Fintech Finance presents: The Insurtech Magazine Issue 02 by Fintech Finance

MAGAZINE PIECE OF CAKE?

Head Chef of insurtech Nigel Walsh on who’s mixing it up the most

CHUBB’S BIG GLOBAL HANDSHAKE

The digital toolkit that’s building partnerships

ISSUE#2

THE

INSURTECH HERE’S THE GAME PLAN

Five ways to work with your tech partner

INVESTOR TIP #1

Mind the protection gap

HOW NOT TO TRANSFORM AN INSURER

Three things you just don’t do!

ANDREINA DOMINGUEZ CHANNELS SUCCESS FOR CUSTOMER EXPERIENCE SPECIALIST

+ INSIGHTS FROM INSURETECH CONNECT ● AFLUENTA ● CITIBANAMEX ● FLOCK

ANTHEMIS ● VERMEG ● HCL TECHNOLOGIES ● OLIVER WYMAN ● RISKGENIUS

250+

CEO speakers

160+

fintechs on stage

70+

countries

2600+ attendees

Get ready for the 5th Edition!

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networking

CONTENTS

CUSTOMER EXPERIENCE 6 Channelling change Business transformation is hard. But with the right omnichannel strategy, Quadient can help change the conversation round insurance forever and for the better

12 How not to transform a legacy insurer Businesses are impatient for value but are incumbents going the right way about delivering it? Read Vermeg’s top tips

INSURTECH SPECIAL: NIGEL WALSH’S HEROES 14 Let them have cake! Nigel Walsh, Partner at Deloitte, co-host with 11:FS of the popular InsurTech Insider podcast and one of our all-time favourite members of the financial services universe, declared earlier this year that when it comes to insurance, customers don’t want ingredients, they want cake. Here’s his choice of the industry insiders who are mixing it up…

THEINSURTECHVIEW

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Do you ever wish you could just take back the words? Nigel Walsh does... but we’re not going to ever let him forget them! To find out what they were, dip into our special section on Nigel’s heroes, who represent a fascinating slice of insurtech life. All of them are rising to the challenge of changing the way we assess and mitigate risk and sell risk cover, either directly or by creating the environment in which insurtech ideas can be brought to commercial life. Their observations and insights are deliciously layered among other features in this issue. They include our cover story interview with Andreina Dominguez on driving transformation in insurance by adopting an omnichannel strategy, and Chubb’s

Sean Ringsted on the global insurer’s decision to change the policy-driven business model for one built around the customer. The cherry on the cake is social media guru Jay Palter’s generous selection of key insurtech influencers and tips on how to connect with them. Did someone mention cake? Whoops!

16 The Startup & The Startup Personality How Flock reached for the skies and RiskGenius’ charismatic CEO explains how he made a business selling 'pickaxes' to insurers!

18 The Conference Organiser & The Reinsurer InsureTech Connect, the knockout Las Vegas event that no one would have put money on, and Munich Re Digital Partners betting on insurance startup success

21 The Insight & The Communicator

Willis RE Insurtech is finding diamonds in the rough, while dedicated insurance information platform Coverager pans for insightful gems

23 The Community Builder & The Venture Capitalist ‘Dating agency’ InsTech London on what’s missing in an insurtech’s life and Eos Venture Partners looking for that perfect match

24 The Insurer & The Accelerator AXA XL, steering insurance in a new direction, while incubator InsurTech Gateway clears the way for entrepreneurs www.fintech.finance

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securing banking

valyoues Itâ&#x20AC;&#x2122;s all about customer experience. Digitalization and customer expectations are driving the future of financial services. Put your customers first by offering state-of-the-art ID management solutions and digital payments services that will make you top of wallet. G+D Mobile Security is a part of the G+D Group with more than 11,000 employees worldwide. Our 5,300 experts in over 40 sales and partner offices all over the world are glad to advise and support you with years of experience and comprehensive solutions that let you meet the challenges of a connected financial industry and capitalize on its opportunities. For more information, please contact mobilesecurity@gi-de.com Follow us on: Social icon

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CONTENTS

34 30

36 42 Waving, not drowning

UNDERWRITING

INSIGHTS

26 Linked up lending

34 Playing the insurtech game to win

Afluenta was one of the first peer-to-peer fintechs to emerge in Argentina. Now offering a range of linked insurance products, it’s looking to provide the missing pieces in LATAM’s lending market

With insurtech attracting record investment, HCL Technologies, predicts that incumbents and startups stand an equal chance of success

Insurers the world over are in the same boat, navigating storms of change. But steering a way through isn't just about technology, says Tony Boobier

44 Mind the gap Anthemis believes the difference between the protection a customer buys and what a customer really needs is both a failure and an opportunity for startups and the investors who back them

36 Diary of an insurtechoholic

28 Winds of change Citibanamex sees bancassurance as a way to lift woefully poor take up of insurance by Mexicans. It’s working with its partner Chubb on a digital-first approach

30 Take Cover!

In his first entries, our not-so-well-disguised tech addict considers how startups should tackle that difficult second album

39 Hungry for change

Insurance is on the move as customer-centric business models take over from policy-driven archetypes. Global insurer, Chubb, is signing up partners large and small to deliver a new type of experience – much of it on mobile

We dine out with Oliver Wyman, sponsor of the largest insurtech gathering in the world and ask what should be on the innovation menu

LAST WORDS 46 Insurtech’s top influencers and why you should be following them! Social media savant Jay Palter opens his virtual little black book of those you need to know

THEINSURTECHMAGAZINE2019 EXECUTIVE EDITOR Ali Paterson EDITOR Sue Scott ART DIRECTOR Chris Swales ONLINE EDITOR YASH HIRANI

PHOTOGRAPHER Jordan “Dusty” Drew SALES James Butcher Chloe Butler Tom Dickinson Shaun Routledge

VIDEO TEAM Douglas Mackenzie Lea Jakobiak Shaun Routledge Lewis Averillo-Singh Classic Dom Beasley Laimis Bilys

FEATURE WRITERS Tracy Fletcher Rachael Harrison Natalie Marchant Fiona McFarlane Sue Scott James Tall Swati Sanyal Tarafdar

Fintech Finance is published by ADVERTAINMENT MEDIA LTD. Advertainment Media Ltd. Riverside Business Centre, Riverside Lawn, Tonbridge Kent, TN9 1EP

ISSUE #2

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All Rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying or otherwise, without prior permission of the publisher and copyright owner. While every effort has been made to ensure the accuracy of the information in this publication, the publisher accepts no responsibility for errors or omissions. The products and services advertised are those of individual authors and are not necessarily endorsed by or connected with the publisher. The opinions expressed in the articles within this publication are those of individual authors and not necessarily those of the publisher.

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Issue 2 | TheInsurtechMagazine

CUSTOMER EXPERIENCE

CHANNELLING

CHANGE Andreina Dominguez, Product Marketing Manager for Quadient, believes the science of interpreting data and the art of designing customer experiences can change the conversation around insurance forever

THE INSURTECH MAGAZINE: How has customer experience changed in the insurance industry and how should an insurer’s digital strategy respond to it? ANDREINA DOMINGUEZ: Insurance is a very competitive, highly saturated market. Where price and product is no longer a differentiator, insurers need to look to customer service to deliver additional value to policy holders, in order to stand out from the competition. They need to create a relationship – establishing a way to engage with those customers – outside of the normal claims experience, in order to add value. That could take the form of advice, content or consulting – sharing information with customers beyond buying the policy or managing the claims experience. Insurers are now serving five generations of policy holders, and that means five generations of different communication preferences, and different devices. The challenge is to deliver a consistent experience, not just across multiple channels, but also across an insurer’s products and lines of business – and at speed. This is difficult because they’re dealing with legacy systems with many point solutions and multiple

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databases. In many cases, the customer information is difficult to access, so insurers might not have the insight needed to deliver a great customer experience.

TIM: Surely that means moving to a digital-first or even mobile-first strategy? AD: You’re right. Three of the five generations of policy holders that insurers are serving will gravitate to a mobile or digital device to get information. We all have super computers in our pockets, right? And if we want to be able to access information very quickly, mobile is important. But it’s not the only technology that insurance needs to look at. It’s the combination and integration of all the interactions that creates meaningful engagement. Mobile is very important, but what’s more meaningful is to create a digital experience around ‘the customer’. This implies looking at the traditional channels, such as print, email, SMS – all of the methods through which insurers can communicate. Integration is what’s important, so that the customer feels they are interacting with one organisation, regardless of product or line of business. We need to remember that insurance was originally sold face-to-face. Reps would quite literally go house to house and sell insurance. There will always be a need for that human and more personal interaction. Digital interactions supplement those personal touchpoints, and in-person supplements digital as well. For insurers, finding the balance between digital and traditional customer communications is what will enable them to provide the best experience. This means

exploring how much of the communications should be digital versus traditional, depending on their customer preferences and where that customer will find more value. For example, for some it might be interacting in-person, while for others it could be getting push notifications via their mobile app. Millennials are seven times more likely to purchase a life insurance policy if it’s recommended through their social network by someone they know. However, depending on the complexity, they might want to purchase that policy in person. This is why digital is important, but never at the expense of traditional.

TIM: You’re talking about the ‘omnichannel’ approach. That term is used a lot around transformation. AD: Yes, it is, but it’s important to take a moment to define what we mean by ‘omnichannel’ because it helps to explain the importance of insurers adopting this approach. Omnichannel is not sending out correspondence in the mail, or alerting policyholders to a change through SMS or an email with attachments. Nor is it pushing content that was mailed to the web portal. What I’m describing there is multichannel. True omnichannel is when all of those communications and touchpoints are connected and integrated. It means that, as an organisation, you know which channel your policy holder is receiving a communication from, at what time, and for what product. Why is that important? Well, there are a few reasons. The first is just to do with the diversity of the population that insurers are serving. They are coming to insurance with experience as consumers www.fintech.finance

A balanced approach: Traditional channels are as important as digital, says Dominguez

in other verticals. They’re saying ‘why can’t I find this information? Why do I have to call and chat with somebody?’ So, number one is about customer expectations. The second reason is that insurance is in the relationship business and you can’t build a relationship with people you don’t talk to or interact with. These folks are your customers. Omnichannel is a way to build engagement and move the relationship forward, whether the insurer is proactively advising the customer or answering questions about a claim. It’s about really understanding who your policy holders are and how to grow a relationship with them. From the customer’s perspective, it’s great when your insurer – after you’ve provided information about yourself – can talk to you using that information without having to ask again for the same details. For insurers, understanding how to better engage with policy holders means more than just providing a great customer experience – it can lead to higher retention rates and, ultimately, growing each account (by upselling or cross-selling). The third reason why omnichannel is important is because the channels themselves will change, meaning some devices might go away and new ones will exist. So, creating a foundation that allows an insurer to be nimble as technology evolves, will help maintain that relationship that they’ve built over time. If you are always talking to your customers and they are engaged with you, they are likely to be more loyal. They can recommend you to their peers, family and friends – omnichannel can help insurers gain a competitive advantage.

Insurance is in the relationship business and you can’t build a relationship with people you don’t talk to

www.fintech.finance

Issue 2 | TheInsurtechMagazine

CUSTOMER EXPERIENCE TIM: How do insurtechs fitinto all this? AD: Insurtechs are really great at providing a digital-first, or rather a digital-only, experience, which works really well for some people. That’s their niche. They want to serve the group of consumers who are 100 per cent digital. But, there’s a whole other segment of consumers who want not traditional only, but a hybrid of traditional and digital. Understanding what that digital customer journey is, and where it fits in with your business against traditional channels, is exactly what insurers are doing today and should continue to do. It’s not a one-and-done effort or project. Transformation is about being able to deliver an experience as the customers’ expectations evolve. Most consumers want this hybrid approach and insurers are responding to that demand. TIM: There are huge amounts of money being invested in customer experience at the moment – mostly to catch up with the standard set by Amazon. What return on their investment can insurers really expect from it? AD: We are all consumers of insurance and, as consumers, we are bringing in expectations from the retail and other consumer experiences. This means we want quicker responses, to easily engage across any mobile device, tablet, or laptop. In terms of return on that investment, insurers are in a really good spot. They can expect to get a linear or proportional return on their customer experience efforts. TIM: That leads us neatly on to the whole transformation agenda. Where are insurers in relation to banks on that journey? AD: Banks started to transform maybe 10, 15 years ago, to address customer expectations. Insurers have been playing catch-up, but we’re seeing a lot of movement in that area now. Insurers have transitioned from just thinking about digital, to doing a few items in digital, to now really becoming digital: by that I mean moving the customer to the centre of their business and digital strategy. What’s influenced this is the range of technology now available to insurance. It’s created a large ecosystem of technologies, which can be beneficial –

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offering solutions to specific and complex insurance needs. One of those areas is innovation. The questions insurers need to ask around that area include: are we creating insurance products that are needed today, that weren’t needed before?; are we selling and distributing it in a way that reaches the customer, that’s easy and simple to purchase – directly, as opposed to through an agent or a broker?; and are we also servicing those policies when needed, between the purchase and the claim experience?

