The evolution of compliance standards and changing consumer demands has influenced major adjustments across the insurance ecosystem. Innovative insurtech start-ups have managed to infiltrate every corner of the industry, and major incumbent players have been increasingly compelled to either innovate or integrate new technologies into their everyday operations.
Much like its close relative, fintech, ‘insurtech’ is a blanket term covering a wide range of innovative technologies that aim to improve efficiency and performance across a broad spectrum of activities within the insurance industry. In 2016, FT Partners reported that nearly every component of the insurance value chain – from marketing, to underwriting, to sales and claims – was undergoing a tech revolution. In the year since its report was published, this trend has become ever more prevalent. Innovation in the insurance industry is occurring at every level, with some innovators seeking to enhance and further digitalise operations within the existing insurance ecosystem, while others aim to create new tools to facilitate increased consumer engagement.
Together, InsurTech and the Internet of Things (IoT) will take centre stage as one of four key interest tracks during our FinTech Vortex event, which will take place in The Hague later this month on the 26th of September 2017. To better prepare our readers and attendees for the upcoming event, we’ve compiled the latest insights and trends from each of the respective focus tracks.
Be sure to read up on SME Capital & Investment and Personal Finance & PensionTech, and stay tuned next week for an article on the Cyber Security & RegTech track, as well as Part II of SME Capital & Investment. Join the conversation with us @HollandFinTech on Twitter, #FintechVortex.
Collaborate to innovate
In its Global Insurtech Report, released July 2017, PwC offered insights from a survey of nearly 200 executives working in the insurance sector, and hailing from 40 different nations around the globe. The study found that 45% of respondents are currently partnering with an insurtech company to further drive innovation achievements. Further, an impressive 94% of respondents reported better prioritisation of risk insights and customer engagement, and 68% of participants indicated an expectation to adopt blockchain as an element of production by 2018.
In its annual insurtech report, entitled, The Rise of Insurtech, Accenture found that 87% of surveyed insurers agreed that technology was expanding at an exponential rate, while 86% believed that, in order to retain a competitive edge, rapid innovation has become a necessity. Meanwhile, 96% of respondents agreed that digital ecosystems are having a major impact on the insurance industry.
The key takeaways across industry reporting in 2017 tend to go like this: insurtech has rapidly become less of a disruptive threat, and is instead increasingly seen as a transformative force. Around the globe, insurers are investing more and more in key technologies to support this transformation, which, according to PwC, is being driven by an industry-wide need for better risk insights and customer engagement. This transformation has brought emergent technologies like Artificial Intelligence, or AI, and the Internet of Things, or IoT, to the forefront, where industry incumbents and insurtech innovators are collaborating to overcome challenges. The figure below illustrates the expected future importance of current insurtech trends over the coming five years.
Securing & insuring the Internet of Things (IoT)
Earlier this year, Accenture reported that insurtech start-ups specialising in Internet of Things (IoT), big data analytics, and AI attracted more than half of the total global funding spent on insurtech deals made between 2014 and 2016. The application of IoT technologies has become evermore prevalent in the insurtech sector in this past year. In 2016, AI and IoT combined accounted for 44% of all insurtech investments. The explanation for this growth is simple: insurance companies rely on data and analytics, and IoT offers countless opportunities to learn more about consumers and how they engage with their insurance providers and products. In addition, IoT has the potential to be applicable within a wide breadth of insurance market niches, such as health, automobile, and home insurance.
So what exactly is the Internet of Things, and why is it so critical to the insurance industry?
In its report The Internet of Things in Insurance, EY defined IoT as, “a network or system of interrelated computing devices, sensors, living creatures or other objects that have unique identifiers and can communicate with other devices on the network. These objects, or ‘things,’ are capable of transmitting data.” The figure below outlines several of the most important and impactful data sources provided by the Internet of Things.
Source: EY, ‘The Internet of Things in Insurance’
The insurtech investment boom
Recent data from CB Insights measured total global investments in insurtech at USD 1.7 billion in 2016, and Accenture described the uptake in innovation investment in the insurance world as a, “truly global trend.” Although the US still accounts for more than half of all insurtech deals with its major hubs on either coast – Silicon Valley and San Francisco on the west coast, and New York on the east; Germany, China, and the UK also represent important insurtech markets. In fact, Finextra recently reported on another big boost in UK insurtech investments in the first half of 2017 despite ever-present Brexit negotiations, and industry experts expect this trend to continue into the coming years.
Beyond the boost in insurtech investments on the global scale, Europe has also seen a considerable uptake in activity. Earlier this year Amsterdam played host to the second edition of the Digital Insurance Agenda (DIA) conference, DIA 2017. More than 50 insurtech firms joined the event, where they showcased innovative tech solutions to an audience that included nearly 850 C-level and C-1 insurance executives representing more than 250 major companies from 40 countries across the globe. During the event, three of the six insurtech firms that were distinguished with the DIAmond Award for ‘insurtech with the most strategic impact’ hailed from the Benelux region.
In our own Holland FinTech network, the efficacy of insurtech innovators is also evident. Just this past month, two of our members – Komparu and EMS Claims Service Provider – were nominated for the prestigious European FinTech Awards, and in March our member Smart2Cover was honoured with a nomination for the Dutch FinTech Awards 2017.
By Katherine Lovelace, Research Analyst at Holland FinTech
Want to learn more about Holland FinTech and the insurtech firms in our network? Join us at our FinTech Vortex event in the Hague on September 26th, 2017. Tickets available here.