FrenchKlein Blue Partners has published 2 interesting reports on the market about insurtechs. The first one, France insurtech panorama was published in June 2017. The second, “Benchmark Insurers facing insurtechs and innovative players“, was published in December 2017. They confirm this young consulting firm’s (and its partner Salim Echoukry ) desire to position as a quality partner for insurers who have questions about their innovation strategy in the market. I start the year by not being late and therefore deals here with the last published! Continue reading “REPORT KleinBlue – Benchmark insurers facing insurtechs”
SwissRe has just published its global insurance review 2017 and its 2018 forecasts. The document is available at this link (Global insurance review) .
Innovation is essential, but to identify new answers, I remain convinced that we need to understand the state of the current market. This type of report is therefore essential to refine the grid of reading of what is happening in the world around us! This is particularly right as they give valuable insights into innovative solutions!
The four main themes covered in this document are:
- Continued cyclical economic recovery at the macroeconomic level, although risks of instability persist;
- Obviously, a big subject on the natural disasters of the year! These are causing great difficulties for all the systemic insurers in the area and therefore even more so for reinsurers;
- Life insurance re-insurers adapt to the new deal;
- Stable emerging markets in non-life and strong growth in life.
Key Points from the 2017 Global Insurance Review
More globally, here are the 10 points that SwissRe puts forward:
- The rise of protectionism in large markets: in the United States, but also Brexit or the situation in Catalonia. This phenomenon is however not uniform (for example Latin America is liberalizing)
- Monetary policy : what about the gradual end of quantitative easing?
- Cyber risk : The market is growing rapidly, and the stakes are high, particularly in terms of the quantity and quality of data needed for risk monitoring and pricing. A particular focus is to read p15 of the doc on this subject. Indeed, an estimated growth of 30% per annum of this market over the next 5 years should not be underestimated.
- Increasing auto claims : More and more miles traveled, more traffic and distracted driving are the first drivers. The key is always technical results.
- Brexit and the UK insurance market: Depending on the UK exit format, premiums should be reduced by 8 to 20%. This is a considerable shock on the market.
- Innovate to increase the scope of insurability, especially in the “commercial” segments: I come back to this point just after
- Losses related to Natural disasters (hurricanes).
- Protecting Floods : Tools now exist to assess flood risk, and collaboration with states is needed to ensure the best coverage of this risk.
- IFRS17 : Investments will be needed around the data to ensure good data collection and analysis.
- Insurtechs in China : I’ll come back to this point below.
On the perimeter of the “commercial” contracts (on which I am working rather seriously lately), innovation brings new solutions.
Swiss Re cites, of course, parametric insurance solutions, coupled with a global vision of risk, that solve complexities of the process at the time of the claims. On the other hand, it does not bring any real additional value talking about premium reduction for example.
The most important point about these contracts is that it is now possible to insure elements previously impossible to cover. This offers interesting growth opportunities. For example: image loss, product recalls, weather protection, or financial risks of increasing energy prices. This is now possible thanks to better access to risk data and a better assessment of its consequences.
Insurance can therefore strengthen its position as a protector of corporate investments and offset the risks of earnings volatility.
Insurtechs in China
A small recap is proposed on the issue of insurtech in China, where the growth of Zhong An is particularly impressive (insurtech largest insurer of the world).
2 successive waves took place in China:
- A first from 2001, around the online distribution, which brought the online market share to almost 8%;
- The second in recent years, which exploits new technologies and especially big data (telematics or insurance to use / UBI)
Prospects can still open up to cover the ecosystem of e-commerce, and even consider the entry of new players outside the insurance world.
The Chinese regulator seeks to constrain certain segments (such as online lending), but it is generally rather a support for innovation.
My opinion on the global insurance review 2017
Always of very good quality, the Swiss Re reports are full of information and figures. One could blame them for their lack of pedagogy and the austere aspect of their reports, which prevent a diffusion to the greatest number. It may be the price of quality!
Deloitte published in November 2016 a European study on car insurance entitled The growth of connected cars insurance. This study is carried out for the second year in a row on approximately 15,000 consumers and in 11 European countries (Austria, Belgium, France, Germany, Ireland, Italy, Poland, the Netherlands, Spain, Switzerland and the United Kingdom) .