Every organisation goes through that valley of despair – the ‘why are we doing this?’ moment. That’s why it’s really important to report on success consistently

In all this, the customer always has to remain at the centre of the business – and that’s not easy. This is exactly where insurers are innovating. TIM: How are insurers tackling it, then, given the scale of ambition and the legacy they are encumbered with? AD: There has been a tendency to create a customer experience project or initiative that is part of a bigger goal. We’re seeing insurers moving away from that one-off project approach towards more of an

ongoing transformation. That takes time. It’s a journey because customer expectations are always evolving and technology is constantly changing. What insurers can do now is create a foundation that means they are ready for those technology changes. It’s about taking one step at a time, you can’t boil the ocean. Many traditional insurers are great at what they do – many have been in business for more than 150 years. They understand the industry and their market, and their customer needs. But they are hamstrung by legacy systems, by those many point solutions, by multiple databases. You can’t get rid of them all at once. It’s also a highly compliant and regulated industry. Insurers have to move carefully and make sure they are delivering that great customer experience using technology, while also remaining compliant. So, they are taking a phased approach. The foundational work is understanding what all of their customer communications are and where they are. This means understanding what information about policy holders they have and can use: the structured and unstructured data and where it lives today within the business. Insurers are continuing to build on this foundational phase, to then migrate content, streamline the look and feel and begin to automate along the way. Then they can move to the next level and that’s really about enabling the business. They might start with one product, then almost carbon copy it. We’re talking about insurers that have offices around the world, operating under different types of regulations in every region and every state. So, it’s not as simple as it sounds, but once you’ve done it successfully once, you have a blueprint. This is where Quadient comes in. We’ve grown serving highly regulated industries – insurers, banks and financial services – so we understand the need to remain compliant, but also that the customer experience is going to be a key differentiator in the future. There are certain solutions we have that address that foundational need, the business empowerment next steps, as well as the steps beyond that, which are more about digital, mobile and the customer journey. www.fintech.finance

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CUSTOMER EXPERIENCE

Transformation is tough: But with the right approach, insurers can excel at it

Quadient’s solution Inspire Express, for example, helps with the heavy lifting at the start of the journey. It can reduce up to 70 per cent of that initial migration time by using artificial intelligence and machine learning to audit all of an insurer’s content and automate it in a way that leaves employees free to do higher value work. Something that could take an entire team a couple of months to do manually, can be accomplished in just a few weeks. That massive reduction in migration time gives a quicker return on investment and moves them towards omnichannel faster. TIM: It’s not just about the technology, though, is it? Successful implementation of a new approach to customer experience also requires good management. AD: Yes, and there are a few things an insurer can do. Number one is to have someone responsible for customer experience at the executive level. This is a person who owns the key performance indicators (KPIs), who is a champion and has a seat at the table to make this a priority. Sometimes that responsibility falls to someone with an existing role. That works well temporarily, but not in the long term because priorities associated with the project shift and, because the individual now has this hybrid role, so will theirs. So, having someone dedicated to customer experience is incredibly important. The second thing we see working really successfully for insurers, is creating an interdisciplinary team. Establishing the strategy and vision and then executing requires input from technology, operations, claims and other departments, including underwriting. They might not need them all the time, but knowing who to pull in at

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which point as they’re evolving their strategy and beginning to execute the plan, is important. The final piece in the project management process is reporting success. It takes a lot of work to change and it’s not easy on people or the organisation. It’s exhausting to switch gears and to have to adapt. Changing an organisation and the culture so that employees are putting the customer at the centre, means everyone will be out of their comfort zone until the new becomes the norm. Every organisation goes through that valley of despair – the ‘why are we doing this?’ moment. That’s why it’s really important to report on short and long-term wins. By measuring the KPIs and reporting on them consistently, you’ll have buy-in. With these three ingredients, many organisations are successful.

It takes a lot of work to change and it’s not easy on people or the organisation. It’s exhausting to switch gears and to have to adapt TIM: How does Quadient help its clients create a successful, responsive and resilient customer experience strategy? AD: It’s a multi-pronged approach. The insurer will have an operations team that is continually looking to reduce costs. So, for them it’s all about digitising and

automating, which we support. The CX, (customer experience), brand or marketing team is looking to enhance the experience across their entire life cycle and maintain brand consistency. Then you have the compliance team, adjusting to changes in regulations to protect the business and, last but not least, you have a products team creating new products and wanting to deliver them with added value to customers. Quadient has been in this business for more than 20 years. We understand the complexity of the documents and policies that need creating. We help to deliver better CX by streamlining processes, digitising communications and automating a lot of the work. So, your marketing teams and your claims teams no longer have to go to IT to make changes to communications. They’re already templated, but the content is highly personalised and customised, with certain controls for audit and compliance. This is where we excel: empowering your business users with the tools they need to do the work, while also giving them access to the information and insights into what’s working well for policy holders. Working out how to fix touch points that are either not working well or could work better, or missing touchpoints in that process. We can talk about the customer experience all day. This is what we do. This is our expertise and where we thrive. www.fintech.finance

CUSTOMER EXPERIENCE

HOW NOT TO TRANSFORM A

LEGACY INSURER Impatient to see value from transformation? Then are you going the right way about delivering it? asks Vermeg’s Senior VP for Insurance, Brahim Halmaoui There has been something of a late flowering of activity on the insurtech front by legacy organisations, although some would argue that much of it has been misguided. Tinkering around the edges, avoiding transformation at the core; policy-centric rather than services-driven innovation; a tendency to containerise new ideas instead of enabling them efficiently and rapidly using application programming interfaces (APIs) that leverage legacy value... haven’t we heard all this somewhere else before? Vermeg certainly has. As a software solutions company, it works across financial services – including all types of banking, pension providers and insurers – and its experience over the past 25 years gives it breadth and depth when it comes to looking at improving customer experience and applying it to the latter. It’s bringing a dose of realism to digital transformation in the insurance sector, which could see more effective investment by large institutions. The company’s senior VP for insurance, Brahim Halmaoui, is clear: despite discrete differences from other financial services, particularly around the distribution model, the list of do’s and don’ts for insurance incumbents is evident from those that have trodden this road before. “Irrespective of which field of insurance they are in, which region, or what size of business they are, transformation needs to take them from a centuries-old model of selling insurance through very silo-based operations – where we have people who specialise in risk management, policy administration, claims management, etc – to one that is more open, based on services, as opposed to products and transactions,” he says. “They need to collaborate with a larger ecosystem than they have in the past. And they have to do all of that with two constraints: they have to operate in an increasingly regulated environment, and deal also with the legacy

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and the assets they have accumulated over the years, i.e. existing policies that last, sometimes, for a lifetime. “Insurance is an intricate part of our lives, but it has not always been transparent or visible to the end customer,” continues Halmaoui. “Insurance companies will have to first change their engagement models. “For instance, if you go to a broker and ask for an insurance product, there are two things they need to do. One is to identify where you are in your life journey, where the points are that you will need that insurance – because you are buying an iPhone, taking on a mortgage or going to travel, for instance. Then they need the best engagement system. If we can achieve that, we move from a grudge sale model to making engaging with an insurer a natural part of a customer’s life.” In essence, what Halmaoui and his team at Vermeg do is tell incumbents what they should avoid when trying to update an industry’s 300-year-old pattern of working to make it fit for a digital generation, and then help them do the right thing. So, this is how not to transform an insurance institution.

DON’T think your legacy system is redundant “One of the mistakes that was made, five or six years ago, when people started talking about digital transformation and innovation, is that many thought legacy would go away over the next few years. It won’t. The reason it’s still going to be there is because it’s become more and more efficient and the transformation and migration of these legacy systems costs a lot of money, takes time and is risky. So there is really no business case for doing it,” says Halmaoui. Rather, insurers should find a plug-in technology that works with it, which is what Vermeg’s API platform, Palmyra, is all about. “The Palmyra platform allows us to integrate any new technology with all

the legacy systems. We understand that, in order to talk to a legacy system, you have to do certain things, and we have been doing that for a lot of banks and insurance companies over the last 10 years. That’s our starting point, but we’ve also created a set of digital journeys and business components around the platform, which accelerate and alleviate the hurdles of business transformation.”

DON’T just put the current process of buying insurance online and think the job’s done That’s not improving the customer journey, just changing the channels, says Halmaoui. “If you ask an insurance company ‘how are you going to change the journey of the customer who is buying an insurance policy from you?‘, nine times out of 10, they’ll take the process they’ve been operating with for 100 years in the back office and try to put that in the hands of the end consumer. It doesn’t work. “They need to transform that back office process and make it a more interesting, seamless and easier experience for the consumer, who doesn’t understand all the complexities of an insurance policy. We make that easier for them by providing digital journeys for buying an insurance policy; for selling an insurance policy and for making a claim. The idea is to help companies think differently, rethink their business processes, and accelerate transformation. “The Palmyra platform onboards all of the innovations and technology and allows companies to move from

transaction-based to service-based, including the set of APIs they put on top of their legacy system so they can also communicate and connect with third parties and the wider ecosystem.” Only then are insurers in a position to make full use of data and artificial intelligence (AI) to automate the process, he adds. “A lot of the back-office operations today are human based. I think there is a fantastic opportunity for a lot of insurance companies to automate or ‘robotise‘ some of this process. It’s based on data and can be easily addressed through automation. When they do that, they will be in a better position to provide a digital process, where 99 per cent of the interaction is done at a single touchpoint, as opposed to still going through a human being.” Halmaoui cites an example of where Vermeg worked with a large European insurance company whose digital journey in the sales process entailed 170 touchpoints. Vermeg managed to reduce it to eight, which meant the salespeople, who previously spent almost 80 per cent of their

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time interacting with the back-office department for each sale, now spend that time on customers. This amount of transformation and impact points to valuable innovation. “In the past, the insurance company used to wait for you to come and engage them. Now, one particular insurance company we’re working with is in a position to engage with you, and say ‘we know exactly the situation you are in and these are the types of products that you need’, then offer them to the customer in such a way that they can understand them, based on their life experience, not based on the fact that they are insurance products,” says Halmaoui. “This is where we are using AI to engage with the customer directly, or through an agent. Imagine it like a memo stating ‘here’s some advice on how you can save some money’, but what’s behind that is an insurance product, positioned in a way that makes sense to the customer. For this client, we are working on an omnichannel solution. It’s all about how you create more meaningful interaction points.” In collaboration with a robotic automation company, Vermeg is creating use cases to demonstrate that 90 per cent of the paperwork that is manually handled today can be processed automatically. This will reduce the processing time for claim payments to less than three days. Anticipating that greater use of intelligent voice interactions in customer journeys will further reduce process work and allow call centres and middle office functions in insurance companies to focus on their customers instead, Vermeg is now focussing on engaging insurance customers through a voice channel. It is also developing a ‘data hub‘ concept to break down information silos, make the data available in different operating systems and enable insurers to read and report on the data fast and easily, accelerating processes even further and giving a 360-degree view of the customer.

DON’T waste time coming up with clever ways to solve future problems Instead, concentrate on fixing what‘s in front of you to drive engagement using less resources, says Halmaoui. “Choosing the right use cases and

the right problems to solve is important in order to make sure you bring digital transformation quickly to the heart of the organisation and don‘t leave it as just a one-off experience that is interesting but doesn‘t bring any value or become an intricate part of the transformation. “There was so much time spent, at least within the big banks and insurance companies, trying to imagine things in the future – new products, new offerings – and how the technology would solve them. The reality is that there is a tremendous number of today’s problems the new technology can’t solve.” He’s sceptical about the fact that, for example, today’s customers are incentivised to choose policies that promise a small reduction in premium in exchange for altering their behaviour – auto and health being two examples. “If you just show you can use data to sell someone a product that they have never sought, the actuary isn’t going to be interested. If you use data the company already has and apply some intelligence to it to reduce the risk of a product that the actuary is already selling, then they are going to be interested in working with you. That’s where Vermeg is in a unique position, because we understand this complexity. “It’s all about choosing the right use cases. It’s not about imagining problems that might occur 10 years from now, and solving them; it’s about taking problems that have existed for the last 20 years and solving them differently, more efficiently, and providing results as quickly as possible. “That’s a big differentiation, because most of the big transformation projects, where an insurance company has spent hundreds of millions, and has changed all of these products, have been done in silos. The insurance company has created a digital innovation company and tried to innovate, and create and test. And that’s a mistake. We need to take that investment and put it in the heart of the organisation. “We want something to go live and be used by real people,” says Halmaoui. “So, we are working on the timeline which is two to four months to bring this type of value to our customers. And that makes a big difference. Insurers are impatient to get something, because they have spent too much time doing things without value. “I’m hugely excited and extremely optimistic for the future of our industry.” Issue 2 | TheInsurtechMagazine

INSURTECH SPECIAL: NIGEL WALSH

Let them have cake!

Nigel Walsh, Partner at Deloitte, co-host with 11:FS of the Insurtech Insider podcast and one of our all-time favourite members of the FS universe, declared earlier this year that customers don’t want ingredients, they want cake... a confection of services in which insurance itself is the essential, but barely detectable, constituent. So, we put Nigel in a fantasy kitchen and asked him to name his top 10 ‘bakers’ making that happen Above all things, human beings are tribal animals. Animated by the will to survive, we as a species instinctively gravitate towards family, tribe and clan. Part of me thinks insurance has always been about community, but it needed the arrival of insurtech to make it wake up to the fact.

More than a big bang technology, insurtech was a call for people to step away from the traditional and obey the desire to come together. Congregation occurred out of the authentic yearning to do so, and the results spoke for themselves. Aside from increasing revenue, the phenomenon resurrected those missing ingredients, necessary for the industry’s survival: a community, a sense of urgency and some answers. Communities, like cities and children, do not raise themselves, however. They must be encouraged to grow. I therefore wanted to take the time to thank some of the tireless hands (and brazen personalities) helping the industry to move forward. Here’s a flavour of my insurtech heroes and, over the next few pages, you can learn more about how they are changing the recipe for insurance.

drones, build a platform from scratch, sign up a few thousand clients and partner with a number of the biggest global insurance carriers. In addition to providing a great service, the platform has unlocked a range of very cool, data-driven insurance and risk management products, such as an on-demand insurance app for micro businesses. New category, new territory. THE STARTUP PERSONALITY: CHRIS CHEATHAM, CEO, RISKGENIUS As someone doomed to go down in history for likening insurance to cake, I was elated to find a kindred spirit in Chris, who compares it to rap music and was once rumoured to go by the nickname Dr Dre of Insurance. With his dry sense of humour and keen eye for team building, Chris has been one of the big drivers behind early US insurtech adoption as well as the success of RiskGenius, a firm that

THE STARTUP: FLOCK This pioneering London insurtech startup made it onto my list for having broken uncharted ground with amazing gusto. In very little time it was able to formulate its idea for pay-as-you-fly insurance for

TheInsurtechMagazine | Issue 2

www.fintech.finance

uses artificial intelligence (AI) and machine learning (ML) to turn something as problematic as policy review into poetry. Chris also helps the rest of us demystify actual intelligence and artificial intelligence.

