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MAGAZINE

ISSUE#3

THE

INSURTECH

REVERSE THINKING

Has Honcho got the answer to channel fatigue?

HOW TO POLISH YOUR PITCH

ARE CONNECTED CARS LIFESAVERS OR LIABILITIES? ALISSA KNIGHT ON CATCHING MANUFACTURERS…

ASLEEP AT

THE WHEEL

KPMG’s top tips for onboarding with FIs

YOU DON’T WANT TO BE A KODAK!

Using insurtech to build a stronger Allianz

INSIGHTS FROM Penni.io ● HCL ● AXA ● Honcho ● CX BPO Ascensos ● Apply Financial

BNP Paribas Cardif ● Trulioo ● FinTech Global ● KPMG ● Kasko ● Digital Insurance Group


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CONTENTS

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Hack seat driver Have the benefits of autonomous vehicles blinded us to the cyber risks?

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Meeting fire with fire (and an open API) It’s the best defence against the aggregators, according to Penni.io

11 Joined-up thinking How HCL Technologies is helping insurers create connected enterprises

12 Time for renewal AXA is quickening the digital pace with help from its insurtech friends

14 The insurtech effect Trulioo looks at what digitisation of ID means for insurance

17 Is it a bird? Is it a plane? No, it's Super Agent! In our world of tech-enabled customer experience, a new hero is emerging, says outsourcing specialist CX BPO Ascensos

18 Change forecast Amid the tectonic plate-shifting going on in insurance, BNP Paribas Cardif’s boss is remaining calm

21 Got your back! Apply Financial’s straight-through processing tools have helped insurers in the West save millions in their back offices… now it’s looking East

THEINSURTECHVIEW

2020

ISSUE #3

Every time I strap my young son into the child seat of our Nissan Qashqai, like every parent, I guess, I’m making a subconscious risk assessment. The World Health Organisation tells us that road accidents are the biggest killers of children and young adults. But I consider myself to be safe when in control of a car. What if I’m not, though… in control, that is? The manufacturer of my car is among the leaders of the autonomous vehicle (AV) revolution: and it’s just completed a milestone, driverless journey using two LEAF models. This moves the tipping point for widespread adoption of AVs for personal travel – most likely in a ride-sharing scenario – closer. Now, I struggle to understand what’s under the hood of my Qashqai, but I know enough to be able to trust the technology. Our star interview with white hat connected car hacker Alissa Knight demonstrates that, like most drivers, I know nothing about the cybersystems powering an AV – nor,

importantly, how my not being in control doesn’t mean that someone else can’t be. And that raises huge questions around liability for insurers. There’s a bit of a transportation theme emerging in this issue. You can also read how startup Honcho is reversing the idea of aggregator sites – initially targeting motor cover – while Kasko is also re-laying the distribution tracks. Technology is definitely rewriting the insurance manual. Editor-in-Chief, Ali Paterson Did you recognise last issue’s ‘spine tingler’? “The cowards never started and the weak die along the way” was a quote from American philosopher William James, ‘Father of American psychology’.

26 A league of their own Wales isn’t just good at rugby, it’s a Number 8 in the insurtech scrum!

28 Why insurers should stop fearing technology

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It offers new revenue streams and can help improve public perception of the industry. That’s why Allianz has embraced it

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30 Tech-friendly onboarding KPMG’s guide to third-party risk management in FS partnerships

35 All aboard the insurtech express! Kasko is plotting an alternative route for distributing insurance products

37 Run for cover Banks could be in danger of missing a bancassurance opportunity. Digital Insurance Group thinks they need to move faster

38 Inside stories Alasdair Paterson sneaks between the covers of Chris Skinner’s upcoming, intimate look at five banks’ experiences of Doing Digital www.fintech.finance

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THEINSURTECHMAGAZINE2020 EXECUTIVE EDITOR Ali Paterson

ONLINE EDITOR YASH HIRANI

EDITOR Sue Scott

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

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ART DIRECTOR Chris Swales PHOTOGRAPHER Jordan “Dusty” Drew SALES James Butcher Chloe Butler Tom Dickinson Shaun Routledge

FEATURE WRITERS Tracy Fletcher Martin Heminway Sue Scott

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ISSUE #3 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.

Issue 3 | TheInsurtechMagazine

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INSURTECH: DRIVERLESS CARS

Hackseatdriver Hack driver Alissa Knight’s new book is a how-to guide for hacking autonomous cars. Why? Because everyone should know where the weak spots are… including insurers Successfully navigating the UK’s main north/south highway any day of the week is stressful enough. So it was probably just as well no one knew they were sharing their lane with two driverless cars at the start of this year. Part of the government-backed HumanDrive project to accelerate development of autonomous vehicles, the 230-mile road trip went off uneventfully; but the implications are profound. The longest test drive ever undertaken in the UK, it challenged the cars – both Nissan electric vehicles (EVs) – to negotiate unmarked, high-speed country lanes, complex junctions, roundabouts, and motorways; the onboard system making its own judgments on speed, positioning, changing lanes, merging, stopping and starting. The only time the passengers – both engineers on the project – intervened was when they pulled in for a quick coffee and a recharge. If you’re rubbish at parallel parking, you collect traffic tickets like other people collect stamps and you’re the kind of driver who can’t wait to flick on the speed limiter, then being able to delegate your daily commute to a supercomputer on wheels probably sounds very appealing – although at around £170k, the cost of such vehicles is likely to be beyond the reach of mere mortals for some time. If, on the other hand, the moment when Charlize Theron steered hundreds of hacked cars remotely down 7th Avenue in 2017’s The Fate Of The Furious (as in Fast And…) left you with a queezy feeling about our future transport plans, you’re not alone. While governments and insurers have been quick to point out the environmental, cost-saving and even life-saving benefits of autonomous technology – around 28,000 people a year are killed or seriously injured on Britain’s roads and 95 per cent of those incidents are caused

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by human error, according to the Royal Society for the Prevention of Accidents – there are others who believe we’re jumping a glaring red light. Alissa Knight is one of them. A self-described ‘recovering hacker’, she’s used her inside knowledge of the vulnerability of connected devices to build a career advising challenger brands and market leaders on cybersecurity. She points out that most cars released after 2011 share the same communication network as your mobile phone or tablet – a standard called the Global System for Mobile Communications, or GSM. “If you think about it, cars today are pretty much like cell phones on wheels, so original equipment manufacturers can communicate with them and push what’s called OTA, or over-the-air updates – which opens up a potential attack vector for these cars,” says Knight. “If you can communicate with a car over GSM, you can theoretically do it from anywhere. Being able to take remote control of a vehicle over GSM, or in close proximity over Wi-Fi, is becoming easier and easier to do. We’re making it possible to be able to connect with them, and with that connectivity comes vulnerability.” A thief, in theory, could already hack your security system to steal your car; if you know what you’re looking for, the hardware to instigate a replay attack can be picked up for $20 on eBay. But combine that capability with a vehicle that can think for itself and you’ve potentially got an army of robotic devices that can be mobilised remotely to cause havoc and create panic on our streets. Smart city transportation systems built on the Internet of Things and plugged into V2X, or vehicle-to-infrastructure, communication systems, could similarly be hacked, creating the spectre of ‘spam jams’ and potential collisions. In every case, the question of where liability rests

– the vehicle owner, manufacturer, civic authority, etc – will come to haunt whichever insurer picks up the claim. Knight’s argument – which she brings home forcibly in her new book Hacking Connected Cars: Tactics, Techniques And Procedures – is that tomorrow’s passengers of driverless cars (and the pedestrians and other road users who share their environment) are being asked to trust – with their lives – that manufacturers will have tested the 1.2 billion lines of code in every autonomous EV sufficiently to know there are no potential security flaws. And, as a professional penetration tester herself, who somewhat shockingly revealed at Money20/20 USA that she had (legitimately) downloaded 30 leading financial services apps and managed to reverse engineer them, she says that’s just not happening. “The problem is, unlike with home Wi-Fi, you can’t just go to Best Buy and pick up a wireless firewall to protect your home network. It’s one thing if I were to compromise your web server and deface your website; it’s another if you and your family are in your car and I drive it into a wall. Unfortunately, there’s really nothing that the average consumer can do, except ask different questions when shopping for a car, like ‘has this car been penetration tested? Does this car have ECU firewalls in it? Is the infotainment system connected to the CAN bus so if my car were to get hacked, they can’t jump to the steering column?’. It’s those kinds of questions we need to ask as a society and hold manufacturers’ feet to the fire, and say ‘hey, are you thinking about these things?’. But the responsibility isn’t on the consumer to address this,” continues Knight, “it’s on the manufacturer and Tier 1 suppliers to make sure that when they put out a request for a proposal, it contains language like ‘if we’re going to award you this contract, you need to produce a penetration test report.