Briefly, Deloitte believes that these products are promising, that customers are ready, and that it remains to work the business model by moving towards services. One of the main elements to remember is the notion of service platform, presented at the end of the study .
Current situation of the European market
Deloitte presents the figure of 97 billion euros for the size of the European market (premiums issued) of motor insurance in 2015. They also present a potential of connected cars insurance by 2020.
Three lessons are to be remembered:
- Overall, the potential is 17% (or € 15bn) of connected cars insurance, with two countries far ahead: Italy (see Swiss Re case study on this topic ) and to a lesser extent the UK. These two countries have a potential of respectively 27 and 23% of their market. Note, in Italy, there are already 4.5m insurance policies concerned.
- The study shows a significant change between 2015 and 2016: the intention to change insurer increases more than 15% in Europe. For the authors, this indicates a transition towards a more volatile market, and therefore a necessary transformation. (Note: In France, we observe it through the consequences of the law “Hamon”)
- 28% of respondents are willing to share their data with their insurer. At the extremes, France and Germany were the most cautious (27% and 25%), and Belgium, the most interested (40%).
Short summary sheets are presented by country and make it possible to explain specific local situations.
While insurers do not always have good press, customers are nevertheless rather ready to share their data with them. Insurers have a relatively better image than many other types of actors.
In an increasingly standardized, competitive and fluid market, this shows the appearance of a momentum for insurers. It could be interesting for them to exploit these good conditions to position themselves in this market and thus set up criteria differentiating from their competitors.
Nevertheless, it’s impossible to talk about connected cars insurance without talking about analyzing and processing the data collected. It is therefore a question of organizing the transition to more big data in order to benefit from real targeting skills.
Which potential customers?
6 categories of customers are identified by the study, with a very different interest towards connected insurance contracts:
- Segment of curious elderly policyholders
- Faithful elderly
- Refractory aged insured categories
- Versatile young people insured
- Young faithful insured
- High-Premium Insureds
If these categories deserve a little refinement, they already allow the authors of the study to make an international comparison.
What motivations for underwriting connected cars insurance?
Several scenarios were proposed to the respondents.
Consumers appear much more likely to share their driving data than data from social networks. In addition, as expected, price reduction is the main motivation that can encourage sharing of information. On the other hand, the provision of complementary services is well reflected in the expectations of customers.
The study then presents two interesting visions showing the correlation in the valuation of services and the confidentiality of data, first by country, then by population segment.
We will note here different profiles for the two most advanced countries (Italy and United Kingdom).
Is connected automobile insurance, in addition to an opportunity for differentiation in the market, the opportunity to renew or develop the service offer. This is what the authors of the study think.
Categories of Services
3 categories of services were studied:
- Automotive related services : troubleshooting assistance, theft notification, etc.
- Non-automotive services : geolocated promotional offer, etc.
- Data analysis and driving behavior services : Travel and expense information, comparing driving with friends, etc.
Respondents then had to indicate whether they would agree to share their data in order to benefit from one of the 17 services offered.
4 services are therefore clearly of significant interest (more than half of the respondents would be willing to share their data):
- free troubleshooting assistance
- automatic assistance in case of emergency
- theft notification / tracking of stolen vehicles
- free oil change or vehicle maintenance services
These services (in relation to the automobile) could then serve as levers for insurers in order to gain maturity on the other 2 categories of services.
Case / smartphone application
Finally, the study shows a preference in almost all countries for a box installed in the vehicle rather than a smartphone application. A nuance is to be brought: the versatile young insureds show a rather opposite behavior (54% of preference for the application). As it is in this segment that there is a strong potential for development, this nuance is important!
As the choice of equipment is fairly structuring, insurers will have to choose the segments of the population they want to target as a prerequisite for any approach.
The usual worries of the insured are not excluded from this study.
The issue of transparency in the use of data is therefore essential. In addition, three approaches are to be taken into account by insurers to integrate social responsibility issues:
- ethical dimension of data usage
- possibility to feed a new type of relationship with the insured
- taking into account real risk prevention / loss reduction.
In the end, it should be clear to insurers that the data collected should be used for risk reduction and not just for risk selection. We find clearly in our study that the assessment of services is related to security issues.
The service platform
One of the main elements of this study is the notion of service platform. Insurers have the opportunity to move from a value proposition focused on claims management to a wider range of services around the mobility experience.