THE CONFERENCE ORGANISER: JAY WEINTRAUB, INSURETECH CONNECT My first interaction with the charismatic Jay was in 2015. He sent me a Twitter message, asking if I wanted to do a conference in Vegas for 1,000 people, to which I responded: “No one is going to want go to a conference in Vegas.” Boy, was I mistaken! The inaugural event brought in the expected 1,000-plus attendees, the second another 2,500, and this year it will be more than 7,000. None of this would have become a reality had it not been for this man and cofounder Caribou Honig’s vision for our globally dispersed community. THE ACCELERATOR: INSURTECH GATEWAY There are a great number of accelerators that have achieved tremendous results this year, with Sabine VanderLinden and team over at Startup

Bootcamp continuing to lead the original charge. I’ve chosen InsurTech Gateway for its newcomer status and bold decision to do things a little differently. Cofounded by Robert Lumley and Stephen Brittain, the team has helped some highly deserving names – Collective, Humn.ai, Insurdata and many more – up the ladder. They’ve just opened a second office in Australia, and I expect more great things. THE INSURER: ADRIAN COPLAND, ACCELERATE PARTNER, AXA XL Adrian, who sits inside AXA XL’s innovation unit, responsible for partnering with a range of startups, is the epitome of the hardworking, enlightened incumbent who rolls up his sleeves and does not relent until results are in the bag. The number of initiatives he has fostered to help AXA XL, from self-driving cars to backend filing, boggles the mind. His demonstration of the ethos that it is no longer ‘them against us’, insurtechs v. incumbents, is an inspiration.

THE REINSURER: ANDREW REAR, CHIEF EXECUTIVE, MUNICH RE DIGITAL PARTNERS Aside from a Superman ability to juggle his responsibilities as CEO and sought-after podcast starlet, Andrew’s most commendable trait might just be understanding that insurance startups and digital verticals are first and foremost creative technology companies, and therefore not necessarily equipped with a profound knowledge of insurance. Because of this, Digital Partners has been able to intuitively bridge the gaps between incumbents and service providers to build vibrant, commercially-viable ecosystems.

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THE INSIGHT: ANDREW JOHNSTON, WILLIS TOWERS WATSON (WITH MATT WONG, CB INSIGHTS) A community cannot grow without a flow of thought-provoking information, and Andrew plays a crucial role in providing it. Be it measuring startups’ performance, curating the insights published in WTW’s quarterly reports, or stepping up to be a spokesperson, his steadfast commitment produces some of the best-written insights. Working with Matt Wong, one of the first insurtech-focussed analysts, they turned the cryptic into the compelling. THE COMMUNITY BUILDERS (AFTER MIDDAY): ROBIN MERTTENS AND PAULO CUOMO, INSTECH LONDON In spite of the impossibility of ever organising something with them before noon, gregarious Robin and bon vivant Paulo have done an incredible job in creating London’s first meetup group devoted to the cause. Technical enough to attract innovators and investors, yet fun enough to not scare any insur-curious away, InsTech London has engineered a dynamic atmosphere since 2015. Strong commendation goes to their efforts in creating a network of 3,000 individual and 65 corporate members. THE COMMUNICATOR: SHEFI BEN-HUTTA, FOUNDER, COVERAGER There’s no better way to start your day in insurtech than with a coffee and the latest Coverager online newsletter. Cofounded by New York-based Shefi in 2016, the media and research company has become the go-to portal for executives. Shefi, cofounder Avi and the team do an outstanding job in bringing us a fresh-faced view of what’s new in insurtech – from investments and partnerships to inspired opinions, tech write ups and even honest tear downs! THE VC: SAM EVANS, FOUNDING PARTNER, EOS VENTURE PARTNERS Sam has made it to my honourable mention list for having cofounded one of the first insurtech-specific venture capital funds, building a great team in the UK and USA. They bridge the digital chasm between insurtech startups and traditional (re)insurance companies, delivering strategic and financial value.

Issue 2 | TheInsurtechMagazine

INSURTECH SPECIAL: NIGEL WALSH’S HEROES

THE STARTUP

Sky is not the limit ED LEON KLINGER CEO@FLOCK In 2018, Ed Leon Klinger co-piloted the launch of data-driven drone insurance solution, the Flock Cover smartphone app. But now the company is spreading its wings… THE INSURTECH MAGAZINE: Tell us about Flock and its journey into the world of data analytics and insurance? ED LEON KLINGER: It began with two academic research papers written by cofounder, Antton Peña, and myself. We were at Imperial College London Data Science Institute and Cambridge

University, respectively. We both wrote our theses on the future of a number of industries, but focussed on drones, specifically, and whether it was possible to use real-time data to identify and quantify risks in the drone industry. We’d separately come to the conclusion that yes, it was. So, when we were introduced to each other by a mutual friend, it was a no-brainer – we both quit our jobs to build Flock. We moved into insurtech when we realised there was an immediate application for our technology if we could convert our risk metric into a price and therefore price and sell insurance better. TIM: What problem did you set out to solve when founding Flock? ELK: We have built what we believe to be

the world’s most advanced real-time risk analysis platform and the way we utilise that in the insurance space is by using real-time data. We feed that data into our real-time risk engine and calculate a risk profile for any insurable event, such as a drone flight, so that we can then provide on-demand, episodic insurance products through a variety of means – mobile phone, website, whatever. We’re allowing customers, end users of our insurance products, to understand and therefore mitigate their own risks. In doing so, we actually de-risk the industry and incentivise the de-risking

THE STARTUP PERSONALITY

The ‘pickaxe’ entrepreneur Pickaxes may be one of the more unusual analogies used when discussing the future of the insurtech industry, but it’s one Chris Cheatham is sticking with. The RiskGenius CEO describes his company as a ‘pickaxe insurtech’ in a sector currently undergoing its own gold rush. “During a gold rush, there are two types of company that emerge,” he explains. “There are the people mining for gold, and then there are the people who are supplying the miners – providing them with pickaxes, jeans, or whatever it is.” RiskGenius is among the latter, with its artificial intelligence (AI)-based solution enabling insurance carriers and brokers to analyse and organise

TheInsurtechMagazine | Issue 2

CHRIS CHEATHAM CEO@RISKGENIUS massive amounts of policy data into something usable. This is in contrast to the ‘miner’ insurance apps, such as Lemonade and Trov, which are striking gold by finding new ways of catching customers online. In the midst of all the industry’s prospecting, the focus has largely been on the Lemonades and less on the back-office solutions supplied by companies such as RiskGenius. But this is beginning to change as the industry matures, he reckons. Insurance, ultimately, just needs to speed up, says Cheatham. There is too www.fintech.finance

of the industry by having proportionally priced insurance policies. Essentially, we make the industry smarter by incentivising good behaviour. TIM: One of the biggest selling points of Flock is real-time data. What does this actually involve? ELK: In the instance of a drone, we produce a price before the flight. All we need is your location, and we get that from your mobile. You whip out your app, you tell us where you’re flying, we then pull from a huge variety of datasets. I think we’re boasting more than 25 risk factors relating to things like your location, proximity to schools, hotels, prisons, airports and busy roads; we have traffic conditions and population density conditions mapped out. Then we factor in hyper-local weather conditions. All these factors are considered in relation to your ability as a pilot: what qualifications you have, how many hours of experience you have, what your claims history has been. In relation to the drone that you’re flying, we take account of how heavy it is, how

much delay, particularly in commercial insurance, in large part due to the systems being really bad at comparing policies across carriers. Another problem is humans – both clients and industry professionals. Insurance is so complex, customers often don’t understand what’s in their policies and policy checking is an issue. “How do I go through 1,000, 10,000 or 100,000 policies to confirm that the right cover is being included on a consistent basis?” he asks. “Because all it takes is one little tricky broker, or one tricky underwriter, sneaking in a certain clause or endorsement, and you then have a policy that has some sort of new coverage, or new exclusion that your customer potentially doesn’t know about, and that can cause all sorts of problems. How do you create that consistent cover on a policy check?” The answer lies in AI. “Reviewing an insurance policy is tedious and time www.fintech.finance

The real-time risk engine that powers our insurance platform is a useful technology that extends far beyond the drone industry

TIM: What is the scalability around demand for this sort of insurance? And does your insurance platform have applications outside the drone industry? ELK: Scalability for real-time insurance products and platforms like Flock is,

without wishing to speak too soon, effectively infinite. Our platform is on AWS (Amazon Web Services), which is a scalable solution for a technology product like the one we’re offering. We’ve run a million quotes, we could run 10 million more. There’s no limit to the number of simultaneous transactions we can undertake on our platform, or no realistic limit that will ever be hit. It’s a universal truth that customers like easy-to-use, simple products well-suited to their needs, so there is no reason why this should be limited to the UK. In terms of scaling to new industries, the interesting piece here is the real-time risk engine that powers our insurance platform. It has the ability to ingest many sources of real-time data, static data, proprietary data, and third-party data to more accurately identify, quantify, and price risk. That is a useful technology that extends far beyond the drone industry. Right now, we are exploring new industries, working with new insurance partners, to understand how we can launch our exposure-based pricing and risk engine in other industries.

consuming, which are two things brokers don’t like when they’re busy serving their customers,” says Cheatham who, in his former life as a lawyer, watched robots out-perform his colleagues in reviewing a contract or litigation document. “It’s the perfect opportunity for augmented technology or augmented humans, or technology that supports humans, to come in and support the process.” He cites a second industry use case where back-office solutions such as that offered by RiskGenius come into their own. “‘Silent cyber’ is a great example, where you have a lot of insurance carriers and brokers now trying to figure out ‘do we have insurance policies that inadvertently cover a cyber event because we did not include a cyber exclusion?’. So we’ve built a platform that includes what we call emerging risks analysis. We can identify

key checklist items in a policy so that, in the case of cyber, a broker or carrier needs to know if there’s a cyber exclusion and, if there’s not, then they want to know if there’s a particular agreement that may instil coverage for a cyber event that they did not intend to have. They need to do that across 100,000 policies very quickly.” Due to such complexities, RiskGenius targets its platform at insurance carriers and brokers, rather than policyholders, as they tend to be the ones responsible for explaining the details to the insured. In his opinion, new ways of selling and buying cover can’t move forward until all the data is understandable. That’s where machine learning and AI will prove crucial. The industry gold rush may be under way, but its success will depend on the pickaxe providers.

many thousands of hours’ worth of flights it’s done on the Flock Cover app previously, and how many crashes it has had. That way, we’re building up a very rich understanding of risk conditions and providing bespoke, user-friendly insurance policies that are well-suited to those conditions, and to the needs of the pilot at the time.

During a gold rush, there are two types of company that emerge. There are the people mining for gold, and then there are the people who are supplying the miners Issue 2 | TheInsurtechMagazine

INSURTECH SPECIAL: NIGEL WALSH’S HEROES

THE CONFERENCE ORGANISER

Meet me in... for the online advertising industry, made up of a large number of insurers. When he met Honig, a fintech venture capitalist, via a mutual friend, the latter was already pondering why there wasn’t an insurtech conference amid all the successful fintech ones he’d experienced. The rest, as they say, is history. It is often observed that insurtech has been slower to grow as a disruptive industry than the fintech sector, an observation that Weintraub agrees with. “You need quite a few things to come together for innovation,” he says. “You need the availability of technology, a massive cultural demand, a willingness to do things differently and a lot of money. Two of those equations rely on the entrepreneurs and the investors.” When they all come together is when ‘the magic starts’, he says. It’s at that point that industry gatherings can play such a vital role. Indeed, he and Honig tend to gauge the success of their events by what they call their ‘we met at…’ stories. Multi-million dollar decisions aren’t something you put on a credit card, or sign up for online, he

says. Instead, you need to ‘break bread with someone’ in order to understand the people you’re working with, which is where bringing together entrepreneurs, investors and industry incumbents in one place for three days can be so effective Take 3D software company Hover, which constructs interactive models of any property from a handful of smartphone photos, enabling more accurate cover estimates, faster claims adjusting and improved customer experience. The Hover team met both their lead investor, American Family Ventures, and property liability insurance provider, Travelers, who went on to roll out Hover’s technology, in Las Vegas. It was also the meeting place for solar insurance company Energetic, which offers a policy for banks and developers that want to bring more commercial solar projects to market at better terms, and global reinsurer Scor, which now backs its 10-year EneRate Credit Cover product. “Those are the stories we love. We tend to describe what we do as, hopefully, aiding the inevitable,” says Weintraub. “These companies will hopefully work together at some point, but if they do so quicker, the outcomes for users are that much better.”

It established its global Digital Partners venture as an ecosystem where disruptive insurance startups can flourish, backed by its capacity, expertise, willingness to experiment and venture capital financing. Andrew Rear, CEO of Munich Re Digital Partners, says: “Insurance is a complicated and highly regulated business with a very long technology stack. To offer one product in one market,

you have to build the frontend customer experience, a policy admin system, claims process and regulatory architecture. For a startup, that’s a big ask…we do most of that heavy lifting, allowing partners to focus on the customer interaction.” And the benefit for Munich Re? Business growth and learning, innovation and an insurtech ecosystem to help it and its clients, says Rear.