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It’s one thing if I were to compromise your web server and deface your website; it’s another if you and your family are in your car and I drive it into a wall

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Issue 3 | TheInsurtechMagazine

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INSURTECH: DRIVERLESS CARS You need to prove to us that you’ve done a vulnerability analysis and a risk assessment on this equipment to make sure all the weaknesses have been identified, and those that are unacceptable to the business have been remedied’. It’s really making sure, on the OEM side, that they’re doing what they should be doing. That they’re eating their own dog food.” This is no longer Hollywood hype. Between 2017 and 2018, cyberattacks involving IoT devices, from hacked doorbell cameras to rogue nanny cams, rose to more than 32 million, according to the 2020 SonicWall Cyberthreat Report, which

Hands off?: Drivers aren’t convinced of autonomous vehicle safety

described it as ‘an alarming year for the security and privacy of IoT devices’, adding that trending data suggests more IoT-based attacks are on the horizon. Earlier this year, Mary Joyce, Global Vice President & General Manager of Mobility & Automotive at safety testing specialist UL (a division newly created in response to the astonishing speed with which manufacturers including General Motors, Daimler AG, Ford Motor Company, Volkswagen Group, BMW AG, the Renault-Nissan-Mitsubishi alliance, the Volvo-Autoliv-Ericsson-Zenuity alliance, Groupe SA, AB Volvo, Toyota Motor Corporation, and Tesla Inc, plus major auto suppliers, technology providers and autonomous vehicle-as-a-service providers such as Uber, are getting into the market), warned that regulation in the States and globally was being left behind. “The danger is that without federal regulations and a universal standard in determining safety, there could be great damage if these cars get on the road without being deemed safe. And, of course, part of safety is security. Can you imagine a

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TheInsurtechMagazine | Issue 3

hacker being able to take control of an autonomous car? It’s very important to not only have a company indicate that its autonomous vehicle technology is safe, but to have third parties, government agencies or agreed-upon standards assure that it truly is safe, followed by, at the very least, minimum guidelines,” said Joyce. AXA, one of the world’s biggest insurers, has been involved with the development of autonomous vehicles from the start, making the case for the technology as an agent of good, citing its potential to reduce accidents and increase mobility for those denied it by conventional cars. Both of which are true.

can be applied to connected cars and autonomous vehicles. Because, as more and more connectivity happens with connected passenger vehicles, hackers are going to shift their attention. It’s one thing for ransomware and malware on a network to affect your infrastructure; what if ransomware and malware were to target vehicles, and hackers were to go after individuals or businesses, saying ‘we’ve got remote control of your vehicle. We want 100,000 Bitcoin for you to get it back’? Hackers are going to evolve to monetise the data that comes especially from vehicular infrastructure, data being produced from cars, including personal identifiable information, that hackers can now go after because vehicles aren’t adequately protected,” says Knight. “You can’t protect yourself against an enemy that you know nothing about. That’s why I want to uncover the vulnerabilities in these connected vehicles and products; so that we can make them more secure, so people are educated and manufacturers start doing something about it.” The public might not know what they don’t know, but their gut instinct is not to trust

Forbes forecast that third-party damage claims could largely disappear and premiums could reduce by as much as 75 per cent as a result But it also acknowledges the complexity around adjusting for risk, the likely higher cost of claims linked to such sophisticated technology and the challenge of fashioning cover for the car-sharing economy that autonomous vehicles will encourage. It would like to see something similar to the clear structure of liability laid down in the UK government’s 2018 Automated and Electric Vehicles (AEV) Act adopted across Europe. Axa sees the insurance industry facing fewer claims under new policies that cover driverless cars in both fully automated and driver-controlled mode – and of those it does, a proportion being passed on to manufacturers. Forbes, meanwhile, has forecast that third-party damage claims could largely disappear and that premiums reduce by as much as 75 per cent as a result. “I think the insurance industry is going to have to adapt,” adds Knight. “Insurers are currently providing cyber insurance and hacking insurance for businesses on their infrastructure side; they’re going to need to start thinking about how their products

driverless cars. According to AXA research, three out of four Brits do not believe they are safer than conventional vehicles, while a poll by Reuters/Ipsos last year revealed that half of US adults think they are more dangerous, not less, and nearly two-thirds would not buy a fully autonomous vehicle. So, would Knight put herself and her family in one? “If I did the penetration testing of that infotainment system and helped the OEM or manufacturer to secure it, then yes.” Not quite sure where that leaves the rest of us…

Hacking Connected Cars: Tactics, Techniques, And Procedures by Alissa Knight is published by John Wiley & Sons in the US. It will be released in the UK on May 14, 2020, in paperback and Kindle editions.

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INSURTECH: DISTRIBUTION Fired up: Savvy insurers can outdo the aggregators

Meeting fire witehnfAirPeI) (and an op Esben Toftdahl Nielsen, Co-founder of Penni.io and an advisor to the Open Insurance Initiative, on the best defence against the aggregators Recent years have seen an increase in online sales of insurance, largely as a result of customer demand and the inexorable rise of the aggregators to meet it. That said, you don’t see the same picture across the whole of Europe, nor, indeed, across all verticals. While McKinsey estimated that by 2017 aggregators were already responsible for more than 50 per cent of the UK’s motor gross written premium (GWP), that figure fell to just 10 per cent in the Netherlands. Stats from the Danish insurance industry suggest that only three to five per cent of all insurance there is sold online. Whatever the volume, it’s clear that only a comparatively small percentage of purchases take place through the insurers’ own online channels. It’s primarily the aggregators that are successfully driving digital sales. In fact, insurance policies were among the first products to be successfully sold or brokered by aggregators when they began to emerge in the 1990s and, in many major European markets, insurance products still account for 75 per cent or more of aggregators’ total revenue, according to McKinsey. This must be a troubling fact for insurers. www.fintech.finance

As I see it, the lack of online success is due to the fact that many of today’s insurance providers take an insurance-centric approach when it comes to selling their products online, with little regard for the end-customer’s journey. By contrast, for the aggregators the journey is everything. We’re seeing a clear shift in customer expectations. Rather than being content with whatever insurers have to offer and how they want to sell it, customers now make use of multiple channels for buying insurance and demand greater added value throughout the entire buying process. Moreover, customers expect to be able to shuffle seamlessly between offline and online channels. In response to this, insurers must be able to provide flexible customer experiences and adapt easily to whichever digital channel the customer decides to use. And, in order to do this, they must change their insurance

As I see it, the lack of online success is due to the fact that many of today’s providers take an insurance-centric approach when it comes to selling their products

distribution model. In other words: insurers must be in the right place, at the right time, with the right offer in order to be successful with online sales.

Bridging the gap with embedded insurance That’s easy to say but, in reality, it’s incredibly challenging, because the customer buying journey is becoming multiplex: they expect to be able to buy insurance through ecosystems, car dealers, retail outlets, banks, and other places. The winners in online sales will be those that are able to seamlessly embed insurance anywhere, and the foundation for that is open application programme interfaces (APIs) because they act as interfaces for cross-platform communication between businesses. At Penni.io, we provide open RESTful APIs to clients, specifically optimised for use in online sales solutions. With embeddable insurance widgets, customer onboarding frontends and conversion optimisation, the platform enables insurance providers to sell any insurance product online through any distribution partner and it can be white-labelled. This enables them to provide real-time quotes to partners, giving insurers the ultimate competitive advantage in online sales. That competition for insurance customers is getting fiercer is obvious. Online sales are a big part of that battle. And open APIs are the most effective weapon for an insurer determined to remain competitive in a digital world. Issue 3 | TheInsurtechMagazine

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INSURTECH: CUSTOMER CENTRICITY

Joinedupthinking Rahul Singh, President and Global Head of Financial Services, HCL Technologies, on how modern insurers create a connected enterprise for a digital world

“What’s dangerous is not to evolve, not to invent, not to improve the customer experience” – Jeff Bezos, Founder of Amazon. In the hubbub surrounding his wealth, the Amazon empire and other ventures, we seem to forget that Jeff Bezos also changed the way we do business. He redefined and rearticulated commerce, not in terms of profits and valuation, but for the end consumer. Amazon’s vision of being ‘the most customer-centric company in the world’ imagined that world to be tech-driven and interconnected, where an unfiltered obsession with customer experience generated long-term value. Today, businesses across the world are finally catching up. Nowhere is this more evident than in insurance. Insurtech has revolutionised how consumers interact with their insurance providers. Companies are today racing to reformat their businesses for the cybernated economy. Developing an outside-in approach, the entire experience is redesigned for the digital-native customer. Emulating the Amazon model, companies are building connected enterprises from the ground up, integrating systems to deliver effective and efficient products and services. “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel” – Maya Angelou, author and activist. What does the modern digital customer want? Understanding their needs, motivations and preferences is the basic building block for a customer-centric

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organisation, informing their entire business strategy. This means that all relevant parts of the organisation that impact customer experience must understand, react and cater for this agenda. The key to building a formidable and durable customer-centric organisation lies in designing and delivering absorbing, seamless customer experiences, aligned across the entire organisation. For a modern insurance company, the front, middle and back offices seamlessly converge to form a customer-centric, agile and digitally transformed, connected enterprise. One of our clients, a Dutch insurance behemoth, realised that the old silos were ineffective in today’s digitised world. It sought to bridge the physical distance

The front, middle and back offices seamlessly converge to form a customer-centric, connected enterprise between customers and its brand by short-circuiting the tedious processes that hamper coordination at all levels of corporate governance and functioning. When we joined it as a single digital partner, we wanted to enhance employee experience, improve efficiencies and optimise cost to ultimately help develop more efficient systems, ones that intuitively understand the modern customer and optimise resources. Any transformation relies on expertise, innovation, experience and continuous,

deep collaboration. We worked with the firm to find the entrepreneurial spirit, technological talent and heritage – including processes, data, expertise, values and information among employees – to lead the change teams. We incubated our ideas in innovation labs, testing their efficacy before incorporating them in the enterprise model. This resulted in a single view of the customer across the organisation, a 40 per cent increase in revenue through multi-channel distribution, up to $3million of cost savings in the first year, and an almost 90 per cent reduction in cycle time. “Just as fast-food chains operate a different capability footprint and deploy different processes than three-star Michelin restaurants, insurance companies should develop and deploy differentiated processes and capabilities, based on specific customer considerations” – Deno Fischer, Financial Services Customer Advisor at KPMG-US. A connected enterprise approach empowers insurance firms to see and serve their customers as people, not just as policyholders according to how their business units define them – as, for example, home or vehicle owners. It’s an ambition that depends on partnership and trust across the organisation. A hybrid model, which manages different efficiencies and expertise, demands a truly all-inclusive experience that puts people, not processes, at the forefront of decisionmaking and customer communication. A vision where customer-centricity and human ingenuity is valued to deliver a connected enterprise.