Connected cars insurance could be the product that will allow the insurer to renew its relationship with the insured, adding more frequent touch points.
This implies for the insurer to be interested, beyond tariff benefits, in the entire ecosystem of car insurance. More specifically, the insurer will probably have to participate more deeply and invest these new segments to reinvent the user experience.
The choice that presents itself is simple for the insurer:
- Either do nothing and take the risk of being overwhelmed by new players that will spill over into its business segment
- Either position itself as a service platform, which will allow the insured to access an ecosystem of partners.
The experience of a few players in other markets (eBay, Uber, TripAdvisor, etc.) shows the potential of such an economic model. These entities are indeed able to operate light and flexible structures that adapt quickly to the needs of consumers.
Auto insurance is already mature enough, and offers a clear environment. This will surely be one of the first branches for which we will have to reinvent the operational model. The first to launch will have a certain competitive advantage.
Deloitte is presenting a proposal for a range of services that could be addressed.
Cap Gemini released mid-September, in partnership with Efma , its annual report on insurance:”world insurance report 2017“. This one is based on an international survey (Capgemini’s voice of customer) and this year is interested in 3 aspects:
- Generation Y and its appetite for digital solutions,
- The notion of” Moment of Truth ” (Moment of Truth, the moments that tip a customer’s opinion on his insurance company)
- A growing cooperation between insurance companies and traditional insurers that makes it possible to exploit the strengths of the two types of structures.
Thus, and I’m aligned with this idea, it is not only necessary to invest in innovation, but we must invest properly.
Key elements to remember from Word insurance report 2017
- 1st part
- Digital technology is now at the heart of insurers’ strategy
- Digital is also changing the competitive landscape and, by raising the insurance profile, is driving sector transformation
- Insurers stay ahead thanks to the confidence they inspire
- With their respective strengths, it is the collaboration that takes place between insurers and insurance companies
- 2nd part
- The deployment of new technologies in insurance is transforming processes and bringing value to insurers and policyholders
- Insurers prioritize their investments towards solutions that are easily integrated into their systems and have a potential impact on the entire value chain
- Innovation and digitalization are likely to respond to the triptych Convenience, Agility and Personalization
- For a successful implementation, insurers must invest in a solution portfolio in synergy with each other.
World insurance report 2017 details each of these aspects.
Digital collaboration redefines the insurance industry
The rise of digital insurance
Insurers have gained unparalleled expertise in risk analysis. The current wave of new technologies, focused on customer needs, is forcing insurers to change. Today, younger generations want to have solutions adapted to their way of life. More specifically, CapGemini finds specificities in the expectations of these groups of populations. They formalized them in their study on “Moments of Truth”.
Specifically, CapGemini finds that Generation Y and the group of techies have more marked behaviors, including the loyalty and the likelihood of buying a complementary product.
This confirms the need to find solutions to meet these more demanding expectations.
CapGemini cites the examples of Aviva (driving support app), AllState (claiming with Quick Foto Claim) or Meiji Yasuda Life (strengthening the sales force with smart tablets).
Is digital changing the competitive environment?
Insurance companies can draw new business models, but in a deeper way, they pull the market on a path of breakthrough innovation. Some examples:
- The Everquote comparator offers a preselection of companies based on the profile analysis of the individual;
- Aggregators FinanceFox or Brolly allow to have a 360 ° vision of the policyholders’ contracts;
- BrightHealth to simplify the patient experience by keeping you healthy on the smartphone;
- Trov offers on-demand insurance;
- Finally, Fabric targets young parents to offer life insurance policies.
Everyone (insurers / insurtech) has its specificities and its assets. The diagram below graphically represents the respective advantages of each.
Collaboration as a method of evolution
Competition has long been the norm between insurers and insurance companies, but the notion of collaboration is becoming more and more popular to make the most of the strengths. The following diagram shows these forces. Knowing them well helps to ensure that we make the most of them.
Different methods of collaboration are envisaged:
- Investment / Equity stake;
- Strategic partnerships: in terms of distribution and the construction of offers, for example;
- Incubators: Kamet’s example for Axa invites external companies to help them in their development;
- Internal Incubators: When internal teams have good ideas, you need to be able to grow them out of the usual constraints;
Among these models, it turns out that pure collaboration is still the one put forward by most actors.
The priority for traditional insurers should be to stimulate a culture of innovation and to have a” digital first” approach. Collaboration with insurance companies is one of the keys to this success.