JAY WEINTRAUB CEO@INSURETECH CONNECT Personal interactions are as good for business as they are for the soul, giving people the opportunity to connect with others they may never otherwise have met, to discuss ideas they may never otherwise have had. They are also the secret behind the success of the InsureTech Connect annual conference in Las Vegas, according to its cofounder and CEO Jay Weintraub. InsureTech Connect is the world’s largest gathering of insurance leaders and innovators. In just four years, attendance has grown from 1,500 to about 5,000 in 2018, with 7,000 guests anticipated to attend this month. “I fully believe that, as the world becomes more digital, these personal connections are that much more important,” says Weintraub. “Yes, you can pick up the phone to somebody but there’s a whole wide world of people that you haven’t met yet.” Weintraub founded InsureTech Connect with Caribou Honig (look out for the big hat) after he’d already been working in what he calls ‘the convening business’ for a number of years. He attended an event

THE REINSURER

MUNICH RE DIGITAL PARTNERS Munich Re is a global provider of reinsurance, primary insurance and risk solutions, whose financial strength and innovation have seen it cover extraordinary risks and financial losses, from rocket launches to earthquakes.

TheInsurtechMagazine | Issue 2

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THE INSIGHT

INSURTECH SPECIAL: NIGEL WALSH’S HEROES

Finding diamonds in the rough Andrew Johnston believes the secret to the insurance industry’s future success is achingly simple – give customers what they want. “If insurers do that, I don’t think they have as much to worry about from outside disruption as they think they do,” he says. But, of course, what customers want differs from geography to geography. “Country trends tend to reflect what existed there previously as an insurance model, and then there’s the broader population and socioeconomic makeup of a country. If you look at a country like China, you don’t have masses of insurance legacy as you do in, say, the UK. And you have a middle class that is growing at an unprecedented rate, who all now need to buy insurance. You also have a culture of more readily adopting technology, because the Chinese are not necessarily comparing providers against the household name bias that has existed for the last 100 years here. “Again, taking the UK as an example, we’ve a longer history of online insurance purchasing, so things like aggregator websites and price transparency are very common here, and you’d think the whole world would want something similar – but it’s just not the case.” Much of Johnston’s work is around providing such investment insights. And he’s observed a vital shift taking place in terms of how inflows are being distributed in the insurtech chain. “In the last quarter, I reported that $1.41billion had been invested, the fourth consecutive quarter

THE COMMUNICATOR

COVERAGER Shefi and Avi Ben-Hutta established the Coverager online insurance platform in 2015, as a source of insurtech news, thought leadership, data and insight, and have led it from strength to strength. With their decades-long backgrounds in insurance product development, business analysis and advertising, the pair www.fintech.finance

ANDREW JOHNSTON GLOBAL HEAD@ WILLIS RE INSURTECH over $1.2billion, but the total number of individual transactions has gone down by 21 per cent. That suggests that insurtech investment capital is being attracted further up the maturation ladder, partly because companies are evolving from babies three years ago to toddlers now, and going through bigger rounds of funding. “Meanwhile, insurance companies that have previously had venture capital (VC) vehicles are now more likely to want to get something out of the insurtech space that specifically benefits their broader strategy, rather than a large series exit. “Spreading lots of small bets is probably not the best thing to do, and it’s worth waiting for an insurtech to prove its worth,” is his advice. “Maybe seed funding should just come from VC and private equity funds, that are used to investing in early stages.”

Insurtech investment capital is being attracted further and further up the maturation ladder

set out to ‘connect the dots, read between the lines and deliver what matters most in a way that keeps you informed, intelligent and surprisingly interested’. “Coverager is the go-to source on insurance innovation that creates and curates coverage on the most pressing topics relevant to insurance executives, focussing on areas such as technology, strategy and alternative distribution by offering custom research and analysis with a creative tone for companies that

He believes there’s a risk of insurers propagating bad businesses by investing early, ‘borne out of a fundamental misunderstanding of the technology’. “You have lots of people at the moment, dabbling in things they probably don’t truly understand. I call that magpie syndrome and a few people have bad cases of it. We need to cut it out,” he says. Willis Re’s role within the broader Willis Towers Watson (WTW) infrastructure, is to identify the shining gems amidst the rough diamonds of the startup space – pushing some towards its parent company and others elsewhere. “The service we provide is really to demystify this enormous space, find the best in class, and then work with our clients to truly understand their own business strategies and facilitate an engagement and integration of technology, where appropriate,” explains Johnston. It has a number of strategic partners, too, the most recent of which is Concirrus. “WTW is the largest inbound broker into the Lloyd’s specialty market, which covers things like marine, aviation and energy, and Concirrus’ focus is on that speciality reinsurance space, which has been relatively slow to adopt technology. What we like about Concirrus is that it is looking at risk more from a behavioural point of view than a demographic one, which is how that market has historically priced risk. It is something we had already started to think about, and so we felt they were a good partner to grow with.”

want to learn from the past and understand the present to better bet on the future,” says Shefi Ben-Hutta. Coverager recently teamed up with customer experience and innovation firm Cake & Arrow Associates to create the Millennials & Modern Insurance report, which challenges assumptions about Generation Y, concluding that the insurance industry should adjust the way it creates insurance products aimed at this group of customers. Issue 2 | TheInsurtechMagazine

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THE COMMUNITY BUILDER

INSURTECH SPECIAL: NIGEL WALSH’S HEROES

Love in a bold climate ROBIN MERTTENS COFOUNDER & PARTNER@INSTECH LONDON

Imagine a Tinder for insurtechs. Somewhere lovelorn entrepreneurs can go to find their perfect match – a sympathetic investor, a devoted client, a supportive ‘other’. That’s what Robin Merttens and Paolo Cuomo had in mind when they set up InsTech London in 2015. “I’d started going to fintech evenings and pitch nights, which seemed achingly cool back then. I saw lots of fresh-faced bankers and crowdfunding platforms, but no one doing anything for insurance,” says Merttens. “The idea was to set up a community where insurance people with smart ideas would have insurance people to pitch to.” It began with 30 chatting in a pub, then 60. An inaugural pitch night followed, which was notable for attracting then relative unknowns Brolly and Cuvva. “Startups got five minutes on the mic to pitch their business and then there were questions from the audience,” recalls Merttens. “Next, we organised a ‘reverse pitch night’ where we got the industry to identify problems it wanted innovators to solve. Before we knew what was happening, we had well over 1,000 members in our meetup group.” There was just one snag: no revenue stream. It was time to get serious. The events remained free for startups but everyone else paid £30 to attend. To Merttens’ and Cuomo’s surprise, insurance corporates fell over themselves to support it: “We were amazed at how many companies just wrote us a cheque for £5k.” Now up to 3,500 individual members and 100 corporates, InsTech London is an established ‘forum around which people can shine up their innovation credentials’. “Insurance companies want access to the innovators – they’re curious,” says Merttens.

THE VENTURE CAPITALIST

EOS VENTURE PARTNERS Based in London and the US, the three general partners behind this specialist venture capital www.fintech.finance

“They also want to show that, if you have a good idea, it’s worth taking it to them. The innovators obviously love it, because they get access to potential customers, and angel and corporate investors.” This year, it reached the ears of Google, Mastercard, Experian and others. “Big companies from proximate worlds which are coming to investigate the possibilities of being part of insurance innovation,” says Merttens. “We use the fact that InsTech London sits in the middle of an ecosystem to say ‘if you want that, you need to go talk to these guys’. We do that endlessly.” InsTech London’s unique position has allowed Merttens to observe some fundamental truths, too. “The biggest issue insurtech faces is lack of early-stage funding,” he says. “There are a lot of VCs that will support Series A funding. In that world, the minimum investment is probably around a million, with a sweet spot of two to five. But it is unbelievably difficult to get to that stage. So few people are prepared to provide really early capital and there is no institutionally organised support and no organised lobby for it. “I’m amazed by how little money comes from the industry – from insurance companies that want to innovate or senior insurance executives who want to be part of what the future looks like.” He also believes the nature of the industry, however curious it is, works against entrepreneurs. “You can pitch to an insurance company which expresses an interest, but it may take six months to come back to you, and when you’re bootstrapping, that’s hard work. We’re trying to solve that by getting those with deep pockets to put the money in so that those who need us most don’t pay.” Four years on, he believes the insurtech wave is some way from reaching its crest.

fund have decades of experience of growing and scaling businesses. Sam Evans, Jonathan Kalman and Carl-Georg Bauer-Schlichtegroll set up Eos Venture Partners as one of the few insurance-focussed funds investing in early-growth stage insurtech businesses that promote innovation and

The turning point will be when everybody thinks everybody else is going to do it “Everybody thought it was going to be deeply disruptive. But the innovators underestimated how much capital you need to disrupt insurance businesses. There were too many kids who thought they could just build an app, change the engagement and the world would be a fundamentally better place.” Instead, those technology surfers are looking for partners. “Everyone is looking for an insurance company to work with. That’s made insurtech rather cosy,” says Merttens. “Now it’s about what insurers can get their heads around; there’s very little deep disruption, and there’s still no burning platform. There’s no perceived threat yet. The turning point will be when everybody thinks that everybody else is going to do it. Then they have a choice: play the consolidation game, opt out or go for it themselves.” Still humbled by the experience of the past four years, he adds: “ I never expected it to be a business. We didn’t have a strategy; we were just running something that we could see was for the public good.” But now there is a definite vision – and an income – which helps. transformation across the industry. “If you look in the right places and don’t follow the crowd, there are extraordinary investment opportunities,” says Kalman. “CEOs are way past the question of ‘why innovate?’ or ‘should we innovate?’. The question now should be ‘how do I drive innovation throughout my organisation?’” Issue 2 | TheInsurtechMagazine

INSURTECH SPECIAL: NIGEL WALSH’S HEROES

THE INSURER

Steerıng insurance in a new direction ADRIAN COPELAND ACCELERATE PARTNER@AXA XL

As large insurers begin to compete with smaller, agile organisati≠≠≠ons, it is vital they find and embrace new approaches to stay relevant, says Adrian Copland, COO of AXA XL Accelerate, the internal innovation unit responsible for partnering with a range of startups to revolutionise outcomes for the multi-national insurance firm and its customers. “There are three things that Accelerate is looking for in a project. First, you need a problem, second you need a technology or a new startup that looks at that problem in a slightly different way, and third there has to be the ambition, from

THE ACCELERATOR

INSURTECH GATEWAY

This incubator has helped some of the coolest startups like Humn.ai and Insurdata gain footholds with its fast-start formula, combining growth funding with underwriting support and advice. It claims to take care of 'hassles' like

TheInsurtechMagazine | Issue 2

the business unit to scale that into the organisation. If it meets all those criteria, then we will look to test different technologies,” says Copland of his team’s selection criteria. But Accelerate has a fundamentally transformative role, too. “We’re working hard at influencing the culture, encouraging underwriters and everybody else to think differently,” he says. “Insurance people find it very hard to get out of incremental thinking, the mind-set that is, ‘improve your book by three’, not ‘how do you double it?’.” And that’s the kind of ambition Copland’s unit displays in breaking new ground. Take autonomous vehicles. It was responsible for bringing the first ever autonomous vehicle cover to market, working with technology company OxBotica, Nominet and digital experience agency, Foolproof, among others as part of the UK’s DRIVEN consortium. AXA XL’s product responded to the rising demand for big businesses to take autonomy seriously while highlighting the need to underpin it with a robust strategy. Copland believes the evolution of autonomy will have a profound impact on business and society. “All the old autonomy is massively expensive in the sense of it’s an infrastructure upgrade: it’s digging up roads, it’s huge robots in warehouses. The type of autonomy we’re authorisation and compliance for policy and product development, freeing up owners to sell while retaining maximum control of their businesses. The only private incubator-onwards fund authorised by the Financial Conduct Authority in the UK, Insurtech Gateway is billed as ‘the fastest place to build and launch an insurtech idea in an industry rife with barriers to entry' by offering founders a ‘one-stop-shop’ of support from post-incubation status to Series A

talking about is putting a few sensors on a forklift truck. It may still be six figures, but it’s relatively minimal compared to an infrastructure upgrade and, suddenly, you have an autonomous forklift truck, which changes everything to do with that warehouse – who works there and when

Autonomy is going to change society, and we have to work out how insurance can support that they work there, which influences things like when they can turn the heating off, which also then has an impact on CO2. “The topic is so broad. What we’re trying to do is get a good understanding of how it’s going to impact. My overall approach is: it’s coming, nobody really knows when, parts of it are already here, and nobody can (and why would they want to?) stop it. Autonomy is going to change society, and we have to work out how insurance can support that.” It chimes with his view of insurance having a societal goal. “There’s a lot of research that says, if you can create an organisation with a purpose, that has a knock-on positive effect on your share price and profits. “Going back to autonomy, we genuinely believe that autonomy is going to make the world safer.” and beyond. Crucially, it promises to reduce insurance provider authorisation timescales from 12 months to just two weeks, super-charging time to market. Having just closed the first tranche of a new £30million investment fund via its London incubator, InsurTech Gateway is setting up a second office ‘Down Under’, led by Australian entrepreneur Simon O’Dell and backed by investment company Envest, which will be a stepping stone for expanion into Asia. www.fintech.finance

Visit the Quadient booth #704 at the InsureTech Connect 2019

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UNDERWRITING

Afluenta was one of the first peer-to-peer fintechs to emerge in Argentina. Now also offering a range of insurance products, CEO Alejandro Cosentino is looking to provide the missing pieces in LATAM’s lending market PERSONAL financial services in Argentina for many people amount to little more than a mattress and a friend with deep pockets. The first one is preferred to going through the time-consuming process of opening a deposit account that pays pitiful interest; the second is a lifeline in times of crisis and avoids the cripplingly high lending rates associated with most forms of credit. A deep-rooted and lingering distrust in traditional banking, in general, means that about half of Argentinians still do not have a bank account, preferring instead to deal in cash within a shadow economy. The primary reason for this lack of confidence in the sector dates back to the country’s economic crisis in 2001/2002 when, in a desperate move to shore up the fast-collapsing peso, the government imposed the much-despised corralito economic measures under which bank accounts were almost frozen, with strict monetary limits placed on monthly withdrawals, and any savings held in US dollars converted into the local currency. The overall impact was that millions of people saw the value of the savings they could no longer access get savaged by runaway inflation while they could only sit back in fury and frustration. Many of them closed their accounts as soon as they could, vowing to never bank again, relying instead on hoarding cash in wall safes or under mattresses. Nearly two decades on, the impact of that remains stark. So many Argentinians still look back in anger to those days, that the nation’s bank deposits as a proportion of GDP (gross domestic product) stand at

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only 18.8 per cent, with a recent OECD (Organisation for Economic Cooperation and Development) report noting there is a ‘scarcity of domestic savings’. By comparison, the amount on deposit in neighbouring Brazil stands at 60 per cent. A direct consequence of Argentinians’ continuing lack of confidence in bricks and mortar banks, is that obtaining credit has become both extremely difficult and hugely expensive, with high interest rates often demanded, particularly for the unbanked who understandably have an even greater battle on their hands to prove their creditworthiness to potential lenders. And it is not just the banks that struggle to attract customers.