Issue 3 | TheInsurtechMagazine

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INSURTECH: DIGITISATION

TIMEFORRENEWAL The insurance industry has been slow to see things through a customer lens, but now it needs to quicken the pace, says David Williams, AXA’s MD of Underwriting and Technical Services. And with the help of Axa’s insurtech partners, it is…

THE INSURTECH MAGAZINE: How has the customers’ experience of dealing with insurance companies changed, compared to the relationship they now enjoy with the banks? DAVID WILLIAMS: The industry was very process-driven and efficiency ruled the roost. But we recognise now that people expect an excellent customer experience; their interactions with other organisations set that standard, so we’ve got to be up there. There’s massive investment in making AXA’s customer interaction better. We’re appointing people as customer advocates and seeking feedback about better ways of doing things. But it’s true that we were slow to get started and you have to understand the nature of the industry’s interactions to understand why. Customers communicate with their bank regularly, through holes in the wall or mobile apps. We sell them something then don’t hear from them for another year, unless they have a claim. This meant we weren’t rushing to invest in customer-facing technology. The advantage is that we’ve been able to go at it at the perfect time, learn from others’ mistakes and really raise our game. TIM: So what customer experience improvements is AXA making? DW: We need to increase our customer contact and we’ve also got to address a reputational issue – in the past,

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insurers were known for relying on lengthy wordings and small print, so we’ve got to find ways to remind our customers that we are there to help them. Technology such as mobile communications and social media give us great opportunities to interact with, and understand more about, customers. We’ve always employed lots of actuaries, clever mathematicians and data scientists who focus on pricing in an incredibly competitive market, but how about using those skills to understand what customers really want? There’s lots of external data we can tap into, much of it free of charge. If we can understand what really makes people tick and shape our interactions around that, we’ll stand a better chance of building that relationship. TIM: How critical is mobile technology to the insurance industry? DW: You could almost argue that the web, while one of the most transformational things that ever happened, was just an interim stage. If you look at analysts’ predictions around when and where people are buying, it’s absolutely a mobile future. More importantly, from an insurer’s perspective, when we have an interaction – when there’s a claim for a motor accident, for instance, or while travelling – people don’t have a PC around, they don’t want paper and pens, but they always have a mobile device.

We can also use apps and social media to connect with people on their mobile devices, to provide information that’s helpful. If we sell somebody a travel policy and we know they’re going to Europe, then with their permission we can link to flight data and, using blockchain technology, know when a flight has been delayed, so that they automatically get a payment without making a claim. However, it’s easy to get excited about ‘shiny toys’ and the future, and we must prepare for that, but we also have to recognise that not all our customers want to interact with us that way. We want to give them choice, making sure they can submit a claim by sending an email, writing a letter or submitting a video clip. Working with clever financial tech startups, we can assess damage to vehicles or property just from a video clip or photos. However, while these things are very exciting, if somebody wants to speak to us or have a motor engineer or surveyor come round, we will do that as well. TIM: Does digital technology allow more efficient onboarding? DW: In the past, we might use different techniques for marketing but then force people down a specific route – like filling in a form. Now, we’re trying to understand what they really want, rather than assuming they’ll like our newest way of doing things, or looking at

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their age and assuming they want a paper form, for example. We’re trying to tailor our products so we know we’re selling them something that brings them value, and using data to model what we think will be the most effective, most appreciated way of interacting. Customers interact with insurers much less than anything else, so whether it’s how they buy their groceries or do their banking, we need to see what’s working and make sure we stay up to date with those trends. Some people are time-scarce and want to do things really quickly, and we can do that using technology. But other individuals like to feel they’re being taken care of more. For example, we sell commercial insurance products, including professional indemnity, and we worked out that, using external data sources and information we already knew about businesses, we could just ask them one or two questions and give them a policy. Then we noticed that conversion dropped off when we were expecting it to rocket. From speaking to these customers, we learned that they didn’t think the product could be that good because we weren’t asking sufficient questions or taking enough interest. In the end, we put some questions back in that we already knew the answers to so that they felt this product would provide the coverage they needed.

TIM: How are you using digital technology to help prevent fraud? DW: Fraud detection is massively helped by the digital world we live in and the devices we use. Everybody leaves a digital trail. The industry currently spreads the cost of total claims over everybody’s premiums, so if people submit fraudulent claims, it’s other customers who bear that cost. So, we’re reducing the cost of insurance for honest customers through all sorts of tracking technology and external databases. I know some people don’t like the idea of some of this, but if they share their information, we can provide them with the benefit while making sure we never take their data for granted.

We’ve always employed lots of actuaries, clever mathematicians and data scientists who focus on pricing in an incredibly competitive market, but how about using those skills to understand what customers really want? TIM: How does AXA collaborate with insurtechs? DW: The vast majority of the people we employ are great at insurance, but not necessarily at the cutting edge of technology or customer experience. We are very focussed on compliance and regulatory issues, which is vitally important, but isn’t necessarily the sort of thing that

will accelerate new development. If we can work with small, entrepreneurial startups that have a great idea and want to turn it into a business, without hampering them with all the regulatory thought, we can take some really good steps forward. The first thing we recognised was that if we bought a little entrepreneurial insurtech firm, brought them in and stuck them in our offices, it wouldn’t be the right environment. So, we’ve set up separate companies – AXA Strategic Ventures and AXA Partners – that view the market the same way an investment or venture capital house would, considering clever ideas and good companies in the insurance space. They’ll work with them to build solutions, provide funding or find the best way to use what they’ve come up with within our business. We can offer a warm introduction to AXA which, as a group, has more than a hundred million customers globally. I think this gives us a bit of an edge over VC funds and it’s proving really successful. TIM: To sum up, what’s the aspiration? DW: In the old days, we would take a premium from somebody, then hope we didn’t hear from them for 12 months because, if we did, they had a claim. We want to move from just selling this promise to pay, to providing other services – to move from payer to partner. Because, when somebody has a claim, it’s much better if they’ve been interacting with us on a regular basis. Whether it’s using Alexa, other connected devices in the home, or through partnering with more insurtech startups to solve problems that have been in the insurance industry for years, or to provide additional services, that’s the way forward. It’s going to be a glorious future, as long as we make sure we’re focussed.

Quickening the pace: Insurance has been inherently slow... but not any more

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Issue 3 | TheInsurtechMagazine

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INSURTECH: SECURITY

ınsurtech effect The

Zac Cohen, COO of identity verification provider Trulioo, looks at what digitisation means for insurance The term digitisation isn’t just a synonym for digital transformation; it has a very specific meaning. Digitisation describes any process or action that, having previously been undertaken without the help of computers, has now been taken over by technology. Essentially, any analogue process that is now done by computers has been digitised.

Digitisation can offer key direction for insurtech companies as they branch out to encompass more of the insurance industry. Innovators that keep abreast of new technologies will be able to stay a few steps ahead of their competitors.

involve a lot of repetitive tasks and movement of forms and paperwork. Advances in technology now mean that more challenging tasks are also open to digitisation. Quicker and easier customer onboarding helps reduce abandonment, which unlocks value over the customer’s lifetime. On-demand customer service also leads to better retention and satisfaction. For example, advanced chatbots are able to take on relatively complex aspects of customer service. Self-service portals have become more advanced and offer many more services and features compared with even a few years ago.

How digitisation is transforming insurance

administrative efficiency 2 Increased The more basic end of digitisation

There are three areas where it’s having the most impact.

has been helping to automate everything from a customer’s initial purchase, right through to claims processing. A combination of automation and self-service features, added to the fact that information no longer has to physically move from one location to another, has helped speed things up in many industries, not just insurance. These improvements free up staff time to focus on more complex, value-adding activities, including any final decisions that can’t be made by machines alone. The metrics available from digitised services can also be used in conjunction with machine learning to optimise procedures and spot errors and potential fraud. Regulatory compliance is a business-critical area that benefits from better administrative efficiency. Digitisation reduces the need for manual, in-person identity verification for online

1

Improved customer experience Much of the digital revolution, both inside and outside the insurance industry, has been driven by the quest to grow revenue by improving customer experience. As with any other fintech service, insurtech is concerned with maintaining security and protecting personal data, while still bringing all the advantages of industry 4.0 (the fourth industrial revolution, which ‘will take what was started in the third with the adoption of computers and automation and enhance it with smart and autonomous systems, fuelled by data and machine learning’, as it’s been described in Forbes). Processes that are ripe for digitisation have, until recently, been those that

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services in insurance and healthcare. Digital identity verification can be performed by cross-referencing user-submitted data with trusted data sources or analysing images of ID documents. These processes help insurance providers comply with data regulations such as the Health Insurance Portability and Accountability Act (HIPAA) in the US, protecting individuals’ medical records and other personal information. With identity verification and authentication, providers can prevent unauthorised access to insurance benefits, prescription drugs, government benefits or other financial gain acquired through identity theft. analytics and 3 Better improved security

Machine learning can be used to analyse every aspect of claims and how they are handled. Optimisation becomes easy, and the prediction of problems and opportunities well in advance can improve how companies function. Close monitoring of real-time metrics can also improve security. Whether it’s an individual fraudulent claim or large-scale organised fraud, digitisation makes problems simpler to spot.

What makes digitisation possible? Concerns about data security and identity fraud are ever-present when an industry is digitising. Dealing with financial products like insurance raises the stakes on those concerns even higher.

www.fintech.finance


Pressing the right buttons: Digitisation can assist with fraud prevention

Insurtech is concerned with maintaining security and protecting personal data, while still bringing all the advantages of industry 4.0 The data that insurers hold on their clients is highly detailed, making it extremely attractive to bad actors. However, advances in digital identity verification are making the digitisation of all kinds of financial products a more practical proposition. Trulioo GlobalGateway is a leading identity verification solution that helps companies reduce exposure to fraud, meet compliance requirements and build trust with their customers. With

www.fintech.finance

automated workflows and end-to-end onboarding assistance, Trulioo enables companies to welcome real customers quickly and easily. GlobalGateway uses a layered approach to identity verification, giving access to multiple verification services and hundreds of data sources around the world through a single application programme interface (API). Insurtech is a fast-moving industry, and companies need to be able to bring

products to market quickly if they’re going to stay ahead of the competition. By partnering with a reliable and innovative identity verification provider like Trulioo, insurtech organisations can offer innovative new products with confidence, knowing that they and their customers will be protected from risk.

Issue 3 | TheInsurtechMagazine

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securing banking

valyoues It’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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INSURTECH: CUSTOMER SERVICE

? D R I B A T I IS IT A PLANE? IS NO, IT’S SUPER AGENT! Like much of our growing subscription economy, insurance for most needs is reflected in our bank accounts as a range of monthly direct debits of barely noticeable amounts.

Regular email communication provides comfort and reassurance that all that we hold dear is protected and accounted for. But when I had to make a claim recently, I dealt with a very competent customer service agent and was genuinely startled to come off the call with everything taken care of and a payment on its way. In our increasingly self-serve relationship with the brands we trust, whether insurance, banking, retail or travel, the role of competent, knowledgeable and courteous customer service teams has always struck me as essential. But how might this change in the future? According to Contact Babel’s report on UK contact centres, more than 700,000 people are employed in the contact industry in the UK. But that number is forecast to decline over the next four years. What then should businesses that depend on an agent pool at significant scale and function, whether in-house or with a partner, focus on for the future?

