“Real” InsurTech Startups do it Differently!

By Karl Heinz Passler Product Manager and Startup Scout, Basler Versicherungen For decades, the insurance industry did business as usual. In 2010, a new kind of tech company started up in the vertical market and began to offer innovative, tech-based services to established risk carriers, intermediaries, and their customers. In 2017 the number of these so-called InsurTech startups skyrocketed to over 1,000 around the globe. On first impression, you can hardly distinguish InsurTech startups from one another. What are the key differences, and which have the potential to deeply change, or even disrupt, the insurance industry? InsurTech Startups Take the Next Step The term “InsurTech” is used to describe innovative, tech-driven ways of solving customer, operational, and business model problems in the insurance industry. InsurTech startups look at the industry as it is. They investigate the pain points that insurers, intermediaries, and their customers suffer from, and employ techdriven solutions to ease those pains. These startups often observe successful technology-oriented solutions in other sectors, such as finance, and transfer them to the insurance sector. These types of startups can be divided into three groups: 1. Startups improving the customer experience 2. Startups enabling incumbent providers 3. Startups starting as risk carriers. Startups Improving the Customer Experience Insurance customers have come to expect the same level of convenience from their insurance providers that they get from digital service providers such as Netflix, Amazon, and Facebook. Traditional insurance offers are not able to meet these changed requirements, as incumbents are still limited by their outdated administration systems.1 This creates opportunities for InsurTech startups acting as intermediaries on their own account to provide their policyholders convenient services. Here are some examples: Check24 and CoverHound offer price comparisons for finding the lowest premiums; Bought by Many provides demand aggregation for obtaining special policies; PolicyGenius, Knip, and Clark provide digital brokerage to keep covers up to date. These startups give policy-holders an excellent customer experience tailored to their needs for convenience and low prices. Startups Enabling Incumbent Providers Most insurance providers underestimated the speed of technological progress and are now hindered from progressing fast enough by their legacy systems and their corresponding processes. This creates opportunities for InsurTech startups to enable incumbent insurance providers. This “self-help” can be found along the entire value chain: • Simplesurance and KASKO provide online insurance self-service platforms that enable the delivery of cross-selling solutions for e-commerce stores and the delivery of new on-demand insurance products;

• Bold Penguin, Virado, and massup support the online sale of whitelabel, low margin, niche financial products direct to customers or via brokers improving the quoting, binding, and servicing elements of new and existing policies; • SPIXII and Insurista provide, respectively, automated insurance agent and messaging leveraging chatbots; • Rightindem and Snapsheet provide friendly digital claims management platforms leveraging enhanced customer experiences; • DreamQuark and others provide big data analytics and machine intelligence solutions that take advantage of stored data; • DataRobot and Neosurance offer automated processing using artificial intelligence that identifies the best timely products. These technology-based services enable incumbent risk carriers and intermediaries to better serve their partners and customers, reduce costs, and speed up and automate processes. Startups Starting as Risk Carriers With the arrival of the mobile Internet (strongly driven by the iPhone in 2007) insurance customers and sales partners developed solutions based on requirements that are difficult to embed within insurers’ legacy systems and locked operations.2 New full-stack InsurTech startups, powered with state-of-the-art technology, compete with incumbent companies in providing better products and streamlined and frictionless services. An acclaimed and respected example is Lemonade. Customers’ distrust of risk carriers and their associated high premiums (due to fraud) is reduced by the application of behavioural science. In the case of Lemonade this includes the use of video interviewled claims, a flat-rate cost model, the use of artificial intelligence to automate and accelerate claim payouts, and donating left premiums post claims settlement to charitable organizations. Another case is Element (in founding as of the time of writing). The demand for simple and transparent products and services by intermediaries and policy-holders prompted Element to equip the traditional business model of insurance with a more flexible product engine, letting distribution partners sell exactly the products they want. Disruptive InsurTech Startups Take the Leap Disruptive InsurTech startups challenge the industry’s underlying assumptions. They re-evaluate the incumbent business model, based on the latest customer and technology insights. This approach leads to innovative and creative solutions, apart from those that are already well known. There are cases where they employ state-of-the-art technologies as basic building blocks for the delivery of superior products, and cases were they “only” augment their groundbreaking business models with technologies. Other cases would include Disruptive InsurTech startups covering risks in new industries. Without the recent progress with digital technologies, such considerations would have been impossible. These types of startup can be divided into three groups: 1. Startups offering superior products 2. Startups tapping into new markets 3. Startups running a new business model. Startups Offering Superior Products Farmers can control many factors of their operations, but they have no control over the weather. Unexpected weather and climate change are the cause of more than 90% of crop losses. The Climate Corporation (formerly known as WeatherBill)

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