Oxbow Partners is a UK-based consulting firm dedicated to the world of insurance. More specifically, they are specialized in topics that are changing the world of insurance, through 3 entry points: strategy, digital, and M&A. They just released a report called “ The 25 insurtechs Oxbow 2018 ” .
I share the point of departure of Oxbow Partners, according to which there is no reliable criterion of comparison of insurtechs currently.
Some are interested in raised funds. However, I think financially speaking, raising money is not necessarily a positive criterion for a startup. Indeed, if it is necessary to pass caps, it can mean that it can not finance its growth alone.
I decided to classify them according to their contribution to the business value chain, but it is just as debatable because I do not take into account their economic sustainability.
In short, Oxbow Partners made its selection according to the following criteria:
In addition, they take up a concept now commonly accepted: insurtechs today are not only distributors (B2C), but are facilitators or accelerators in B2B.
Last interesting element, represented under the diagram below, they consider that after the abandonment of a phase of competition, in favor of the collaboration between big groups and insurtechs, one should see reappearing soon a competition of another kind . This could be explained, according to Oxbow Partners, in the event of insufficient commitment by insurers.
Selection of 25 insurtechs Oxbow 2018
The selected startups belong to 4 categories:
Distribution: These players are looking for end customers and need insurers or reinsurers to provide them with products
Data & analytics
Claims and fraud
These last 3 categories are actors who need insurers as clients.
Here is the selection presented differently.
The last pages of the report present a summary in 1 or 2 pages for each of the selected solutions.
When we look at the connected objects of vehicles, or more technically what is called telematics, a major problem appears: the exploitation of data! The startup Otoconnect focuses on this segment and is working on the provision of multiple connectors, around a first target, the portability of contracts under the GDPR regulation. Continue reading “Otoconnect – Vehicle’s data platform”
Matteo Carbone is an opinion leader in the insurtech industry today as one of the most prominent on the market. He created the Connected Insurance Observatory, an international working group, first in Europe, then in North America, dedicated to insurtechs. Matteo participates in numerous conferences around the world throughout the year. He unfolds his theory of 4P’s of insurtechs, and I wanted to make a presentation for a long time.
The 4P’s of insurtechs
First of all, you can listen to Matteo Carbone in his presentation at the 2017 Global Insurance Symposium in Des Moines.
You can also find slides at this link, if you are an aficionado of his prose, without listening to his wonderful English accent!
Key points to remember
According to Matteo Carbone, insurtechs can intervene on 4 axes:
Productivity : be more efficient
Profitability : get a better technical result
Proximity : to be closer to the customer and his needs
Sustainability of the portfolio (the term it uses is “Persistency” which means persistence over time, and therefore no attrition): Build a profitable portfolio on the long run term, with a small rotation.
In the absence of these objectives, there is no interest in innovating because the solution will not bring anything useful.
The second subject addressed in this presentation is telematics, because it is one of the key topics of Matteo Carbone. The Swiss Re report which I was echoing a few months ago is directly worked with him, when it comes to the Italian example.
3 topics to consider:
The connected object : often a black box connected to the vehicle
Insurance coverage : and the notion of incentive reduction associated with it
Associated services : access to a set of additional services that can be provided for a fixed fee.
Under the arguments that telematics allows of itself and of course a selection of the best risks ( Note: it is questionable ) and a better controls of the compensations ( Note: that on the other hand, I share ), he comes to the conclusion that the financial result of the insurer is improved thanks to this technology.
It is also possible to rework the customer experience on all of its use of the vehicle and the different needs that might be relevant. Note: this aspect is absolutely essential, because it is from the use that one deduces the exploitation that one can make technologies.
Finally, the figures it presents show that attrition will be lower with telematics than without (11% instead of 14%).
In short, that positive points!
I share a lot of Matteo’s conclusions.
By reading, you will understand that the questions of use and business need interest me first. The 4P’s of insurtechs are a key to reading that is interesting to keep in the lead.
On the Telematics side, I am also convinced of the short / medium term prospects for the subject. I invite you to read again my note on it . Let’s discuss if you want to consider a deployment!
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%;
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
Refractory aged insured categories
Versatile young people insured
Young faithful insured
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
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
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;
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:
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 .