Technology defining tomorrow A key driver of the change in agent population and the nature of the work that agents support is the acceleration of self-serve solutions, enabled by evolving technology. Every sector has considered more effective use of technology to reduce effort for customers and citizens, and the corresponding internal resource and infrastructure cost required to support it. Arguably, if we think ‘transactional’ about an engagement with an organisation to achieve a desired outcome, then that engagement should be supported by the channel that best fits that purpose. The engagement that remains is, by default, not transactional and will require a greater level of emotional engagement, empathy and communication skills. www.fintech.finance

In our world of tech-enabled customer experience, a new hero is emerging, says William Carson, Director of Market Engagement at outsourcing specialist CX BPO Ascensos Hero of the hour Critical thinking, creativity and emotional intelligence are fundamental to the success of millions of customer/citizen engagements today. The shift from ‘arbitrage-first to digital-first’ engagement models means the long-established base of low-skilled, low-salaried agents is shrinking. In its place, the ‘super agent’ is emerging with supporting infrastructure and working arrangements. This team ‘hero’ or champion becomes the norm when engagement scenarios are no longer binary and require greater reasoning and solutions skills to help resolve an inquiry. While self-serve initiatives are tech-enabled, new roles can be expected that will help support and optimise utilisation of these channels and supporting infrastructures. One leading UK insurance brand already uses pattern-matching artificial intelligence (AI) to identify potential fraud, for instance, but it still requires interpretation by agents. With the need for greater skills and capabilities, a key consideration for the future agent will, of course, include salary. A recent Sabio report revealed that the average salary for an agent is now north of £19k. Any business operating a sizable agent population will be concerned with ensuring they are recruiting, selecting, retaining and developing the best

talent, with a keen eye on where micro and macro factors will require them to grow, expand and evolve in the future.

Your place or mine? In its report, Everest Group expects that work-at-home, onshore models will become more credible, prevalent and effective over the coming years. Already brands in financial and insurance services are partnering with work-at-home solution providers, but the associated zero hours contract raises political and cultural temperatures. That said, the success of Uber, Deliveroo, and online freelancer marketplaces all point to an unstoppable re-imagining of the role of work. The customer service agent of the future may very well be self-employed and still offer the best brand engagement. According to Ernst & Young, 50 per cent of organisations have seen an increase in their gig employee population or ‘contingent workforce’ over the past five years. The gig economy now puts within a brand’s reach a solution that could sit alongside existing in-house teams and self-serve technology investments to better support customer contact and help them dominate in their sectors. But to truly benefit from the rise of the super agent, management teams will have to consider the perks, benefits and attractivness of their business to highly skilled, highly intelligent and in-demand resources if they are to remain competitive and operate effectively. New powers: Super agents are critical thinkers, empathetic and creative

Issue 3 | TheInsurtechMagazine

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INSURTECH: DIGITISATION

Staying prepared: And it’s not just about tech

Change forecast Here’s a conundrum. As the insurance industry uses ever-more advanced versions of technologies like artificial intelligence (AI), big data, the Internet of Things (IoT) and wearables to customise policies to people, a major survey has revealed that almost 60 per cent of us want to speak to a real human advisor when signing up. And there’s more. Seventy-two per cent of respondents say they would prefer a physical location to do so. Can this circle be squared? Renaud Dumora, CEO of insurance giant BNP Paribas Cardif, which commissioned Ipsos to carry out the poll among 26,000 people in 26 countries across Europe, Asia and South America, is convinced it can be. People, he says, want the best of both worlds and, if that’s what

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Amid the tectonic plate shifting going on in insurance, BNP Paribas Cardif Chief Executive Officer Renaud Dumora is remaining calm they want, then that is what they’ll get. “It’s true that if you fully automate insurance – the customer journey for underwriting, for example – your net promoter score increases by 40 or 50 points. It sounds like a contradiction but, in fact, it is not. People want to have automated, very lean, very fast processes, but when they raise their hand and say ‘I want to speak to someone’, you have to create an exit door and allow them to,” says Dumora. “That’s the best combination for customers.”

Maintaining human contact was one of four fundamental challenges identified from the survey by BNP Paribas Cardif, a wholly-owned subsidiary of banking giant BNP Paribas, which has 100 million insurance customers across three continents. The others were strengthening recognition of distribution partners as insurance providers (banks were in second place to standalone insurance firms, according to poll respondents); reconciling individual and collective benefits and supporting policyholders beyond compensation. Somewhat reassuringly, the survey also overwhelmingly demonstrated the continuing demand for insurance products, particularly those that cover financial loss and serious illness. Having insurance was at the very heart of respondents’ expectations regarding www.fintech.finance


protection and looking to the future. So, how is the insurance market, and in particular BNP Paribas Cardif, adapting to provide it? According to Dumora, finding the right tech is part of BNP Paribas Cardif’s strategy to invest in the global economy, and to do so with an eye on the changing attitudes of stakeholders – including, but not exclusively, the policyholder.

Making the technology leap Three years ago, BNP Paribas Cardif created a fund for startups called C. Entrepreneurs with Cathay Innovation. “We have invested in 12 different startups in Mexico, Spain, France, the UK, the US, Israel and China, all working in very different areas like blockchain, AI, big data and new distribution channels,” says Dumora. “We invest only in startups we are working with. That’s very important. We invest, but we partner with them at the same time. An early stage startup is not enough; we have to accompany them in the growth stage, in the late stage.” Earlier this year, the insurer’s parent bank committed, with three other French companies (Edenred, a specialist in prepaid corporate services; payments solutions provider Ingenico; and supermarket group Carrefour S.A ), to setting up a fintech accelerator and innovation hub in Brazil – La Fabrique – to boost digital transformation and aid larger companies in becoming more efficient. The accelerator aims to complete at least eight projects by the end of this year, two of which will be to the benefit of the bank’s insurance business. BNP Paribas Cardif also runs its own accelerator startup lab, called Hackquarters, to improve corporate innovation, a programme that is supported by global giants including Google, Bayer, NEM and Red Bull. Since 2015, the Hackquarters team has been working closely with various startups to allow it to observe how insurance technologies can provide solutions to insurance providers and customers by minimising their risks and thereby optimising premiums. So far, it’s looked at how emerging technologies can be used to simplify complex risk analysis criteria; how IoT could drive down car insurance costs by tracking both driver behaviour and locations, and how wearable technologies can provide health data to www.fintech.finance

build up a much more accurate picture of policyholders so that premium costs can be personalised. In December 2019, Hackquarters also ran a competition called Disrupting Insurance Startup Challenge, in which fledging companies were invited to pitch their insurtech innovations. The overall winner out of more than 60 to pitch their ideas to a panel of judges was B2Metric, which uses AI-native analytics to manage underwriting risk management with fraud prevention insurance and finance. Second came User Vision, a platform where brands could quickly reach their target audience and get explicit, subconscious and implicit insights with AI leverage. And in third place was Musebirds, which designs alternative insurance products that improve the traveller experience. All three will now receive investment from BNP Paribas Cardif, as well as advice and guidance from its own experts and

We invest only in startups we are working with. That’s very important. We invest, but we partner with them at the same time those among its corporate partners to develop pilots with the expectation of bringing their ideas to market. Dumora says projects like Hackquarters will continue to bear fruit by providing a conduit for fledging insurtechs and fintech to bring more innovations into the industry. “The time when there was no relationship between startups and large corporates is fully over and now we see that, with this mood and energy, it is really a win-win relationship.” The results of those collaborations are also bringing very real benefits to customers. AI, for instance, is being increasingly used by forward-thinking insurance companies to power chatbots, enabling potential policyholders to immediately obtain the answers they need. Notwithstanding customers’ desire for human interaction, Dumora forecasts the adoption of such automated services will increase just as centuries-old

‘one-size-fits-all’ policies are replaced by highly customised products developed using algorithms and once unobtainable personal information from sources such as IoT and wearables. Traditional insurers will have to adapt fast to keep up. “I think that the main change will be in the distribution of insurance, because the environment is becoming very complicated for the customer,” says Dumora. “And sometimes it’s hard to keep all the solutions in your mind, so we need the help of artificial intelligence.” Asked whether insurtech innovations, which have the potential to drive down policy premiums, will also help to democratise the insurance market, Dumora cites an example of something that is already up and running at BNP Paribas Cardif. “We signed an innovative partnership with Birdee, a subsidiary of Gambit Financial Solutions, which we use for a pure online life insurance product starting at €1,000, which is quite small. It’s a sort of digital office for lower life insurance products, and that’s absolutely key, because making insurance accessible to the many is very important for the future.” Making insurance accessible to a wider demographic is not the only fundamental change impacting the industry. “The environment will totally change in terms of regulation, in terms of customer expectations, in terms of rates – by which I mean very low rates – in terms of volatility of the financial markets, and insurance will totally change, too,” says Dumora. Amongst this change will be how the industry responds to demand for more ethical investment. With insurance companies among the world’s biggest investors, stakeholders have already put some operators under pressure to pull out of fossil fuels, for example. “The future will be green; that’s absolutely key. At BNP Paribas Cardif, 98 per cent of the assets of our euro fund are already evaluated against environmental, social and governance (ESG) criteria,” says Dumora. “And, thanks to these assets under management, we have a positive impact on other industries in terms of growth and the economy in general.” So, no, it’s not all about the tech. The insurance industry also recognises it must continue to heed the voice of its customers. Conundrum solved. Issue 3 | TheInsurtechMagazine

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#Sibos www.sibos.com


INSURTECH: PAYMENTS Stress test: Every failed payment costs the industry £50 in back-office processing