3 themes appear as levers of” Moments of Truth”:
Browse the enigma of innovation
The capabilities of insurance companies open up new opportunities for insurers
From a customer point of view, the solutions offered by insurtechs revolutionize the historical face-to-face relationship through:
- B2C aggregators: These are the comparators, like Insurify
- B2B aggregators: Proposals for tailored solutions for business customers
- P2P Intermediaries: Collaborative Solutions
- Mobile apps and chatbots
Emerging technologies act as catalysts for insurance companies
The technologies cited as examples on the back-office side are:
Then, others, more visible to the client, and therefore front-office side:
- Robo Advisor
- Wearables : portable connected objects (mostly health-oriented)
- Ecosystems connected
Note: CapGemini does not take too much risk here because they quote almost all the technologies that make the headlines of the moment!
Set priorities for the future
In order to select priorities for future development, World Insurance Report 2017 suggests meeting the 3 essential needs of the insured: Convenience, Agility, Personalization.
To do this, CapGemini proposes 3 pillars, visible on the diagram below:
- Digitization, to look for improvements in the cost structure;
- Data & analytics, to look for a better customer engagement;
- Insurance as-a-utility to find new sources of income.
What digitalization solutions?
The recommended solutions are:
- Connected objects : for example, Oscar for health that tracks your physical activity levels, or Hippo for the home that tracks leaks before they cause damage;
- Key process automation : Lemonade robots by example are dreadfully effective, or the use of drones to resolve claims more quickly in natural disasters;
- Smart contracts with the blockchain : Examples of Dynamis and SafeShare Global are included as examples.
- Mobile solutions : Focusing on mobile-only solutions may be relevant, as proposed Wrisk .
- APIs open to develop new applications : This allows you to benefit from the creativity of the mass of developers on the market. The report only cites MuHu .
What solutions around data and analytics?
The recommended solutions are:
- Build individualized profiles : Amodo or Mydrive solutions
- Individual Risk Assessment / Risk Management : Cigna or GOQii allow to target the technophiles for example.
- Pricing Analytics : Sentiance and its partnership with Insurtech RISK is quoted.
- Identifying Emerging Risks : Praedicat analyzes millions of pages of scientific studies to identify new risks.
- Targeted products and services : For example Y-Risk
- Customer service augmented by artificial intelligence : Chatbots of course, but also offers solutions such as Next Insurance or Xtra Axa chatbot .
What solutions for insurance as-a-Utility?
The recommended solutions are:
- Collaborative Insurance : for example, the now well-known Friendsurance
- Multi-risk policies : The solution proposed by Aioi Nissay Dowa Insurance Europe meets this criterion;
- On Demand Insurance : Slice Labs of course and also Sure provide interesting solutions;
- Usage-Based Insurance (UBI) Metromile or Progressive among others offer Pay-As-You-Drive or other derived from the genus.
- Micro Insurance : BIMA or Star Microinsurance ;
- Flexible Coverage : This is the principle of the wholesale broker, for example Bought by many or GEICO ;
How to move forward?
All actors have priorities that vary from year to year and according to their level of advancement. On the other hand, all are confronted with an identical context and the search for new business models is important. For this, it is about being able to choose which solutions to put forward.
The following diagram presents, for each model that an insurer could consider, the functionalities or solutions on which it is relevant to invest.
So we see that one solution can not meet all needs. Therefore, we must invest in a reasoned and coherent way in a set of solutions that create synergies between them. ( Note: Nothing new, the popular saying says well:” Do not put all your eggs in one basket”! ).
Conclusions on world insurance report 2017
The report World insurance report 2017 sometimes appears as a catalog at the forefront of all that the insurance innovation market has solutions, without any opinion, and we can regret it. However, you have to keep 2 things:
- It has the merit, in this catalog, of being quite exhaustive, and little is missing on the call
- There are many examples to illustrate ideas and to form one’s own opinion.
In short, they succeed their exercise at will educational, but do not go further!
On Monday, November 6th, 2017, April Group organized the event Insurection, wanted as the biggest French event dedicated to insurtechs. 300 people attended, and as part of our insurance innovation activities, I was there to represent Siltea .
Back to this day, with the key elements to remember: roundtables and startups present. Continue reading “Insurection by Group April: debrief”