-centric product familiarity being a hallmark of the
current era. It also marks a nice anticipation of the rise of
wearables, which have been on the horizon for some time now, though
this particular product doesn't require any additional
apparatus other than a smartphone. The company is furthermore
interested in rewarding other healthy actions too, like
sleeping—yes, the dream is finally coming true: you will be
able to get paid to sleep.
Another InsurTech company, Metromile, is working along similar lines by
monitoring car mileage, and converting the data into customised
insurance rate information. If you start thinking creatively, there
are lots of things that can be monitored with a view to better
informing insurance companies: steps, sleep, and mileage we have
already—why not what you buy from the supermarket, how often
you brush your teeth, or how much smoke/coffee/chocolate gets into
Other InsurTech products include plan aggregators, peer-to-peer
sharing of emergency funds, and insurance product/buyer matchmaking
platforms. Big data is a favourite technology, coming hand in hand
with artificial intelligence and machine learning, but blockchain is
being put to use as well.
The slew of start-ups out there are bound to churn up at least a
couple of revolutionary products, if not revolutionary business
models. Large insurance companies are on board too: the
320-year-old Aviva has been snapping up start-ups and trying out
its own innovation lab; and another incumbent, the Bâloise
Group in Luxembourg, has launched a car-insurance product called Game of Roads
which they developed in collaboration with the help of a start-up.
Earlier this year Google folded up its insurance offering, Google
Compare—but the fact that they threw themselves in the game
is a sure sign that the opportunistic can already taste disruption
in the industry.
Will it be an incumbent, a plucky start-up, or one of the tech
giants to crack the insurance industry first? We think that whoever
it is, it will be someone with a product that's able to harvest
technology to allow users a closer relationship with their
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This is the January edition of the Arthur Cox Insurance Regulatory Update, the monthly bulletin of the Arthur Cox Insurance Group focused on recent developments in insurance regulation, law and practice.
The first instance decision in this case was reported in Weekly Update 23/15. A worker was seriously injured using a tool which had been hired by the claimant insured (via a builders' merchant).
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