Got you r back Apply Financial’s straight-through processing tools have helped insurers in the West save millions in back-office costs while simultaneously burnishing their reputation with customers. Now CEO and Founder Mark Bradbury is looking East While big strides have been made in digitally revolutionising a sector notoriously slow at innovating, much of the emphasis so far has been on insurance product development and user experience. Telematics devices in vehicles to record and analyse data and reward less risky drivers with reduced ‘good behaviour’ premiums; embedding insurance in services offered by digital partners; providing users with more seamless and tailored experiences, not to mention faster claims resolution – no more sitting on the phone for hours waiting to get through to your insurance company – all dominate the insurtech agenda. But while such innovations undoubtedly enhance an insurance company’s value proposition for customers in an era of weak or even negative growth and intense profit pressures, they don’t address where the biggest cost drains are. Many of these www.fintech.finance

can be found in the middle or back office and one of the key issues is that of failed payments: the black hole of reconciliations where straight-through processing dreams go to die. Payments processor and validation software provider Apply Financial estimates that every payment that fails to validate can cost an organisation – be it a financial institution, corporate or otherwise – £50 in charges, resending costs, time spent rectifying the problem and exchange rate fluctuations (in the case of crossborder payments). For a large insurer this can add up to a lot of manual processing hours and a bruising impact on the bottom line. In fact, Apply Financial estimates that an insurer making eight failed payments a day will spend £100k a year fixing them. “The issue with a failed direct debit, in any company – not just insurance companies – is that you have to resubmit,”

says Apply Financial’s CEO and founder Mark Bradbury, “and that’s a very costly process; it takes up time.” Some of it’s down to fat-finger syndrome – wrongly keyed-in digits on the part of the insurer or the customer; a good proportion is due to oversight – the customer failing to update his/her information held on file by the insurer. Apply Financial’s key offering to clients is its Validate software that verifies bank payments through an application programme interface (API) plugged into a customer’s payment system at the front end. Interrogating world-class, virgin data sourced from the originating providers, the Cloud-based service uses algorithms to identify, analyse and validate payment data by crossreferencing account numbers, branch codes, payment purpose codes, holiday dates and many more data requirements, country by country and bank by bank. Issue 3 | TheInsurtechMagazine

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INSURTECH: PAYMENTS Validate can also generate IBANs (international bank account numbers) and BICs (business identification codes) from domestic account details and check a complete MT103 for SWIFT gpi payments, including the correspondent bank details. If Validate identifies a problem, it gives the insurer the opportunity to stop a transaction before the system spits it out, the hassle and costs of a failed payment or collection. Meanwhile, the Validate Data Manager makes continual background sweeps of information and alerts the insurance company to changes in relevant client data. The company can, in turn, notify the customer to update the information in advance of any mismatches occurring.

resources to invest in transformation and product innovation programmes, like those bots, clever apps and microinsurance services. By reducing the hassle and costs of fixing failed disbursements and collections, Apply Financial’s Validate helps clients achieve that aim. It also improves the insurer’s reputation in its clients’ eyes – especially around the emotionally sensitive time of a claim. Validate’s application is not limited to direct debits, of course. Although they remain the legacy industry’s go-to payment method, Apply Financial is increasingly working with providers committed to instant payments, which don’t afford the insurer the luxury of sometimes T+3

and low penetration by insurance products. London-based Apply Financial, which was founded in 2010, already counts major financial organisations among its clients, including high street banks HSBC and Barclays, credit card provider American Express and insurers in the US, Ireland, the UK and Europe, such as AXA. In addition to offering them domestic and international account and payment validation services in more than 170 countries, Apply Financial can also help clients with compliance around the world by checking against up-to-date global payment rules. What it can’t do (yet) is identify whether there’s any money in the account. “That’s a whole different application set,” laughs Bradbury Digital dividends: Investment in straight-through processing pays off

“We have a database of 66 million data records – which has about 7,000 changes a day around the world of banking,” explains Bradbury, illustrating the scale of the reconciliation task. Apply Financial says clients have so far saved more than £500million in operational costs for processing £1trillion of payments by using its payment validation software. It might not be as sexy as a bot broker or microinsurance for today’s sharing economy but, given the current global outlook, it’s an investment likely to float any CFO’s boat. EY’s 2020 Global Insurance Outlook identified achieving operational excellence and cost efficiency as top among its six key themes and priorities for the sector from now through to 2022. It went so far as to describe cost optimisation as ‘critical’, because without it, insurers will struggle to realise one of the other key goals: to free

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We have a database of 66 million data records – which has about 7,000 changes a day around the world of banking processing time to spot an error and fix it. If anything, in that scenario Validate is an even more valuable tool, and it makes the company’s recent expansion into the Far East, where small-value, same-day settlements are increasingly common, a no-brainer. Indeed, EY’s 2020 Asia-Pacific Insurance Outlook predicts the region could hold the key to the industry’s future, thanks to being home to a third of the world’s population, some of the fastest-growing economies, rapidly-expanding middle class groups

– although he doesn’t entirely rule out such services being possible in future. “We might be able to, eventually, if open banking allows us to,” he says. So far, Apply Financial has worked direct with insurers, rather than the industry’s intermediaries, such as banks. “Although I’m not saying that won’t change, or they won’t come to us and say ‘we want [you] to look at our insurance side as well’,” observes Bradbury. With insurance steeped in back-office processes that are high volume, repetitive and time-consuming, Apply Financial with its focus on artificial intelligence, machine learning and open (API) models that can free up capacity at enterprise level while improving customer experience and minimise operational risks, looks an obvious fit. As businesses look to revolutionise the front end, it must be good to know someone’s got their back. www.fintech.finance


THE FUTURE OF INSURANCE: EMBRACING DIGITAL TRANSFORMATION 1 S T & 2 N D J U LY 2 0 2 0 – O LY M P I A , L O N D O N

1000+

Attendees

200

Visionary Speakers

5

Conference Tracks

30

Exhibitors

VISIONARY SPEAKERS

SIMON CLAYDEN

SAM WHITE, CEO

KETAN MOTWANI

CHRISTOF TREMP

Chief Operating Officer (Technology), AXA

Pukka Insure

Director - Strategic Change Portfolio, Aon UK

Head Digital Transformation Distribution, Generali

STEVE TUNSTALL

JAMES BIRCH

ADAM WICKENS

DAVID GERMAIN

CEO & Co-Founder, Inzsure

Head of Innovation, Brit Insurance

Senior Vice President, Marsh

Group Chief Information Officer, RSA Group

insurancetransformationsummit.com Part of:


INSURTECH: DISTRIBUTION

REVERSEGEAR

R EVERSEGEAR As CEO of Honcho, Gavin Sewell is helping to steer a new insurance distribution model that could drive much-needed value into the market for both consumers and providers...

Gavin Sewell, who goes (for obvious reasons) by the title of Head Honcho, knows exactly the number of consumers signed up to his new platform: 13,300, according to his daily report. Not enormous, but not bad considering it entered one of the most fiercely contested general insurance markets just six months ago and with minimal marketing spend. Of those users, he tells me, 8,700 had run, between them, 17,000 reverse auctions in which insurers bid for their business; 1,600 liked what they saw and clicked through to the vendor’s website, and – according to the panel of currently 14 insurers signed up to the Honcho marketplace – a high proportion of them converted to sales. They reckon the conversion rate is 13 times better, in fact, than they get from the platforms that have come to dominate digital motor insurance: the price comparison websites (PCWs), while the cost of acquisition for each of those drivers is considerably lower. Honcho charges insurers just £1 to access the same customer enquiring about the same risk over a 28-day period. There is no commission and every participant gets to see exactly what the others are offering at what price. And, for Honcho, which positions itself as a consumer champion brand, it’s all about transparency.

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“Price comparison sites dominate the market and, of course, offer convenience. They do not offer a lot of competitive advantage for the consumer,” says Sewell, CEO of the Durham-based startup that closed its second fundraise on Crowdcube in February at £1.2million. In the same month, it came runner-up in the New and Noteworthy category of the annual Pulse Awards run by consultancy 11:FS, and went beyond its initial target market of drivers up to the age of 25 for the first time by adding three new insurance providers specialising in niche motor products. Its game plan is to double-down on growing motor insurance traffic over the platform during the next 12 months through a combination of business-toconsumer and business-to-business channels. The ink is still wet on the first of those marketplace partnerships. But the concept was never limited to motor. “From an insurer’s perspective, Honcho allows them to go after a consumer with a product that responds to their requirements in an environment in which they can see how others are responding to that risk and then flex those products during the auction process – that is utterly new and generates data insurers have never seen before,” says Sewell. “It’s not all about the bottomline price. What we say to the consumer is ‘what do you want from the product and we will help you gather those various moving parts. We will tell you whether the policy responds to your needs or not ‘. That’s the consumer competition angle. From the perspective of the insurer, we want to move away from a quote imperative and be much more data-driven – that data, in terms of how a market is pricing a product, is very valuable to an insurer. “There is good reason why we convert better to sales,” he adds. “Firstly, we discourage price research. One of the

things that younger drivers in particular use PCWs for is researching the likely cost of insurance before they buy a car to see if they can afford the running costs: they have no intention of buying the policy, but it generates vast amounts of quote traffic. We require the customer to create an account with us, including a known registration plate for the car – and they are unlikely to do that unless they are going to go on to buy insurance.” Once fed all the relevant information – which includes using optical character recognition to scan drivers’ licences – the free app runs three auction rounds within 30 seconds to come up with policies and prices best matched to the policyholder. Compared to PCWs, users are presented with a much shorter list of potential insurers to choose from because ‘bidders’ are unlikely to pay to enter the auction if they can’t match the price and policy needs. With a shorter list, the consumer isn’t overwhelmed by choice and the click-through rate is higher.