We are segmenting every single lending product we have to add the insurtech piece Other financial markets, including insurance, have tiny take-up rates compared to the West, with latest estimates showing that only a little over two per cent of Argentinians have any cover at all. But these unusual market conditions, closely allied to a recent boom in internet access and smartphone use across Latin America, have spawned other credit channels, notably peer-to-peer (P2P), in which those seeking credit are matched with those willing to lend. Crowdfunding is competing against traditional bank options and winning the market. The pioneer in the P2P field was

Afluenta, founded by CEO Alejandro Cosentino in Argentina in 2012 as the first Latin American (LATAM) collaborative finance company, connecting people looking for investment and credit services with investors, in return for commission. Afluenta connects those seeking a loan with investors via an auction mechanism. Investors see returns on their investments from the interest yields as the loans are repaid. Having started with individual credits, Afluenta now also facilitates loans for small and medium-sized businesses. Cosentino puts Afluenta’s success down to its nimbleness, with loan enquiries answered in an impressive average of seven seconds, its 24/7 online accessibility and its flexibility, which allows it to arrange cheaper loans with interest rates customised to each individual’s repayment history rather than taking a one-size-fitsall approach. Although its interest rates are significantly higher than one might be offered from a bank in the West, by Latin American standards they are competitive. “The loan is sized correctly, with the right price for the right risk, in seven seconds, with no bureaucracy,” he says. “If you are a better customer, you receive a much better interest rate. But that is just one part of the offering. We are living in a time of impatience; we need to deliver our service fast – we take seven seconds to reply to our loan applications – and we need to be accurate. If, for example, we cannot grant someone a loan right now because they are in debt elsewhere, we tell them immediately, rather than waste their time. "And, finally, we hate bureaucracy. With incumbent institutions, you need www.fintech.finance

A good fit: Afluenta teamed up with Chubb to offer insurance alongside lending products

to go to a bank branch, then wait for a person to tell you how to apply for a loan and finally complete a form. What we offer is immediate and you can do it from your cell phone. “When we started in 2012 in Argentina, only three per cent of people used their cell phone to apply for a loan. Now it’s 90 per cent,” says Cosentino. He has already expanded operations to Peru and Mexico and is targeting Colombia, Brazil, Uruguay and Chile in what is becoming a fast-growing market. “We like to think of ourselves as the McDonald’s of fintech. You can get a Big Mac in exactly the same way in every country you visit. We are using that vision to serve a loan, as fast as we can, in the three markets we now operate in and those we are planning to open in.” Research by Finnovista estimates that 40 per cent of fintechs in Argentina, Brazil, Chile, Colombia and Mexico are now targeting unbanked and underbanked consumers and small businesses. But Afluenta is one step ahead of the pack. Cosentino has now struck a deal with insurance giant Chubb to reach into another untapped market. Put simply, those seeking credit through Afluenta are also made aware of the benefits of adding insurance cover to the loan product. Cosentino says he was aware from the start of the need to mitigate risk for both borrowers and lenders, and that it would require specialist help. But in discussions www.fintech.finance

with Chubb, it quickly became clear that there were other opportunities to offer customers different types of insurance protection, linked to their activity. “In the case of lenders, they wanted to mitigate the risk, in the case of borrowers, they wanted to protect something they will be acquiring with the loans,” Cosentino says. “Initially, we asked Chubb if it could help lenders mitigate the risk in the event of death or disability, including temporary disability. In that discussion, they said ‘you have another opportunity for lending products you have, or just the purpose of that loan’. For example, in Argentina, since we don’t have a big mortgage industry, the main lending

product is a home improvement loan and there is an opportunity to add insurance for homes. “In that way, we are segmenting every lending product we have to add the insurtech piece and that has been very successful. Adding it to our marketplace is the secret, but we are looking for the right expert to be part of our lending community.” Cosentino believes fintechs such as his are crucial in helping to address the low rates of financial inclusion in LATAM, as well as providing an increasingly attractive proposition to investors, which now include venture capitalists. “That means Afluenta will continue to diversify. We will start to offer digital possibilities,” says Cosentino, “and maybe credit cards as well as insurance associated with those products.” Issue 2 | TheInsurtechMagazine

UNDERWRITING

WINDS OF CHANGE Citibanamex is working with bancassurance partner Chubb to extend cover to millions in Mexico by taking a digital-first approach. Sinead O’Connor, Collaborator in Digital, explains When hurricanes Ingrid and Manuel ripped through Mexico in 2013, they left a $5.7billion trail of destruction. A year later, hurricane Odile inflicted another $1.2billion in economic losses. Mexico is a country vulnerable to natural disasters. Earthquakes, floods, hurricanes and other meteorological events such as the El Niño phenomenon, are a constant threat. Yet, despite the obvious risk of unforeseen events likely to cause both casualties and damage or even destruction of property, access to insurance services hovers at just above two per cent among the general population – the very people who are usually impacted the most. That statistic is maybe not so surprising – but very difficult to fix – when only half of adults have a bank account. It was crystal clear to American banking giant Citi, when it entered the market two years ago, that extending the kind of financial services that underpin most

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developed economies was going to be a big ask in Mexico. It’s why it committed to investing $1billion in Banamex (rebranding it Citibanamex) with the aim of making it the country’s ‘digital and data-driven Bank of the Future’ by 2020. Much of that development has been mobile-focussed, which has lent itself to added-value, data-driven services that customers can access ‘in the moment’. While that extends to credit and payments, it’s also provided an opportunity to offer user-based (or micro) insurance through the bank. For its delivery partner, global insurer Chubb, the data insight that tie-up provides allows it to extend its reach in a massively under-protected region by giving it a more accurate picture of the risk, based on behavioural patterns and account management as people go about their everyday lives. Citibanamex’s exclusive and long-term partnership with Chubb, the second largest

P&C (property and casualty) and auto insurer in Mexico, was announced in June 2018. “In its strategic alliance with Chubb, Citibanamex is starting to leverage a lot of what we’ve already done around banking products: how, for instance, we profile our customers, using cookies, Facebook and Instagram, with the objective of finding new, tailored means to offer relevant products to customers that have shown an interest,” says Sinead O’Connor, collaborator in digital customer experience at Citibanamex. “Then we use direct digital channels to ensure that we can create a seamless experience.”

Data-driven insight How to place the customer first – understand their choices and requirements, cater for their specific needs, attend to their various stages of life and generational differences – continues to present a knotty know your customer (KYC) puzzle to insurers, and not just in Latin America. But www.fintech.finance

In the eye of the storm: Mexico’s huge unbanked popultion represents both an opportunity and a challenge

partnering with banks that use their data to build up a 360-degree picture of customers at any given point in time, certainly helps. But first Citibanamex had to address the issue of financial literacy. When you’ve only just been introduced to banking, it’s unlikely you’ll dive into complex life and property insurance for catastrophic losses. “Only half of the population has a bank account and so there’s a way to go in terms of financial education. When we look at insurance, only a little over two per cent have access to it,” reflects O’Connor. It means a major chunk of a new entrant’s, or even an existing provider’s, efforts in Mexico must go into educating people about the need for insurance and making the terms and conditions comprehensible and relevant to them. The other aspect of the challenge, says O’Connor, is ‘how do we ensure that we’re creating products suitable for the profile of individuals operating here Mexico today?’. Given the audience profile, Citibanamex believes it’s a smarter sell to offer entry-level insurance at the point of need: a one-time car journey, for example, could be the baby step towards taking out broader P&C indemnity. www.fintech.finance

There is another statistic that plays to this argument. While 50 per cent of the Mexican population is unbanked and the insurance sector unorganised, the Ernst & Young (EY) Mexico Insurance Report 2018 suggests that almost 65.5 million people have access to the internet and 81 million use mobile phones. Of this, 76 per cent have smartphones. This offers a huge opportunity for global insurance companies to reach out to customers and provide communication and instructions about relevant insurance coverage and benefits through mobile apps at relevant moments for the consumer – when they book a plane ticket, when they hire a car or buy a mobile phone. And more than 90 per cent of Citibanamex’s digital customers are now using the bank’s own mobile app to carry out just those sorts of transactions. “We’re growing three times faster in mobile than we are on the internet,” says O’Connor. “So, mobile obviously gives us the means to be contextual. Knowing where the customer is and what they are doing offers a huge opportunity for insurance to deliver contextualised products through mobile. “The biggest opportunity we have today is ensuring end-to-end servicing and transacting in digital, making the interaction with the insurance product easy for the customer,” she adds. “And that goes from visualising the policy, being able to create modifications as needed and in a contextualised fashion, to processing claims,” she says.

The biggest opportunity we have today is ensuring end-to-end servicing and transacting in digital, making the interaction with the insurance product easy for the customer Of the challenges insurers have in the region, she adds: “Making sure customers understand what the products are, how they can modify them and how they can use them because, obviously, when you put the insurance product into use, that’s when the perceived value is greatest.

“They are the experiences that we need to build out on mobile today.”

Meeting the challenge Latin America, for all its opportunity, is a whole different order of challenge for financial services and Mexico – the 15th largest economy in the world, with unemployment at around 3.5 per cent and yet only around half of the population banking their earnings – a riddle within it. In an attempt to shift those stats, the country’s government put its weight behind digital transactions by launching a pilot digital payment system earlier this year, which, it hopes will encourage Mexicans to enter the banking system, almost by default. Cobro Digital (CoDi), which doesn't charge merchants a processing fee and uses the existing SPEI payment rails, allows anyone with a mobile phone to scan a QR code, with the transaction processed through the central bank. The quid pro quo is that, to use it, you need to already operate or open a bank account. The government hopes that millions of Mexicans will do just that, giving more people access to products such as loans, investments or, indeed, insurance. By the end of September, all six national banks, including Banamex, should be on board with CoDi. CoDi could provide a useful platform from which to offer bancassurance, which, as a product category, continues to see double-digit growth in Mexico, according to EY analysts. The same analysts forecast that digital transformation and solutions will play a larger role in the country’s insurance market over the next 10 to 15 years. “One of the things I think financial institutions have thought a lot around, and especially here at Citibanamex, is what should our core capabilities be? What do we need to ensure we’re getting it right?” says O’Connor. “I think one of the challenges we have, especially large-scale retail banks, is that we do everything across the spectrum, for all segments and for all products, and so the depth and width and breadth of what we need to try and do to get it right is huge. “One of the things that partnerships are enabling us to do is focus very much on what these core capabilities need to be, make sure we’re getting those right and then use partnerships with fintechs and other companies to help create a more seamless experience for the customers.” Issue 2 | TheInsurtechMagazine

UNDERWRITING

PARTNERSHIP

Global insurer Chubb is signing up partners large and small to deliver a new type of experience. The industry’s traditional policy-driven business model is giving way to a more user-based way of working, as Sean Ringsted, Chief Digital Officer, explains Naysayers often accuse the insurance industry of being slow-moving, predictable and resistant to change. But the speed of digitisation, coupled with an explosion in the amount of data available, is giving the more ambitious insurers a great opportunity to extend their product and services footprint. One of them is Chubb, the world’s largest publicly traded property and casualty (P&C) insurer, which is busy reshaping its operating model and leveraging digital relationships with intermediaries.

Sean Ringsted, chief digital officer at Chubb, has been tasked with leading the insurer’s digital efforts and transforming it into an agile organisation that can easily integrate with its partners’ systems. “Economies and societies have been changing at quite a pace in the last decade, driven by circular trends but also by digitisation,” he explains. “We’re seeing new business models emerge that simply weren’t there 10 years ago, and this is creating different ecosystems. Insurance is at the very core, because we’re the oil that makes everything work. So we have to be part of that change and adapt ourselves.”

