The latest figures from a Willis Towers Watson (WTW) report shows that investment in insurance technology, or InsurTech, reached an all-time high in 2019 at $6.37 billion, with funding in the Property/Casualty sector representing the lion’s share over its Life/Health counterpart.
InsurTech is designed to disrupt and change the way the insurance distribution system conducts business, upping the game in delivering tailored product lines, reducing friction in client transactions, providing a better online customer experience, and assessing risk scenarios to provide new offerings.
Impact of COVID-19 on InsurTech
Since the release of the WTW figures, COVID-19 has further accelerated the insurance industry’s implementation of new mobile apps and online platforms to meet consumer demands. The COVID-19 pandemic, with increasingly more people working remotely, has shown the limitations of insurance models that have not adequately prepared for the digital marketplace. According to a report by law firm Mayer Brown, COVID-19 has fueled certain trends that have been developing in the insurance industry over the last 10 years, including:
- Online self-directed purchases of insurance and streamlined binding and issuance of insurance policies through digital platforms;
- Expanded use of digital distribution channels and electronic delivery of documents and other communications;
- Increased data collection and analytics; and
- Faster “paperless” claim processing.
JD Power also recently released a report, “2020 U.S. Insurance Digital Experience Study,SM that iterates how the COVID-19 pandemic has thrust digital shopping and customer self-service solutions into the spotlight.
Who’s Investing in InsurTech?
While incumbent insurance companies and tech startups backed by venture capitalists have separately been behind InsurTech investments and launches, in the last couple of years we have seen a mature space form with increasingly more partnerships and collaborations taking place between incumbents and startups.
According to the 2019 World Insurance Report by global consulting firm Capgemini, more than half of insurer respondents say they are partnering with InsurTech ventures for risk control and loss prevention services. Nearly half of insurers said they use InsurTech to quantify risk. As an example, Munich Re America partners with telematics and crash avoidance experts to help fleet owners boost safety and reduce collisions.
Additionally, many insurers have formed accelerators/incubators to provide a platform for innovation and funding to InsurTech firms. Zurich has its “Zurich Innovation Championship” for startups to compete and win the opportunity to bring great solutions for the insurer and its customers. XL Innovate helps create new ventures to provide innovation to the global insurance industry, and has provided funding for InsurTech firms Embroker, Lemonade, Slice, and Stonestep, to name a few.
Lloyd’s Lab invites tech startups to apply to partner with mentors from managing agents across the market to develop and test their solutions, leverage the expertise and experience of their mentors, and demonstrate how they can add value to the Lloyd’s Market.
InsurTech Supporting Agents & Brokers
Initially, when tech companies began launching insurance platforms, naysayers feared the demise of the independent agent and broker. But just as Zillow and other platforms didn’t upend real estate agents, InsurTech is helping the retail insurance agent become more efficient. Here are some examples:
- CoverWallet in late 2018 launched a dedicated platform for independent agents to get commercial lines quotes, bind coverage, purchase policies, and service customers online. Agents instantly receive quotes from top carriers for lines of business including General Liability, Business Owners Policy, Workers Compensation, and Professional Liability.
- Tower IQ allows agencies and brokers to facilitate user-friendly and compliant communications from application to binding of an insurance policy.
- Buddha Broker’s technology platform makes it easy for commercial brokers to sell insurance by automating agency operations and turning tedious paperwork into an efficient digital process.
- Insurance tech firm Applied Systems acquired digital tech start-up Indio Technologies late last year. Applied plans to offer Indio’s digitized commercial insurance application and renewal process to its 13,000 agency and brokerage customers and their business customers. Plans are to integrate Indio into Applied’s popular agency management system, Epic. (Note: Google has a stake in Applied.)
Apple, Google, Amazon & Others Getting in the InsurTech Space
While the tech giants with some exceptions may be focusing on the Life/Health insurance space, for now, they are also keeping their eye on the P/C sector. Apple has partnered with health insurers to offer its Apple Watch. Google’s parent company, Alphabet, has a stake in health insurance start-ups Oscar Health and Clover. Amazon has partnered with Travelers to bundle insurance with smart home product purchases.
InsurTech Shaping the Future of Our Industry
Demanding clients, a new set of challenges such as remote work, climate change, and cyber risks, and additional competitors/disrupters entering the insurance landscape, are collectively transforming our industry. Those innovating and leveraging InsurTech to deliver innovative products and offerings with a greater focus on prevention, and streamline processes and services are – and will be – in the driver’s seat.
This article was originally published on February 20, 2020, and updated to reflect recent events
Sources: Willis Towers Watson, Capgemini, Deloitte, Digital Insurance