Software as a service While general insurers are super-sensitive to value being sucked out of the distribution chain in what’s shaping up to be a negative growth environment in the UK the Financial Conduct Authority consumer watchdog has already laid bare its concerns over how pricing behaviours are working against consumers. Its final report, following a sharply worded letter to insurance chiefs in 2018 and interim findings published last autumn, is expected soon. PCWs might have made pricing more opaque, but by throwing the same aggregator mechanism into reverse, Honcho hopes to demonstrate that insurtech can help the market regulate itself and work effectively for all participants. The magic bullet is data. www.fintech.finance


Price comparison sites dominate the market and, of course, offer convenience. They do not offer a lot of competitive advantage for the consumer Currently backed by Maven Investment Partners, multiple venture capitalists (VC), angel investors and the crowd, Sewell is preparing for another, this time pure VC investment round with a minimum £3million target for Q1 2021 – around the same time as Honcho is forecast to begin to turn a unit profit. Meanwhile, some of the newly-raised cash will go into growing www.fintech.finance

the Honcho technology team that built the proprietary auction software and third-party connectivity that underpins the Honcho user experience (UX). It will also take the front-end development, which won such praise from 11:FS, in-house. “Honcho is, in effect, pulling together some of the convenience of price comparison sites with the price efficiency you see in the capital markets’ electronic exchanges. But the insurance industry is poorly standardised by comparison,” says Sewell. “There is a whole lot of plumbing between PCWs, insurers and brokers.” The ‘plumbers’ looking after all this pipework are the specialist insurance software houses. Honcho is partnered with three – CDL, SSP and Quote the Market – to, in his words, ‘leverage what is already there for our marketplace model’. “An insurer using any of those systems can access Honcho,” says Sewell. “And, if

they are not operating on one of those or, for whatever reason, do not want to use it, we have our own application programming interfaces (APIs) – or we’ll build what they want with our inhouse team.” That puts Honcho squarely in the software as a service market, further strengthening its B2B proposition, which falls into three categories: – affiliate, affinity and white label partnerships. That unlocks a whole host of possible marketplace tie-ups, with everyone from digital-led banks to large corporates offering value-add to users and corresponding market data for auction participants. New van, learner and motorcycle product lines will be added this year as Honcho increases its motor insurance panel to more than 40 and improves the UX still further with feedback from its near 700 investors who have been involved in the app’s product design and testing. It’s already specced out a home and contents insurance customer journey. Mortgages, lending and health insurance are all on a more distant horizon. But, for now, Sewell says, they’ll keep their eyes firmly on the road. Issue 3 | TheInsurtechMagazine

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INSURTECH: COUNTRY FOCUS

A league of theır own The Guinness Six Nations 2020 saw many eager fans gripped to their seats. Nowhere more so than in the famously rugby-obsessed nation of Wales. From 360-degree daffodil hats to impromptu Bread Of Heaven performances, the Welsh take their national sport seriously.

Wales isn’t just good at rugby, it’s an all-important Number 8 in the insurtech scrum. Hannah Duncan sing its praises

Something else that this country has cocooned and nurtured as its own, perhaps surprisingly, is its thriving insurtech ecosystem. The nation has characteristically blended insurtech with sporting values, approaching it with unrivalled community spirit and gritty determination. As a European centre for insurance aggregator platforms, including Moneysupermarket, GoCompare and Confused.com, and key hub for tech research, Wales has kept its eye firmly on the ball.

are booming with the extra attention. Everyone is getting involved. Becoming digitally fluent is fast becoming the focus across schools and colleges. The ever-expanding range of insurtech internships and education for young people is compelling. 2020 kicked off with Bangor University in North Wales launching a new research facility dedicated to developing 5G technology. The Digital Signalling Processing Centre is on a quest to transform wireless internet. And then there is Cardiff University’s extraordinary Data Science Academy. The department is merging maths and computer science to rocket-propel cyber security and artificial intelligence into the future.

Driving forward together The rules of play for Welsh insurtech are strikingly close to the rules of rugby. Each player passes back to the next, and they all move forward together. Collective knowledge-sharing across government, schools and business is what’s setting the country apart. In government boardrooms, the word ‘tech’ pops up again and again across research papers, policies and funding. Becoming a digital leader is not an optional extra, it’s a national priority. If Wales doesn’t continue to outpace tech developments, more than 26 per cent of its workers will find themselves out of a job by the 2030s, according to Future Advocacy. The Welsh government has made it clear in its 2019 paper, Delivering Economic Transformation For A Better Future Of Work, that the focus needs to move from ‘coal mining to data mining’. Devolution has made slow progress, but as the country gains more control over its future, industries such as insurtech

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All players welcome From a stocky scrum half to a whippet-like wing, there’s a place for everyone in rugby. Perhaps that’s the reason why so many people enjoy taking part, with Wales having nearly 90,000 registered players, which is astonishing in a population of just three million. It’s

Somehow, against all odds, Wales has produced a groundbreaking ecosystem of sophisticated insurance firms

a similar story away from the pitch, as there’s room for all shapes and sizes in this bustling insurtech epicentre. Whether your company is little or large, agile or bulky, all you need is an occasional dash of bravery and you’re part of the team. Look in one direction and you’ll see it’s a breeding ground for plucky, innovative startups. The Development Bank of Wales offers life-changing investments for promising innovators, while organisations such as FinTech Wales are relentless in providing free advice and skilled tech workshops. It’s this blend of consistent support and funding that is instilling confidence in the sector. It’s hardly surprising, then, that more than 90 digital startups have made Cardiff their home (according to Tech Nation) since 2017. Only last week, the usually quiet seaside town of Llandudno was shaken by a vibrant Emerging Tech Fest to boost and propel ambitious new founders. “We quickly identified the key areas we can improve that will add resilience and growth for the sector in Wales,” says Gavin Powell, general secretary of FinTech Wales. “Of those areas, the need to enhance the pipeline of innovation and next-generation products is key. We are already in a programme of work with companies and academics in Wales to make impactful changes to that mechanism, which will definitely give the sector in Wales a competitive advantage.” Looking to the other extreme of the pitch, you’ll notice insurance giants such as the FTSE 100 company Admiral and its subsidiaries, Elephant and Confused.com. Together, they make up the largest tech employers in South Wales with a combined 7,000-strong workforce. Atradius is another hefty example. This global trade credit insurer planted its feet firmly in Cardiff in 2004. Welsh insurtech has heavyweights, newcomers and everything in between. www.fintech.finance


Running with the insurtech ball: Wales has built another world-class reputation

Exploiting open spaces Last September, Cardiff-based startup Coincover launched the world’s first cryptocurrency insurance. Eyes widened across Silicon Valley as the UK Department for International Trade unveiled the game-changing product. But it was more or less another day in the office as Wales boasts a long-standing tradition of insurtech innovation. The launch of Confused.com in 2002 pioneered a new comparison platform industry globally. Locally based competitors such as Moneysupermarket and GoCompare popped up like daffodils. “Confused.com came up with a solution to a problem that affected millions of people – the process of ringing around an endless number of insurers to compare car insurance,” says its CEO Louise O’Shea. “The system was broken and we used technology to fix it. We’ve recognised that comparing insurance isn’t just a problem for people in the UK and have now launched platforms across Europe, Asia and Mexico, forming the world’s largest network of comparison platforms.” www.fintech.finance

Bursts of innovation spark new insurtech supply and demand. Another example, Comparison Creator, pioneered the first business-to-business software to support the data comparison movement. “Wales is a small country but we pack a punch when it comes to being passionate and loyal,” says Stephen Jones, CEO of Comparison Creator. “We thrive on working together to create more value for our users. With the evolution of price comparison sites, innovation has led us to collaborate with four of the largest examples in the UK, three of them Welsh businesses. By working together, we can deliver excellent service and products, so we'll always ‘keep up with the Joneses’.”

Community spirit Sheep jokes aside, the Welsh have a few characteristics which make them stand out. Naturally friendly and inquisitive, their desire for community has been the perfect catalyst for insurtech. These companies find the market gaps as it’s in their nature to connect with neighbours. Brewing ideas over a brew, or more likely picking brains over a Brains (that’s a Welsh

beer to the uninitiated), creates an extraordinary support system. One example is ActiveQuote, which launched a world-first comparison site for health insurance that allows users to customise their own plan, and went on to build partnerships, including a second with Moneysupermarket last year to create an unrivalled health comparison site. “Innovation and collaboration are key to growth,” says Rod Jones, ActiveQuote’s head of partnerships and marketing. Little countries like Wales don’t often get to be on top of the world. When you only have three million people and a history that’s been dominated by a rather pushy neighbour, it’s trickier to stand out. But a red shirt and an oval-shaped ball gave a small nation the opportunity to have global victories… and by God, did it take it! It’s the same story with insurtech. Somehow, against all odds, this little country has produced an ecosystem of sophisticated insurance firms. It’s blended tech with its rugby-like passion and unyielding community spirit to create the extraordinary. The future of insurtech looks bright for this ambitious nation. Issue 3 | TheInsurtechMagazine

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INSURTECH: DIGITISATION

Why insurers should stop fearing technology Insurtech has the potential to offer new revenue streams and to even help restore the public perception of the insurance industry, as Stephanie Smith, Chief Operating Officer at Allianz, explains to financial data experts FinTech Global

Protecting against the future: $13.5billion has been invested in insurtechs

The insurance industry is no stranger to using the latest technologies, giving rise to an entire new sector dubbed insurtech. The innovators in this industry are utilising blockchain, artificial intelligence (AI), natural language processing (NLP) and other new solutions to provide better services. By doing so, they are not only able to help consumers find more personalised coverage, but to also empower insurers to

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streamline and accelerate claims processing as well as, in some cases, even reunite clients with lost property. Clearly, technology has provided a wealth of opportunities for the industry. One of the people who has had first-hand experience of this technology revolution is Stephanie Smith, chief operating officer at Allianz, the financial services firm and insurance provider. “Much more exciting is what we’re getting off the back of data and connected data, because it’s opening up

new avenues for the industry,” she says. As an example, she points to how insurers can leverage geospatial data to identify land areas that are at high risk of flooding and how this enables personalised cover and better risk control. Several insurtechs are already utilising this geospatial data in their offering. Tensorflight is one of them. The company provides an AI-powered platform combining geospatial imagery with machine learning algorithms to help insurers better understand their risks.

www.fintech.finance


It can account for building footprints, construction type, roof pitch, number of storeys and more. This does not mean technology can only help small segments of customers – collating publicly available information can, for example, reduce onboarding times for everyone. Not only is insurtech providing customers with new services, but it’s also easing their current interactions with insurance firms. “By connecting data available in the public domain, you can make customers’ lives easier,” Smith explains. “So, we don't have to ask them a suite of questions. We can draw information from public sources to make that process much slicker and simpler.”