Chubb’s digital toolkit provides the building blocks for these digital relationships. “The toolkit is very flexible,” says Ringsted. “It’s set up in a number of ways. First and foremost, being able to integrate with the partner is critical, so we use a number of technologies to do that. They range from standing up a white-label website, to widgets where we’re renting some pixels on a partner’s screen, all the way through to application programming interface (API) deep integrations. It’s very scalable that way, and we’re working with large incumbent companies and smaller fintechs across numerous different territories.” This innovative approach is especially important in countries where industry penetration is

Cover for all: Chubb is building a new model of protection

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typically low, with opportunities to sell standalone insurance, which is limited by cultural or economic factors. It’s enabling Chubb to insure virtually anything, from a large multinational company or an oil rig, to a single taxi ride in Singapore. A good example of this integration in action is Chubb’s work in the bancassurance arena. Bancassurance brings together banking and insurance by using a bank’s networks to distribute insurance products. This practice has been making headlines in the financial press in recent years, especially in Asia and Europe. Chubb is currently focussing on Latin America, a region ripe for disruption, that the insurer is keen to expand into via carefully considered partnerships. It’s not an easy win: it’s estimated that around 50 per cent of the population of LatAm countries is unbanked and only just under three per cent of people have insurance in any form. But, interestingly, mobile usage is exponential. Analysts at Nearshore Americas forecast that, by 2022, Latin America is likely to have 180 million registered mobile money users, with 91.8 million of them active. Earlier this year, Chubb established a multi-year distribution partnership with Citibanamex, the Citi Group’s Mexican operation in which it is investing $1billion to make it the country’s leading digital and data-driven ‘Bank of the Future’ by 2020. Citibanamex will distribute a range of Chubb insurance products through a variety of mobile, digital and direct marketing channels. The comprehensive agreement encompasses property and casualty (P&C) coverage for auto, home, individuals and SMEs; accident and health (A&H) insurance products and commercial P&C coverages for larger businesses. This isn’t an isolated deal in the region, rather it’s part of a wider strategy. In January 2019, Chubb signed a similar distribution agreement with Banco de Chile. According to Ringsted: “It all starts with sitting down with the bank and developing a really good understanding of its vision for how it wants to better serve its customers and increase the value it has locked up in its customer base. “Insurance can play a tremendous role in increasing the value of a customer base. We’re following the customer through their journey and offering more www.fintech.finance

contextual products and services at the right point in that journey. If they’re taking out a personal loan, for example, they might want to think about life insurance, particularly if they have a young family; or cyber protection if they’re starting up a small business.” Chubb is also working with emergent fintechs such as Afluenta, a peer-to-peer platform active in multiple countries in Latin America that connects people looking for investment and credit services with investors. “Afluenta is a very exciting venture,” says Ringsted. “But if something unfortunate happens to the borrower, then the lender is out of pocket. So, that’s where we step in and provide insurance that helps to cover the obligation to the lender. We’re confident that the way forward is through these partnerships that maximise the strengths we have, while effectively outsourcing more commodity-type skills.”

We’re seeing new business models emerge that simply weren’t there 10 years ago... insurance is at the very core, because we’re the oil that makes everything work He says financial services providers should ‘think about the path and the pace to change’. “If you can develop something in house, it may look great, but it may also take you three years, in which case you’ve missed the opportunity,” he says.

Riding on industry trends The bancassurance model is proving popular because it helps financial institutions to improve their customer service, with such partnerships enhancing financial security, businesses and customers’ day-to-day lives. It’s growing in tandem with a wider industry trend that is seeing a shift from insurancepolicy-centric to customer-centric operations, which is being propelled by mobile and the rise of flexible usage-

based insurance (UBI) or single-use insurance products. “Historically, if you work in the insurance industry, it’s been about the policy and the policy administration systems,” explains Ringsted. “Everything we think and do has been centred around the product, and now insurance is having to pivot and think more about the customer and how we deliver the product in a more efficient way. At Chubb, that’s meant investing a significant part of our technology spend, which is over a billion dollars a year, into digitisation. We’re investing in everything from our back office operations through to the customer interactions, making sure that, when we transact, we do it in a way that provides a rich, omnichannel customer experience.” Chubb is riding this trend globally, and is also now delivering digital insurance services across Asia’s diverse markets. Singapore’s DBS Bank, for example, has recently launched an integrated travel platform, DBS Travel Marketplace, with a number of partners, including Singapore Airlines, Expedia and Chubb. Customers will be able to find flight fares and hotel rates for more than 25,000 global destinations, as well as free travel insurance cover that is underwritten by Chubb. In another strategic play, the company has partnered with Grab, which is widely known as ‘the Uber of Singapore’, to provide insurance to self-employed drivers. Using the Grab app, drivers can select different insurance options to protect their vehicles and their livelihoods, with access to loss-of-income insurance, per-ride schemes, personal accident policies and motor insurance. The two companies will also explore data technology from Grab’s platform, including telematics, machine learning and predictive analytics, to offer insurance solutions that are personalised to the specific needs of different private hire vehicle drivers across Southeast Asia. “Digitisation allows, I think, improved communication and personalisation regarding the type of product and service a customer may need,” concludes Ringsted. “One of the areas I’m very excited about is the Internet of Things which, through complex sensors, can allow near real-time risk monitoring and assessment of exposure, enabling the insurer to provide a much more tailored service.” Issue 2 | TheInsurtechMagazine

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CEO CEOspeakers speakers

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Get ready for the 5th Edition!

They were speakers at the 2019 edition

F. Villeroy de Galhau

Christine Lagarde

Bruno Le Maire

Alexander de Croo

Pierre Gramegna

Vilius Šapoka

Managing Director International Monetary Funds (US)

Minister of Economy & Finance (France)

Minister of Finance (Belgium)

Minister of Finance (Luxembourg)

Minister of Finance (Lithuania)

Stefan Ingves

Robert Ophèle

Ann Cairns

Carlos Torres Vila

Thomas Buberl

Frédéric Oudéa

Governor Sveriges Riksbank (SE)

Chairman Autorité des Marchés Financiers (FR)

Vice Chairman Mastercard (US)

Group Executive Chairman BBVA (ES)

CEO Axa (FR)

CEO Société Générale (FR)

Wim Mijs

Eva Kaili

Nicolas Dufourcq

Charlotte Hogg

Frédéric Janbon

Gottfried Leibbrandt

CEO European Banking Federation (BE)

Member European Parliament (BE)

CEO Bpifrance (FR)

CEO Europe Visa (US)

CEO BNP Paribas A.M. (FR)

CEO SWIFT (BE)

Kristo Käärmann

Kathryn Petralia

David Vélez

Mark Mullen

Brad Garlinghouse

Oliver Hughes

President Kabbage (US)

CEO Nubank (BR)

CEO Atom Bank (UK)

CEO Ripple (US)

CEO Tinkoff (RU)

Maximilian Tayenthal

Anne Boden

Charles Egly

Laurent Le Moal

Scott Walchek

Rishi Khosla

Co-Founder N26 (DE)

CEO Starling Bank (UK)

CEO Younited Credit (FR)

CEO PayU (NL)

CEO Trov (US)

CEO OakNorth (UK)

Jason Gardner

Zach Perret

Viola Llewellyn

Nuno Sebastiao

Diana Paredes

Jack Zhang

CEO Marqeta (US)

CEO Plaid (US)

President Ovamba (CM)

CEO Feedzai (PT)

CEO Suade (UK)

CEO Airwallex (HK)

CEO TransferWise (UK)

Governor Banque de France (FR)

INSIGHTS

Playing the insurtech game to win With insurtech attracting record investment, Rahul Singh, President and Global Head of HCL Technologies’ Financial Services Division, predicts that incumbents and startups stand an equal chance of success From being a risk-averse industry that has been resisting change for decades, insurance is turning into a digital diva. Insurtech, a close cousin of fintech, has arrived to give the industry a makeover with new technologies like big data, analytics, algorithms, automation, machine learning, internet of things (IoT), telematics, chatbots and blockchain. The new startups are nimble and fearless and they are eyeing a slice of the enormous $4.8trillion in global gross written premium (GWP). The good news is that insurtech is also driving the behemoths of insurance and, in some cases, inspiring them, to step into the future. There are many indicators that show that traditional insurance organisations aren’t being timid. But are they playing hard enough to win? Can they tilt the rules of the game in their favour and own the future? Insurtech startups have figured out the key weaknesses of the traditional insurance industry and are relentlessly attacking those vulnerabilities, spawning exciting new services. They know that customers don’t enjoy interacting with insurance companies. Buying insurance products is complicated, with a pile of paperwork and complex form-filling; claims payouts can be tiring and long-winded and the premiums that customers pay seem inexplicably unrealistic. This is not necessarily true across the industry but, over a period of time, this is the perception that the industry has created. Bottom line? If customers have an alternative, they will move their business to the simpler options.

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The new breed of insurtech players have been steadily flexing their muscles and are today fancied for winning a major part of the insurance sweepstakes. There is good reason to believe this. Investments totalling $3.18billion worldwide in 2018 made their way to insurtech startups, almost double the $1.65billion invested in 2017. According to industry reports, the first quarter of 2019 saw the sector attract another $1.42billion. Investment jockeys have sniffed an opportunity and are pumping money into what currently seem to be the minnows. By comparison, spends on IT by insurance companies worldwide grew from $184.9billion in 2016 to $202.1billion in 2018, and this is only the beginning of the turf war. These investments are likely to grow, with a focus on platform modernisation and technologies such as predictive analytics, machine learning, artificial intelligence (AI), robotic process automation (RPA), cognitive automation, telematics, blockchain and social media. The new investments are focussed on innovative products and services in the

Startups have figured out the key weaknesses of the traditional insurance industry and are relentlessly attacking those vulnerabilities

area of property, life and health, with the key target being the burgeoning market of tech-oriented millennials and centennials – what one might call the new theatre of war, which will decide the future of several insurance organisations. Technology is playing such an influential role that a recent JD Power survey found that one in five consumers would choose Google or Amazon for their home insurance. Not surprisingly, Google and Amazon are busy investing in insurtech firms. Without doubt, they will end up leveraging their ecosystem of products and services, such as Google Assistant and Alexa, to enhance the home and motor insurance experience on the front end. Their formidable expertise in data, analytics, AI, Cloud, mobility and cyber security will also build efficient back ends. Expect personalised products and services, new business models, omnichannel delivery and elevated customer experience to be the USP of these insurtech giants. Nimble solutions are showing up everywhere – witness Haven Life in the US, Mango in Mexico and Digital Risks in the UK – whose USP is ‘we’ll give you insurance in minutes’. Customer convenience and cutting the paperwork is seen as a major step forward in an industry that is steeped in legacy. And then there are innovators like Lumkani in South Africa, which provides insurance cover for informal settlements along with an IoT heat detector for fires around homes (which customers proudly show visitors as assurance that their www.fintech.finance

Advantage tech: Investment in startups is being more than equalled by investment by incumbents

family is safe). In fact, businesses like Lumkani reflect the principle that could propel traditional insurance organisations to develop symbiotic relationships with manufacturers of home security systems and wearable health devices, as well as alternative energy generation prosumers, weather forecasting organisations, gyms, etc, to create innovative insurance value ecosystems and products. On the operations and back office side, they could partner with analytics, AI, blockchain, IoT and drone startups to tap into new growth opportunities. The good news is that major insurance organisations are waking up to these opportunities. Some smart examples include Allstate’s partnership with startup Carpe Data to fight fraud; Starr’s partnership with SkyWatch.AI to offer usage-based drone insurance, and Munich Re’s investment in Mnubo, a startup focussed on IoT, data analytics and AI, in a bid to create new business models. There are five key areas where incumbents need to work with technology providers that have the domain experience necessary to counter the wave of insurtech that is challenging them: ■■ Create simpler processes using technologies like analytics, automation, RPA and AI for underwriting, policy administration and claims management, resulting in paperless processes that drive efficiency and win back customer confidence www.fintech.finance

■■ Use natural language processing (NLP) and chatbots to deliver accurate and reliable information to customers in a human-centric manner ■■ Drive product innovation using IoT, telematics, blockchain and social platforms for customised usage-based models and better pricing to address newer segments and changing customer needs ■■ Improve risk management by using advanced AI, machine learning and data analytics, which contribute to reductions in underwriting costs and fraud detection ■■ Use APIs to rapidly create larger, flexible ecosystems of partners that share information and help create disruptive business models and improve customer service Some insurance organisations have begun to take steps in the right direction, addressing new markets and customers with technology. Allianz in Switzerland has Splitsurance, which delivers home insurance to youngsters who experience frequent roommate changes. In Singapore, AIG has On the Go, which leverages telematics to analyse driver behaviour and

reward safe behaviour through premium savings. These are just two examples of a growing number where incumbents are demonstrating their appetite for innovation through partnerships and emerging new tech. The signals being sent by incumbents are clear: they don’t plan to ignore the insurtech tsunami. They know they can up the game – and, in fact, they are in a position to win it. After all, their war chest is the historical data they have on their customers, which they can use to personalise and shape products. They also have the relationships with top global technology providers that have the experience, the talent and domain expertise to develop systems and methodologies to counter the challenges laid out by startups. The big question, after technology establishes a level playing field between the old and the new, is: which will consumers choose – startups or incumbents? Chances are, it won’t be a binary decision – consumers are far too smart for that. Instead, it will be a mix of the two. Issue 2 | TheInsurtechMagazine

INSIGHTS: NIGEL WALSH Chart-toppers: But are they breakthrough or remix?

