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Insurtech trends: towards 2018

New and innovative is not enough to define a trend. What really makes a trend is adoption at scale. In this article, we dive into the top insurtech trends in both global and regional markets, looking at the key technologies and services being offered, the state of funding for insurtech, and finally, at the commercial viewpoint.

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 and business partnerships to support this transformation, which, according to PwC, is being driven by an industry-wide need for better risk insights and customer engagement.

Global & regional markets

In the Insurance Nexus Global Trend Map 2017, Insurance Nexus presents the findings of a survey of over 1000 insurance professionals from around the globe. Their research found that internationally, digital innovation is the top priority for insurers, and this was indeed the case in the three key regions surveyed: North America, Europe, and Asia-Pacific. Although results varied by region, other top priorities included analytics, claims, and increased focus on the customer experience.

Across Europe the top priorities indicated by insurers and reinsurers were claims, customer centricity, mobile innovation, and regulation. In contrast, North American respondents prioritized analytics, cybersecurity, investment management, risk management, underwriting, and product development. In Asia-Pacific, top priorities were analytics, distribution diversification, digital innovation, Internet of Things (IoT), pricing, and fraud.

Technology & services

The global move toward insurance innovation 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.

Throughout the financial services and insurance industries, the core trend is a move toward increased automation as a cost saving mechanism, and to improve efficiency. Likewise, the automation of routine activities allows insurance professionals to devote more time to improving the customer’s experience, and to tackling major issues such as cyber-risk in insurance.

In its 20th annual CEO insurance survey, PwC outlined several promising tech solutions for the insurance industry. To start, the use of machine learning, advanced analytics, and sensor technologies to better target consumers, evaluate their demands, and develop tailored solutions to address price risk in real time is becoming ever more prevalent.

Automation and advanced AI tools have already helped to cut costs and improve day-to-day underwriting, and emerging opportunities such as equipment sensors and cognitive computing are on the rise. According to PwC, the industry is moving from anticipating through predictive analytics, toward prescriptive analytics to better shape the outcome. Another key tech trend to watch is robotics, which is helping to reshape the standard mode of operation and to reduce costs.


The state of venture capital (VC) has an impact on the amount of funding and the type of funding for innovative insurance technologies. The United States has a dynamic and competitive VC market that has proved beneficial for insurtech start-ups, and many have already managed to complete several successful funding rounds. Over the past few years, the size and value of insurtech funding has skyrocketed.

According to data from CB Insights, 2015 was a record year for insurtech funding with totals reaching an estimated USD USD 2.67 billion – more than triple that of the previous year. And, although the total value of deals declined in 2016, the amount of funding deals taking place has continued to rise into 2017. The figure below illustrates funding growth between 2011 and 2016.

Figure 1: Insurance tech annual financing trends (2011-2016)
Source: CB Insights

The United States has the liveliest VC market for insurtech. In 2016, 59% of all insurtech deals were allocated to US-based start-ups. For comparison, Germany had the second most insurtech deals, but only accounted for 6%, followed by the UK (5%), China (5%), and India (3%). Despite the comparatively small volume, insurtech does seem to be on the rise in these markets. 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.

The figure below illustrates the distribution of responses in a recent survey of insurance sector executives carried out by PwC, which asked participants to indicate the most relevant technologies for business investments over the coming year.

PWC Global InsurTech Report image

Figure 2: Relevant areas of investment over the next 12 months. Source: PWC Global InsurTech Report 2017 – Insurance’s New Normal: Driving Innovation with InsurTech.

The commercial viewpoint

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.

Another recent report by PwC found that 60% of insurtech start-ups focus on innovating the customer’s experience. Similarly, an Accenture report from earlier this year, titled The Rise of Insurtech, 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.

Future challenges

Throughout the available surveys of businesses and industry professionals, one thing seems clear: the world of insurance is optimistic about the future of insurtech. However, despite this optimism the industry faces a range of challenges in both the short-term and long-term. These include changing customer expectations, moral hazards, newly emerging risks, fluctuating economic conditions, and increased regulation.

Some of these challenges can be addressed (at least in part) by the application of new technologies and ways of working in the insurance industry. In particular, the insurance industry can take on the task of addressing consumer-related issues, such as privacy, data collection, user experience, and the range of ethical issues that arise when more sophisticated data collection & analysis techniques are applied.

Other challenges, however, are not under the control of companies. Externalities such as fluctuating economic conditions and regulatory complexity mean that companies must keep a close eye on broader market and governmental trends, as well as ones specific to the insurance industry.

For example, European regulations such as GDPR and PSD2, due to be implemented in early 2018, are relevant to the insurance industry as they stipulate how customer data must be managed. In the broader market, China is an emerging player, and although they tend to primarily serve their domestic market, their investment in insurtech means they are likely to influence which technologies emerge and the markets they impact generally.

Faced with these complexities, companies working in the insurance space would be well placed to invest time in understanding their position in the broader market, as well as on their B2B and B2C relationships.

By Katherine Lovelace and Erin Taylor, researchers at Holland FinTech
This article is part of a series on InsurTech. Read about InsurTech Essentials and keep an eye out for more articles in the series.]]>

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