Big data, big money Moving beyond publicly available data, technology has become ingrained into our daily lives and is still finding more ways to play a part in what we do. Most of these interactions with technology can be turned into data and used by companies. Putting aside the fear that everything we do nowadays relies on technology and is hoarding information about us, there are a lot of new, personalised services available because of this. Within the engineering inspection space, Allianz is using black boxes on wind turbines to help it take a more preventative position on risk. “By looking at how something is performing, you can actually stop someone having to claim because you can give them guidance up front,” Smith says. “So, I think that technology, the proactive enablement piece, is quite exciting as well.” Insurtech could also help insurers work on their image, which is something they seem to be in dire need of. A recent study from YouGov claimed that 68 per cent of Britons believe insurance companies would do whatever it takes to avoid paying out in the event of a legitimate claim. Another area of grievance from consumers is the use of complex language. Making use of data to create personalised and simplified experiences for consumers can help with this. For example, automatically collecting geospatial data after a flood or black box information from cars can quickly supply information on a potential claim. Not only will this ensure claims are paid out when

www.fintech.finance

needed but it will alleviate the stress on claimants. “I think it’s important to remind ourselves of the fundamentals of why we’re here,” Smith adds. “It’s about giving people the confidence to get on with their lives and look to the future. That’s the bit that is core to what we do and it won’t change. But I think, if you look at the technology capabilities, you’ve got to help speed up that engagement, make people feel more comfortable and more confident, have a preventative focus as well, using things like the Internet of Things. In the future, insurance will be more technically enabled, but will never eradicate the need for us to support our customers and provide an assisted service for them.” Still, she points out that embracing and adopting new technology is not something that is done overnight. For Allianz, it has been a long process to welcome new innovations, which is understandable given the company is more than 100 years old and has a global presence. While this might have slowed down the insurer, it has not stopped it. Allianz has made efforts to embrace new technologies, even establishing a handful of investment arms which are taking a keen interest in the fintech sector. One of these is Allianz X, which has a total fund size of €1billion to invest into startups across the mobility, property, health, wealth management, data intelligence and cybersecurity spaces. As an example, the firm recently invested in the German open source software platform SDA SE Open Industry Solutions. The company supports the digitisation of businesses, enabling clients to integrate existing IT systems with new digital services. Through this, insurance firms can deploy new services quickly and bolster customer touchpoints. Smith says that Allianz is looking for partnerships where it can couple its traditional skills around underwriting

with new thinking coming through the fintech community. Such partnering with insurtech startups can help incumbents re-engineer their customer interactions and create an environment and architecture that lets them put an interaction layer between customer activity and legacy systems. “I think the challenge for all businesses is that you don’t want to be a laggard,” adds Smith. “You’ve got to get with the programme and not be a Kodak where you sort of deny the fact that technology is changing and moving at an incredible pace. For Allianz, as a leader in this environment, it’s about getting the best balance between running the business day-to-day and investing in the future. And that is a not an easy balance to strike.” Allianz’s efforts are a sign that the anxiety about the fintech wave replacing traditional players has died and organisations are working together to evolve insurance. A few years back, telematics was being heavily publicised as the new revolution in car insurance and it did change the segment, but in a niche way. There was no dramatic overhaul. Realising this coexistence could be why insurtech has not witnessed the same crash as the dotcom bubble did. Investors’ interests have clearly been piqued, with more than $13.5billion being invested into the space since 2014, according to FinTech Global’s data. Smith reminds insurance companies that their role is to make consumers feel safe. “And in order for us to deliver that service, we need to make sure that it’s hassle-free and gives customers security,” she says. “If you keep true to those core principles of why we’re here and what insurance is about, actually, there’s opportunity that comes from tighter regulation and real focus on demand from our customer. Embracing that is the key.”

You’ve got to get with a programme and not be a Kodak... For Allianz it’s about getting the best balance between running the business day to day and investing in the future

Issue 3 | TheInsurtechMagazine

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INSURTECH: ENTERPRISE

Tech-friendly Greg Matthews, Nicole Trawick and Sarah Gross at KPMG on a guide to third party risk management and financial services partnerships So, you met a vice president of a large financial services institution at an industry conference and convinced her that your brand new product is critical for the next phase of their project build. Awesome! Then, you pitched the product to her boss and confirmed with the bank’s technology team that your product will integrate into their existing tech stack. Even better! But don’t start fantasising about a global launch quite yet… even with the business, technology and operations

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how to avoid a protracted onboarding timetable when selling products and services to regulated financial services (FS) organisations.

Understand the implications on board, there are stakeholders within procurement, risk and compliance who need to sign off on the deal. Unfortunately, for many tech startups, these control functions can appear to be impenetrable gatekeepers that want to stifle innovation.1 However, it may only take a little understanding and preparation on your part to transform the vendor onboarding process from a Herculean task to a predictable and instructive exercise. This article offers guidance to fintech and insurtechs on

Onboarding implications differ, based on how fintechs structure agreements with a bank or FS organisation. While this is only one lens through which to view your potential business dealings with the FS organisation, it is an important consideration – if speed for signing the contract (and receiving payment) is a key concern. Your two choices are acquisition/joint venture or subscription service/standard vendor contract. Acquisition or joint venture Banks are required to manage the risk from services www.fintech.finance


Command and control: Understand what’s on your client’s risk radar

provided by their affiliates or joint ventures. Therefore, fintechs that are acquired in whole or part may still field inquiries from the bank’s third-party risk management (TPRM) team – from initial onboarding, through risk assessment, ongoing monitoring and termination. Subscription service or standard vendor contract Run-of-the-mill, third-party service agreements between fintechs and FS organisations will go through the full procurement and TPRM processes, including (as applicable) competitive bid and request for proposal (RFP) processes.

Forewarned is forearmed for TPRM TPRM defined Third party risk management is consistently listed as a regulatory priority across jurisdictions globally. In 2019, the European Banking Authority (EBA) refreshed its outsourcing

guidance with granular and proscriptive requirements for FS organisations to identify, assess, monitor and manage third-party risk. The general theme across all TPRM regulations is that while FS organisations can outsource an activity, they cannot outsource accountability for the risk and therefore need to assess the fintech’s ability to meet its control standards in delivering a product/service. The TPRM lifecycle and what it means for you Due to the regulatory burden, client and customer scrutiny as well as board oversight, mature FS organisations have developed comprehensive TPRM programmes that adhere to a consistent, multi-phased lifecycle. Any fintech that contracts with an FS organisation will interact with the TPRM team before, during and after contracting. Initial risk assessment Your business contact (in this case, the vice president

Unfortunately for many tech startups, these control functions can appear to be impenetrable gatekeepers that want to stifle innovation www.fintech.finance

from the meet-up whom you convinced needed your product) will likely fill out a form with basic information about the product that will calculate an inherent (for which read initial) risk score for the third-party relationship. Due diligence Not all fintech products or services are created equal when it comes to TPRM. Offerings that help the FS organisation fulfil regulatory requirements, involve the sharing of confidential data, or underpin the business continuity of the business, will trigger a higher inherent risk score. Based on the inherent risk score, a series of due diligence questionnaires covering various risks associated with your service (e.g. information security if you handle data, compliance if you interact with customers) will be triggered and sent to you to complete. Make sure you have the right programmes and discipline at your end to give the FI comfort that the fintech product or service is being offered in alignment with its standards. Well-documented policies, procedures and risk management frameworks with experienced employees will greatly expedite the due diligence process. Issue 3 | TheInsurtechMagazine

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INSURTECH: ENTERPRISE TPRM process filters fintechs by level of risk management and compliance maturity

Business identifies fintech partnership opportunity

2 1

Blockchain & crypto Capital markets Money transfer & remittances Insurance Lending 3 Payments & billing Personal finance Real estate RegTech Wealth Management

6

5

TRPM program pursues one of two paths

Risk and compliance maturity factors

1 2 4 6

3 5

4 5 2

Source: CB Insights, Global Fintech Report Q3 19 (November 2019)

1

4

3 6

Fintech has robust risk management & compliance programs Established technology firm that has familiarity with FS regulations Early-stage fintech start-up that does not have risk management or compliance programs

A

A. Standard TPRM process: Fintech is prepared for the standard TPRM process

B

B. White glove service: Fintech may require additional hand-holding to complete the TPRM process via a ‘speciality program’

Which fintechs pose the most challenge for the TPRM program? Be timely and thorough when responding to these questionnaires; we find that the back and forth between subject matter experts and fintechs can be the most painful and cumbersome part of the TPRM process. Due diligence may uncover findings or issues that the FS organisation will work to remediate with you by strengthening your risk and compliance processes and programmes. Contracting The due diligence process may lead to additional terms and conditions being included in your contract with the FS organisation. Banks will have a list of clauses that likely include the right for the FS organisation to audit you (potentially on site) and/or receive SOC 2 reports or the results of internal controls testing. Ongoing monitoring Both the risk and criticality of the third-party fintech product or service will determine how often – and how strenuously – the FS organisation will conduct ongoing monitoring. This could include the aforementioned audits and control testing, but ongoing monitoring also relates to adverse media, corporate actions and performance metrics, including adherence to service level agreements (SLAs). The main takeaway here is that TPRM is not a one-time exercise; expect continuous baseline monitoring with periodic due diligence reassessment. Termination Sadly, all good things must come to an end. When you and the FS organisation decide to part ways, it will want assurances that, among other things, data was destroyed and fintech employees with access to the FS organisation have their accounts deactivated. Additionally,

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some FS regulations will mandate that you maintain records for a given period of time.