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LEGACY

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y is insurtechs y the next journe block? Some sa allengers. But I fully-fledged ch morphing into haler, senior ng Paul Morgent can’t help thinki zVentures, has ager of Commer rs investment man and neo insure says neo banks ve ha y sil a point when he ea n e ca fferent beasts. W are two very di bank services w ne ith w nships multiple relatio nalty or cost, zero impact, pe providers with our gadget, r going to insure but we are neve me to that) use (or pizza, co holiday, car, ho collaboration at a time. It’s why more than once hs remains nce and insurtec between insura what that t the question of so important. Bu ill nagging me. ill be about is st second album w sleep (3:00 am) Can’t e first th is : for thinking ld where or w a In forever young? album perhaps y are tr en to surable, barriers ess everything is in sin bu ta e ability to star dropping and th ily av he e micro thing is focussed on on s an infinite ap rh pe s, or vest supported by in inue to populate rtechs will cont number of insu notion of a y removing the the space, thereb wcomers be m. Would the ne limited first albu to them? s, or just adding solving problem t rebundle? encounter a grea Are we about to ver. Like) Starting O Aargh! It’s (Just

www.fintech.finance

AUGUST 19

Lloyds Banking Group today announced a new pa rtnership with Trov, under which Trov will white -label a platform to rol l out a suite of insurance products. Is bundlin g ba ck? I won’t stop believin g, but I’m also holdi ng on to this feeling that some of these big insurtec hs are merely competing ag ainst one another rat her than solving problem s. Through a positive lens, this is perhaps why the new and micro ins ura nce categories actually wo rk, but still…

INSURTECH

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I detect great powe r in allowing insuranc e professionals to brea k away from the mo th ers hip and come together around their own wa ck y passions, be it bicyc les, drones (or even 80s music collections). Ins urance innovation ha s been the result of it, as specialised comm un ities formed around niche s. Could there perhap s be more value in br inging people togeth er around topics that ma tter to them; allowing the industry to start with its passion and work from there, as oppo sed to starting with a need and mechanically so lving it? How big an im pact could such a shift ha ve? As in music, I wonder if our tastes have rea lly changed in insuran ce, or do we just go ba ck to the same old produc ts, remastered and remixed to suit a new generat ion? Are we doing an ything fundamentally differe nt, or, with every ins ur tech that has emerged ov er the last few years , perhaps we just have the greatest remix ev er!

COMMUNITY

I’m beginning to th ink that I am developing ma ternal instincts towards ins urtech startups. Even the craziest have me wa nting to cradle them an d whisper ‘never going to give you up, neve r go ing to let you down…’ Bu t I believe it to be ma tte r of urgency now: we are in danger of flopp ing on our second album . In the music industry , we’ve seen many tim es how the deafening success of a first alb um ca n make the follow-up extremely difficult. Pressure, conflicting ideas an d even fame itself ca n trip crowd pleasers and send the entire band crashing down. Some of these characteris tics are already emerging on the insurtech sce ne.

I’ve come to the conclusion that the years of DIY and unbundlin g are at their end, replaced by the do-it-for-me era

LEGACY

SEPT 6

INSURTECH

JULY 20

AUGUST 1

COMMUNITY

JUNE 18

LEGACY

e speed to surtech and th in s, se ca e m In so of whole d the creation le ab en d s ha t marke ld have existe at never wou th es ri e er go m te e new ca ese ar allenge that th ch I t bu , ly . us m previo second albu t the awaited ber features – no find the num beginning to am I , y ly m al e on ar Additi frankly, so nfusing and, co hs e ec se rt to su of in en begun UK, we have ev radox clients. In the g from the pa in le are suffer op pe ngle at si y th s er sign at ev pteen options um ith ing W . do ce d oi an of ch dlessly searching en up d nd en co ey se th , d turn es. Must fin ork themselv all the hard w o late. e before it’s to album premis ievin’ #don’tstopbel Zego London-based day that announced to nd European 2million to fu $4 ed is ra d it ha Made Of This t Dreams Are ee Sw n. io ns expa d ar, I publishe Earlier this ye d le tit en le tic a LinkedIn ar edients, but gr in h ec rt lots of insu ve ha at I ay m e ‘W had known th ant cake!’. If I w st of ju n ly so al ri re we my compa be defined by to ice g tw in t go gh as w have thou cake, I would tI to e Bu nc it! ra g in su in before upload

k into a coffee We do not wal . is es th e th tter, sugar, stand by eggs, flour, bu o tw r fo k as shop and berry muffin. ask for a blue e W s. g ie rr be nce expectin and blue alk into insura w t n’ do e e w th Likewise, ming up with rd work of co , to do all the ha es for carriers . The same go to ve ha cover we need to er om pect the cust ow, I N . er th which don’t ex ei , k themselves or w rd ha e rsonalisation do all th element of pe an is e er th te eferential apprecia blueberries, pr to s ie rg lle (a involved ions) but uten-free vers gl s, in is ra r hy swaps fo ns true. So, w incipal remai ers om st the overall pr cu g on puttin g in st si in ep do we ke is pain? through all th e I’ve come to th the at conclusion th d, are at an en d unbundling ust years of DIY an e era – or, ‘I tr the do-it-for-m by d w an no ns ed replac gh) optio (or good enou od t. go gh ck ri pi they’re you to ck’ phase. And ba e tim s y ge m pa e give m g our 28 eren’t readin w ey th ew e ar kn We all convenience ay. Time and e of Ts&Cs anyw what scares m y drivers. But ar im pr e. s’ nc er ra custom about insu just don’t care is that people without it. go they can ve lie be en ev Some mpeting surtechs are co in n ea m at th Does hing else? ore than anyt m hy at ap t agains

Issue 2 | TheInsurtechMagazine

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INSIGHTS: A CONSULTANT’S VIEW Fresh approach: Insurtechs are ‘elevating standards through the industry’

My lunch appointment with Oliver Wyman lands on one of those sun-dappled, breezy days that bring out the best of Washington’s cosmopolitan spirit. Downtown at noon is the usual jungle of suited individuals, hot-stepping it to their lunch spot or workouts (or both) , as I muscle my way through the crowd and into the entrance of Old Ebbitt Grill. I am 10 minutes early for my interview, but Kristin Ricci is already waiting. First impressions are that she seems far too young to have a decade with the global management consultancy under her belt. In her words, the trajectory from young New York trainee to Chicago,and then finally to DC , where she is now a partner, www.fintech.finance

Fiona McFarlane dines out with Kristin Ricci, Partner at global management consultancy Oliver Wyman, sponsor of the largest insurtech gathering in the world flew by: “I accredit it to the work environment. The atmosphere is rather collegiate and the work is incredibly varied. Once we’ve found a solution, you don’t repeatedly need to bring Oliver Wyman in to tackle the same topic again.” We sit down and order grilled salmon salads and sparkling water – the classic

choice for the health conscious in this city – before diving into the reason I’m here: insurtech. From a numbers standpoint, Wyman’s client list of insurance carriers outstrips its interaction with insurtech startups, but it recognises their importance to the industry. It’s the reason the firm has been main sponsor of the InsureTech Connect Conference in Las Vegas for four years. “Even if you’re not directly dealing with insurtechs, you have to watch their every move,” says Ricci. “Some still see insurtech primarily as a topic for investors, or treat it as a distinct sector, which is naive. The innovations these firms are making will have a knock-on effect and elevate standards through the industry. Issue 2 | TheInsurtechMagazine

INSIGHTS: A CONSULTANT’S VIEW “A few years back, it felt like much of the focus for insurtech was on the front end of the value chain, but now we are seeing more and more startups emerge across the full spectrum.” Does that mean there’s no hope as a carrier, then? “That’s not what I’m saying – many bring their own competitive edge that will continue to persist,” says Ricci. “But the questions carriers should be asking themselves are: ‘how could the marketplace evolve?’, ‘how well positioned are we against these shifts?’ and ‘what actions can we take to future-proof our business?’ For many, the answers will require them to embrace the innovators within the industry and seek ways to partner and engage with them.” Ricci finds Las Vegas overwhelming and chaotic, but makes an effort for the annual InsureTech Connect event. “It’s worth the discomfort just to see the turnout, like a Disney World for insurance,” she says. She dives into recounting findings from her previous visits: “It provides an excellent analogy of the market dynamic over the past 24 months: fun, eclectic, enthused, yet very transient. Our insights record that there is roughly one startup leaving the market for every new one that enters it.” Fintech solutions: Insurers need to be part of that conversation, too

So, what does she think of the bubbling ecosystem, exactly? “It’s been exciting to watch it broaden and evolve over the past few years. In the early years, many firms were focussed on bringing digital solutions to the sales process and distribution. One of my observations from InsureTech Connect last year was how much the insurtech industry had matured: startups which, only a year or two before, were trying to find a compelling application for their technology, now have much clearer value positions and perspectives on how their solutions fit within the ecosystem. We

TheInsurtechMagazine | Issue 2

have also seen them tackling a wider range of topics – from developing new approaches to underwrite and even mitigate risk, to building solutions to enhance insurer operations and claims management. For example, claims is, and will continue to be, an important area for innovation, just because of the huge potential impact it can have – and not by changing insurer processes but also by considering the broader set of providers. Our analysis shows that, for every dollar of insurance premium, 44 cents is paid directly to the ecosystem (e.g. auto repair shops or medical providers). “Beyond just cost management, it’s hopefully about the increase in solutions that seek to deliver more than just financial coverage; they help to actively manage risk and prevent losses. This is something the health insurance industry has done for years by encouraging preventative medicine and focussing on care management. The property and casualty

the carriers, the majority have business models that put them in partnership, not competition, with insurers.” Our plates are cleared and, over coffee, I ask about the relationship between insurtech and its more established sibling, fintech. “This depends where in the industry you are coming from. For years, insurance startups were mistaken for fintechs – lumped in with fintech research – until their numbers became too large to ignore,” says Ricci. We eye the dessert on the adjacent table but decline the offer to order. “I feel like the comparison between the two is cliché. Both certainly have activity and excitement from innovators, investors and the industry, and are asking similar questions about how changes in technology and its usage create opportunities. But then there are also opportunities, especially around evaluating, mitigating and managing risks, that are unique to the insurance industry.” She thinks insurance carriers should pay

There’s a fine balance between helping insurance ecosystems and taking on the underlying risk, something many insurtechs aren’t willing to do... the majority have business models that put them in partnership, not competition, with insurers

(P&C) industry is now beginning to follow suit – with the potential to create real value for both the consumer and the industry. This is also an area we find traditional players focussing on, as many view success in this dimension as critical to building and owning the client relationship.” A waiter interrupts with the bread basket. It gives me an opening to ask whether insurtechs will become real competitors. “There’s a fine balance between helping insurance ecosystems and taking on the underlying risk, which is something many insurtechs aren’t willing to do. While a handful of startups have directly taken on

greater attention to the fintech space. “Last year, I attended a conference on the future of financial advice – there were many startups and wealth management firms present, but only one insurer. I would have expected life and retirement carriers to want them to be a larger part of that conversation. Fintech solutions don’t necessarily consider life insurance or annuities as part of their offering, despite them being critical tools for consumers. “When working with a broker-dealer a few years ago to select an advice tool for its agents, we struggled to find suitable options that contemplated insurance. Part of the challenge for the industry is not getting left behind as fintech moves forward and I’d love to see insurers actively shaping the dialogue on financial advice.” The prescribed hour is up. Nevertheless, I extend a final hook. “What is Oliver Wyman’s advice to insurtechs?” I ask. “Have a clear view of the challenge you’re solving and what you can offer the industry – be it consumers, brokers or carriers,” she smiles and waves her hand for the bill. www.fintech.finance

meniga

INSIGHTS: TRANSFORMATION

Waving, not drowning Insurers the world over are in the same boat, buffeted by storms of change. But some are navigating a way through better than others, says insurtech consultant and author Tony Boobier The opening lines at any event or meeting are always the most difficult. They not only set the tone of the gathering but also aim to establish the credentials of the speaker. It was with this in mind that I recently welcomed a group of Chinese insurance executives to London, in the context of my role as academic course director at a leading London business school. I’d only met one of them before, some years previously. “Welcome to London, you are now part of my insurance family,” I opened. And with that short but sincere introduction, the ice was broken and almost as one the group collectively broke into a broad grin. Describing them as an insurance family has wide implications but carries a great degree of honesty. It’s a business reality that, wherever you go in the world, fellow insurers seem to have the same issues to contend with – those of managing profitable growth, getting more customers, coping with risk and regulation, and usually managing fraud as well. It’s almost as if these elements are in the DNA of the industry. Within that insurance family, the insurtech community are, I suppose, our newest family members.

TheInsurtechMagazine | Issue 2

Before me at the Chinese event were industry leaders from one specific company who, collectively, were managing more than 600 million customer policies, with aspirations to grow. Numbers like this make even large western insurers look like small beer. It’s not that these Asian players are offering fantastic insurance products, but rather that it’s a reflection of the size of their countries compared to the degree of insurance penetration. Inevitably, the conversation turned to insurance technology. It’s an area that I’m well-placed to speak about, having most recently been a worldwide insurance executive focussing on analytics at one of the leading technology companies, following a couple of decades working for insurance carriers and intermediaries. My initial experience was in the claims area and my ambition, even in the early days, was to be more proactive in the claims process. How could it be right that, when a family stand in front of their burned-out home with no possessions to their name, insurers should

demand they obtain three repair estimates, and they should also personally fund the cost of alternative accommodation, before insurers would reimburse them? Surely, there was a better way? I took time to look specifically at the public sector, which seemed to me much more proactive. Local councils were able to quickly move families from a fire-damaged property to a habitable one. It was there that I learned some lessons which, with time, I was able to bring into the insurance sector and which still exist today. The essence was about having better control of the supply chain. That required dealing with fewer, more strategic

Helping hand: Can successful insurtech ideas cross continents?

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companies, and it was recognised that a smaller supplier base was also needed. The only way to identify which suppliers to go forward with, and how many, was to adopt a data-led approach. So it was that I found myself, in the early Nineties, being immersed into this new world of data and analytics. It was all very primitive and spreadsheet-dominated. The brightest guy in the room was the one who could work a pivot table in Excel, so we gave him the nickname ‘Pivot’. As my data team grew, we became more confident in our ability to source and analyse data, ultimately creating industry best practices. These are not only still in operation today, but they still provide the foundation for much current insurtech thinking, too. However, there was a gap in my approach. The US insurance model was at that time five to seven years ahead of western Europe and I wondered if some of the technical capabilities being used in North America were transferable across the Atlantic. It’s a similar question we need to address today. Are new insurtech technologies readily transferable across continents and different insurance practices and customs? We’re often interested by what is happening elsewhere, but how we implement it into our own business environment is much more challenging. I was to stay with the tech sector for another couple of decades through the springtime of management information (MI) and business intelligence (BI) and into what might be called the early summertime of advanced analytics and artificial intelligence (AI). The opportunity to work in about 40-plus countries helpfully gave me an international viewpoint and an understanding of market maturity, especially in Asia and Latin America where there is more buoyancy, shorter chains of command and quicker decision making. I left the corporate world in 2016 to coincide with the release of my first book, Analytics For Insurance: The Real World Of Big Data, which has been recently translated

Worldwide Insurance Growth Absolute Premium Increase in Euro € Billions Worldwide Oceania Western Europe Japan Eastern Europe Middle East & North Africa Latin America North America Asia (ex China & Japan) China -20

into Chinese for that market. My second, Advanced Analytics And AI: Impact, Implementation And The Future of Work, was released in 2018 and there is a third book planned for 2020. Nowadays, between professional engagements, I often speak with insurtech startups and also to overseas tech companies that are trying to break into the UK insurance market. And why shouldn’t they? It’s still a sector that looks and behaves like a 300-year-old industry struggling to come to terms with the future. Elsewhere, Asian and Latin American insurers don’t have the relative luxury of time. Their marketplace is growing at double-digit rates, propelled forwards by social change and government intervention and support. For them, advanced analytics and AI are not ‘nice to have’ options but, rather, they are business critical. The current scale and expected growth of their businesses, coupled with demographic change and the increasing influence of digital natives, means that the old traditions and manual processes are unsustainable. They already know that digital insurance is more than just digitising existing processes but rather a catalyst for new, radical business models. As I discussed these tech matters with that group of Chinese insurance executives, it also became clear that they understood, as I knew and you should know, that the

Asian and Latin American insurers already know that digital insurance is more than just digitising existing processes but rather a catalyst for new, radical business models

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Reference: AXCO, National Supervisory Authorities and Insurance Associations, National Banks, National Statistical Office, Allianz Research, 2016 figures

100 120 140 Euro Billions

160

180

answer doesn’t just rest with the technology. The same issues of transformation still exist today for them as they did for me, nearly 30 years ago. Issues of effective leadership, empathetic stakeholder management, ability to measure returns on investment, managing culture and optimising the organisation, remain critical. Perhaps the most difficult is of these is leadership, especially in a volatile and uncertain business environment where leaders have little or no experience of this new, digital age. Leaders in all sectors are ultimately tasked with building organisations and teams that need to respond effectively to any one version of an unclear future. Overall, for insurers and insurtech companies, there are likely to be stormy seas ahead due to market conditions, harsher regulation, changing consumer behaviour and continuing advances in technology. The ability to navigate safely and successfully through stormy water becomes a critical success factor, and market insight and experience provides an essential compass for that perilous time ahead.

READER OFFER Tony is offering free copies of his book Analytics For Insurance: The Real World Of Big Data to the first two readers who email The Fintech Magazine‘s publisher Ali Paterson at ali@fintech.finance

Issue 2 | TheInsurtechMagazine

INSIGHTS

MIND THE GAP

Matthew Jones, Principal at venture investment firm Anthemis, believes the difference between the insurance a customer buys and the cover they really need is both a failure and an opportunity for startups and the investors who back them The inspiration for something new – a concept, product or strategy – can arrive at any time. It can turn up anywhere: independently, or as a result of talking to any number of people. Often, the inspiration for trying something new is the result of having a bad experience. Take insurance, for example. Many of the startups that spearheaded the current wave of technology-driven innovation in insurance were distribution-focussed brokers or managing general agents (MGAs). The founding stories that prompted the startups include the inability to buy a landlord’s or auto insurance policy in the middle of the night, for example, which led to them bringing insurance online. Their principles were – and remain – noble and

straightforward. Anyone who needs an insurance policy should be able to buy one that adequately covers their exposure at an affordable price and at a time that suits them. These distribution-focussed startups have had a huge impact on the industry. Not necessarily in terms of premium volume – at least, not yet – but in changing the narrative around insurance innovation, causing incumbents to invest in new forms of distribution and encouraging insurance executives to think carefully about the future of the industry. However, in my opinion, where they haven’t yet had a big impact is on the ‘protection gap’ – the difference between the amount of insurance cover that is economically beneficial and what is actually purchased. Put simply, it is the protection that a customer should have, but doesn’t. In products such as auto liability, there is next to no protection gap. Coverage is mandatory in many markets and those who do not buy it are subject to punishment, as

TheInsurtechMagazine | Issue 2

determined by the local law. In products such as landlord’s insurance, there is a protection gap – without a law making this mandatory, not everyone buys what they need but, in developed markets, the opportunity to access these products is generally good. I believe that mature lines of business, where customers are already well-served by competitive markets with suitable products, do not need so much attention from entrepreneurs and their startups. Instead, I encourage them to roll up their sleeves and close the protection gaps in selective segments and certain areas around the world.

Swiss Re, the largest holder of biometric risk in the world, estimated that the life insurance protection gap in 2016 was

calculate the size of a protection gap is one thing, but why does a gap exist? Why don’t people buy something when they really should? Aside from that feeling of ‘it’ll never happen to me’, there are a myriad of reasons, ranging from hard, technical challenges to softer engagement-related issues. These differ in their relevance, by both product and geography, as well as the regulatory regime in place. On the technical side, in many cases a suitable insurance product just doesn’t exist today. Sometimes that means that it hasn’t been thought of, despite all the bright minds in insurance. More likely, the lack of a product often means that it simply isn’t yet possible to suitably estimate the risk in question – either more generally or specifically – at the customer

close to $25trillion in the United States alone. In the same year, the total face value of all life insurance in the US was only $21trillion. So, while the incumbents have done a great job of getting us to $21trillion, some creative approaches might be required to get us closer to $46trillion. That missing $25trillion represents coverage that people need but currently do not buy. A similar picture emerges around catastrophic events. Total economic losses from both natural and man-made disasters were $165billion in 2018. Insurance covered only $85billion of those losses. Unfortunately, that gap is growing: economic losses grew by five per cent between 1992 and 2018, yet insured losses grew by only by 4.7 per cent. Creating a sophisticated model to

level. In certain cases, there have been advances in underwriting, but the pricing makes the product unaffordable. With respect to engagement, insurance suffers from various issues related to perception. A recent LIMRA survey showed respondents deemed insurance too expensive (63 per cent), others claimed they have other financial priorities (61 per cent) and some believe that they already have sufficient cover (52 per cent). Furthermore, most customers estimated the price at three times the actual cost to acquire the coverage. With household budgets stretched, is it surprising that customers take the easy option and just don’t bother to buy any? The business of distributing insurance products, especially in well-known lines of business like landlord’s and auto, is

Where are the gaps?

It’s time to do more to get the right insurance products into the right hands, at the right time

www.fintech.finance

difficult. In some markets and in some product lines, brand continues to matter a lot to prospective customers. Offline, the number of agents selling insurance has declined significantly over the last few years. Online, insurance-related keywords are pricey and getting more expensive.

So, what’s exciting about insurance? As a venture capital investor in the insurance industry, I remain convinced that there are opportunities for innovation across the insurance value chain; not just in distribution but underwriting and operations, for example, too. When it comes to distribution, there is a distinct correlation between my excitement about a new proposition and the extent of the protection gap in that space. At Anthemis, we’re putting our money where our mouth is. A great example of this is Stable. Stable protects businesses

from volatile commodity prices by insuring them against price falls or rises. Whether the business in question is a solo farmer or a multinational food processor, dealing in milk, wheat or pork, Stable can protect against the financial volatility that such companies would otherwise be exposed to. Such insurance products provide the financial stability that makes it much easier to plan major investment projects, thereby improving efficiencies and, by extension, profits. At present, the risk management strategies for such businesses range from extremely complex derivatives (out of scope for all except the largest companies), locking in prices well in advance (assuming the counterpart is even able to) or crossing your fingers and hoping for the best. Another example is Hokodo. Hokodo offers single invoice credit insurance products to small and medium-sized businesses looking to protect against the event of default. Cashflow is the number one worry for these businesses, with late www.fintech.finance

payment of invoices being one of the leading causes of small business failure across Europe. Hokodo delivers its invoice protection products through accounting services and marketplaces, among other distribution channels. Served through an application programming interface (API), the insurance is delivered at the point of need, embedded and easy to access within existing platforms and workflows.

How technology closes the gap My enthusiasm for tackling protection gaps is driven by the optimism I have around technology and how it can

materially reduce underinsurance around the world. As evidenced by the companies above, the benefits of technology are real and already underway. Technology can be, and is being, used to address protection gaps through: n New products Technology is enabling the development of products that have hitherto not been possible. Insurance has become atomic, broken down to cover specific time periods or specific risks n New data sources Data science is enabling insurers to understand risk in real time and price it accordingly n New methods of engagement The existence of a risk and need to mitigate it can now be anticipated well in advance. Customers can learn about products on their terms, at their convenience n New distribution In many lines of business, insurance is

gradually becoming invisible: the acquisition of cover embedded within existing transaction processes or workflows n New methods for matching capital with risk Making this process more efficient can reduce the overall cost structure, especially in insurancelinked securities and reinsurance.

Lightbulb moment: Innovate in the space between what we buy and what we need

As the world changes, new risks inevitably emerge and, by extension, new protection gaps emerge, too. Munich Re and Swiss Re monitor the risk landscape for new risks and have highlighted several areas to watch. These include the increasing prevalence of intangible assets, automation, social inequality and protectionism. If you’re an entrepreneur looking for a real problem to tackle, start with the protection gap. It’s time to do more to get the right insurance products into the right hands, at the right time. There are too many people walking a tightrope without a safety net out there. Issue 2 | TheInsurtechMagazine

LAST WORDS

Insurtech’s top influencers and why you should be following them! Social media savant Jay Palter opens his virtual little black book of those you need to know

It used to be that you could keep abreast of key developments and trends in your industry by attending an annual conference and reading a trade publication or two. Oh, how the world has changed!

identifying the right ones for you and your business objectives, then tuning into their social feeds, you gain access to a wealth of crowdsourced knowledge. So, in the generous spirit of the online community, we’d like to share our favourite influencers on LinkedIn and Twitter with you. But first, here are our top tips for maximising your social connections:

Now, there are dozens of industry events to choose from and hundreds of publications, blogs, podcasts and a variety of thought leaders, online influencers and social media amplifiers who have news and insights that can help you navigate the new frontier of technological innovation. A new strategy is needed for filtering this firehose of information and insight – and online influencers are key to it. By

Use LinkedIn as your calling card for people you’ve met. Update your profile and make sure you have a current summary and picture. Whenever you meet new people, follow up and connect with them on LinkedIn, and stay in touch. Consume as much finance industry content as you can and share the most valuable and insightful material regularly in your social networks. Be generous and kind in sharing your

SPIROS MARGARIS spirosmargaris @SpirosMargaris VC at Margaris Ventures and advisor to fintechs, including F10 Accelerator.

ANDREAS STAUB andreas-staub-384b4984 @andi_staub Managing partner at FehrAdvice. Mentor at F10 Accelerator.

MATTEO CARBONE matteocarbone @MCins_ Founder/director of the IoT Insurance Observatory. NED and chair of Innovation Advisory Board at Net Insurance S.p.a.

DANIELLE GUZMAN guzmandanielle @guzmand Global head of social media for Mercer. Onalytica-recognised top influencer.

MINH Q. TRAN minhtran @Minh_Q_Tran VC, entrepreneur, co-founder/managing partner at Odysseus Alternative Ventures. DR ROBIN KIERA dr-robin-kiera-33536931 @stratorob Founder of Digitalscouting.de. Speaker and author. SEBASTIEN MEUNIER sbmeunier @sbmeunier Head of digital for North America at consulting firm Chappuis Halder & Co. FLORIAN GRAILLOT florian-graillot-56a1aba/ @FGraillot Founding partner at Astorya.VC, investor in early stage insurtech startups.

TheInsurtechMagazine | Issue 2

NIGEL WALSH nigelwalsh @nigelwalsh Deloitte Digital Partner. Leading firms on work with insurtech disruptors. Host for 11:FS Insurtech Insider podcast. SABINE VANDERLINDEN sabinevanderlinden @SabineVdL CEO of Startupbootcamp InsurTech and partner at Rainmaking Innovation. Co-editor of The InsurTech Book. PAOLO CUOMO paolocuomo/ @pgc_at_work Head of strategy at Brit Insurance. Co-founder of InsTech London. DENISE GARTH denisegarth/ @denisegarth SVP Strategic Marketing at Majesco.

opinion and always strive to add value in your interactions. Take time each week to pay attention to and comment on content that others write and share. Engage people personally in your online networks. Think of Twitter as a virtual conference that you attend each week. Seek out people in insurtech and beyond whose ideas, perspectives and personalities attract you, then share their content and engage with them. Get to know who the online influencers are in insurtech and build relationships with the ones whose ideas and insights speak to you.

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n To find LinkedIn contacts, type in the URL https://www.linkedin.com/in/ followed by their handle. KIRK BORNE kirkdborne @KirkDBorne Principal data scientist at Booz Allen Hamilton. Global speaker on big data science and AI. Also an astrophysicist! TIMO DREGER timodreger @insurtechforum Founder of @insurtechforum platform for insurtech, VC and bancassurance views. STEVE TUNSTALL stevetunstall @TunstallAsc CEO and co-founder of Inzsure.com. Contributor to The InsurTech Book. THEO LAU theodoralau @psb_dc Co-founder of Unconventional Ventures. VC and advisor to fintech and healthtech. CHARLOTTE HALKETT charlottehalkett/ @charliehalkett CCO for Bought By Many. DALITH STEIGER dalith-steiger @DalithSteiger Co-founder of SwissCognitive. CEO of Swiss IT Leadership Forum. www.fintech.finance

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