What banks can do to help Despite the challenges, incorporating fintech offerings has become a business imperative for established FS organisations as they work to satisfy customer expectations and remain competitive. Many leading FS organisations are pursuing the following actions to go to market quickly with fintech start-ups:

1

Developing a ‘white glove’ service within the TPRM process to advise fintechs on how to complete the due diligence questionnaires and mature risk and compliance processes and programmes Funding innovation labs and accelerators to shape the growth of fintech startups and watch them over time before investing or partnering Building a data sandbox to move forward on proof of concept with dummy data in parallel with procurement and TPRM processes Integrating with a third-party assessment utility, like KY3P or TruSight, so that fintechs need only complete due diligence assessments once; the same assessment can be leveraged by multiple banks and FS organisations

2 3

4

Coming back to you, tech founder and your next steps You’ve gotten to the end of this article and are now briefed on the complexities of the procurement and TPRM processes. Additional actions to consider include the following:

1

Structure the deal in a way that matches your appetite to take on your share of the TPRM requirements (acquisition, partnership, or subscription service) Prepare your risk and compliance teams to answer a plethora of TPRM assessment questions; invest in these functions to bring them up to maturity Communicate actively with your advocates in the FS organisation; if they want to close the deal, they will help shepherd you through the assessments and paperwork

2 3

While the TPRM process may seem overwhelming, the good news is that banks and FS organisations are working to streamline these processes to expedite decision-making and onboarding. Additionally, for fintechs and FS organisations who get this right, the rewards can be valuable. According to a 2019 Thompson Reuters study, ‘the greatest perceived potential benefits from fintech include enhanced productivity, efficiency and accuracy, better product delivery and customer experience, as well as improved compliance monitoring and reporting’.3

https://www.forbes.com/sites/ronshevlin/2019/10/14/ bank-fintech-partnerships-the-fad-is-over/#6769e0fe7527 2 https://eba.europa.eu/eba-publishes-revised-guidelineson-outsourcing-arrangements 3Fintech, Regtech and the Role of Compliance in 2019, Thompson Reuters 1

This article was first printed in the Winter 2020 edition of Ethical Boardroom Magazine and is being republished with kind permission of the Ethical Boardroom Group Ltd. www.fintech.finance


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INSURTECH: DISTRIBUTION

All aboard the

insurtech express! An inefficient network for distributing insurance products makes for a frustrating ride for consumers. Nikolaus Suehr, CEO and Co-founder of Kasko, plots an alternative route The transcontinental railroad linking the east and west coasts of America, the trans-Siberian railway between Moscow with Vladivostok and the more recently completed line between the eastern Chinese trading city of Yiwu and Madrid in Spain (let that one sink in for a moment)… railways have connected the world more than almost anything else in history. They have done it along one piece of track at a time, allowing multiple parties to use each line at a small cost. Each company sending a package didn’t have to lay their own individual rails, did they? So why does the insurance industry insist on doing so? Insurance is intermediated as an industry; it doesn’t matter if they are businesses or individuals, customers rarely buy directly from an insurer, but through brokers, price comparison sites, tied sales agents and so on. Each insurer has to build up these networks, which takes time and a lot of money. That is the same as building your own private railway lines to connect the same cities. Typically, as much as 40 per cent of insurance premiums go into distribution and operations/IT. That is a huge amount, considering most of the networks are there already. They just seem to get rebuilt each and every time someone launches a new product offering or onboards a new distribution partner. In fact, it gets worse than that as the insurance ‘tracks’ are so old and brittle that the ‘cities’ actually stop the insurer’s train at the gates and request the train passengers board a new service for the final part of the journey. It’s truly mad! www.fintech.finance

Much like the UK’s rail networks, it’s the consumer that pays the price – twice. They end up having to pay for a ‘railway’ to be built alongside a perfectly good pre-existing one in order to buy the ticket they want, and, to warrant the building of said tracks, the products are standardised to make them ‘off-the-shelf’. In a world where customers want all the choice and personalisation, be it a car or a neobank offering, is it any wonder they won’t board the insurance train? It’s dull, the opposite of personal, and the price of riding it extortionately expensive. I mean, with life insurance, there is a strong argument for people not to bother, a steady investment in ISAs and some safe shares will provide a better payout.

Typically, 40 per cent of insurance premiums go into distribution and operations/IT. That’s a huge amount, considering the networks are there already At Kasko, we are already fixing the problem. We have successfully validated and deployed a modular insurance operating system that’s fully equipped with an integration layer, allowing for fast, collaborative products to be built, distributed and even managed at a fraction of the cost. We can pull the freight (products) from all the suppliers on our network and, through

our shared distribution channels, provide personally requested offerings to customers wherever they are, when they want them. But our current insurtech as a service (a term we created) offering is really just the starting point. It’s the building block for creating a shared railway and train station network, if you like, because what we really aspire to is building a truly connected insurance network by opening up these tools to anyone with a licence to use them. It is one thing providing new products at one tenth of the speed and cost it once took for insurers, it is another to offer flexible products from everyone on-demand at the point of sale. We’re sharing and thus massively reducing the costs of distribution networks and even point-of-sale operations, and granting access to these tools for the market to use. This has never been done for insurance –even with things like Lloyds’ marketplace, people have to go to that aggregator and buy something built for it, within it. If you are a product person or partnerships lead at an insurer, an MGA (managing general agent), a broker, re-insurer, bank, car manufacturer, retailer or travel operator, we want you to come on the journey, too. Help make insurance cool (which means pretty much invisible and ‘lean’) for you, your partners and, most of all, your customers. A golden age of insurtech railways is approaching. Please stand behind the yellow line. Issue 3 | TheInsurtechMagazine

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INSURTECH: BANCASSURANCE

RUN FOR COVER Given banks’ privileged insight into the lives of their customers, are they leveraging bancassurance fast enough? Ingo Weber, Co-founder and CEO of Digital Insurance Group thinks not

Years of record low interest rates and intensifying competition from the growing army of upstart challengers have forced many incumbent banks to look for other ways to bring in the cash. And one such road to revenue is to offer insurance. Bancassurance, as it’s known, is already generating big business for those banks that have stolen a march in recent years. Leading the estimated $1.2billion bancassurance market are those in France, Germany, the UK, Spain and Italy. In some smaller European markets, such as Portugal, up to 85 per cent of all insurance premiums are through bancassurance channels. But McKinsey reports that ‘incredible opportunities’ still exist for growth, with one important caveat: more digitisation is needed. In a review of the bancassurance market, McKinsey argues that digital tools are key to increasing market share. It recommends banks focus on: ■ Boosting personalisation by making the most of unique banking data and analytics ■ Tapping the potential of digital to offer superior customer service ■ Mastering the omnichannel game It’s a strategy that will surely find favour with Ingo Weber, CEO and co-founder of

www.fintech.finance

Digital Insurance Group (DIG), an industry leader in providing data-driven technology to insurers, brokers and banks, with whom it works on strategies for insurance distribution and customer engagement. Last October, for example, it helped a leading global bank to power a new digital life insurance business in Latin America and offer transparent, fast and personalised customer experience. Weber argues that insurance is a perfect fit for banks – but they need to grab it fast. “Large consumer brands, the original equipment manufacturers, the Teslas of this world, are integrating financial services – payments, then lending, and now insurance – into their proposition. They will become the gatekeepers for all kinds of financial services. Everyone, essentially, will become a fintech company. That’s why the banks have to act now. They are sitting on an enormous amount of data. So, just go get it!” he says. McKinsey’s report similarly highlights the potential for banks to maximise insurance opportunities by combining the interactive data they are gathering continuously on customers with event triggers, such as moving house. And it pushes the case for banks to harness contextual information and insights, such as card transactions, money transfers and georeferencing, and then use internet or phone

Banks are sitting on an enormous amount of data. So, just go get it!

messaging to offer specific insurance products, such as travel cover. New technology will bring even more sweeping opportunities, says Weber: “We’re now entering the second paradigm shift, around data, machine learning and artificial intelligence. We also see a convergence of technologies coming – Internet of Things, 5G and AI – that will have major implications for insurers.” To help pave the way for those changes, DIG has developed a tech platform that can work with the wide variety of systems used by legacy institutions. “The insurers are worse than the banks in having dozens of old systems. The issue is, how can you innovate very fast and build new digital tools on top of them?” continues Weber. “That’s where we come in. We have a powerful API platform that can speak to legacy and also aggregate any external data feed to provide real-time and contextual offers. It can work with the revised Payment Services Directive (PSD2) and connect to any third-party services. On top of that, we have a very flexible front-end suite, which means if an insurer wantsto launch a new digital business or customer portal, our platform can help with a very short time to market. That’s our sweet spot.” Despite being an advocate of the automated model, Weber believes insurance will continue to need real-life advisors at least for the next 10 years. “When it comes to distribution, let technology make the recommendations, use big data to come up with the best products, but add the human element on top,” he says. “As humans we still have a competitive advantage, especially when it comes to complex products and advisory. Our advantage is empathy, creativity, and finding a smart solution for the customer.”

Issue 3 | TheInsurtechMagazine

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INSURTECH: BOOK REVIEW

Inside stories

Alasdair Paterson sneaks between the covers of Chris Skinner’s upcoming, intimate look at five banks’ experience of Doing Digital Right off the bat, I have to say I am a huge fan of Chris Skinner’s daily blog. It’s always a welcome sight at the top of my inbox. I am also terrible at reading and find myself consuming five to 10 credits per month on Audible (1.35 speed of course!). There’s an expression that crops up in his latest book, Doing Digital: Lessons From Leaders, that I remember hearing in several of the blog posts from around the time that it must have been written. To my mind, it’s the key message that we should be taking away from this book (if it is to only have one). That is: the transformation is never finished. In Doing Digital, Chris takes us on a journey that allows us to see, from the inside out, five of the biggest banks’ experiences of digital implementation, all of them very different. You have your

The key message is: the transformation is never finished 38

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obvious digital warrior in BBVA in Europe, along with ING, JPMorgan Chase in the US and DBS and CMB in Asia. He persuades them to share their secrets of how they’ve adapted and survived, in detailed interviews with well-informed commentary. One of the most illuminating of those interviews is in the section devoted to DBS Bank in Singapore, which has long self-identified as being in the same league as Google and Amazon… in fact, it likes to see itself as the D in GANDALF (Google, Amazon, Netflix, DBS, Apple, LinkedIn, Facebook). It’s obvious from the evidence that becoming ‘digital’ is an incremental process, not a wham-bam moment of truth. But Skinner argues that, in some cases, it’s being treated like the Victorian desire for a robotic horse (same animal, different moving parts), as opposed to the more revolutionary evolution necessary to become a digital bank. This isn’t a self-help book for CTOs simply looking to imitate the technology adopted by some of the most successful banks in this space. Rather, it exposes us

to what it is like at ground level in a digital bank, looking at every element, from front-end to back-end, and as an employee, as a customer and as a vendor. It’s about how to recognise, on a case-by-case, stakeholder-by-stakeholder basis, the best ethos to adopt and how to make the emotional connections if you are to Do Digital and do it successfully.

Doing Digital: Lessons From Leaders by Chris Skinner is published by Marshall Cavendish International (Asia) Pte Ltd on 15 April. The hardcover edition is available to pre-order on Amazon, priced £15.99 Great for: Making us stop and think Best read: To encourage you on your digital journey Good read rating: ★★★★★

www.fintech.finance


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Profile for Fintech Finance

Fintech Finance presents: The Insurtech Magazine Issue 03