Fintech Finance presents: The Insurtech Magazine 07

ISSUE#7

THE

GOING FOR BROKER Why wefox still believes in a human touch

PREDICT & PROTECT

WHAT’S YOUR SUPERPOWER?

How technology is improving the industry’s image

EIS and what The Flash, The Hulk and Elastigirl have to do with insurance

WHEN META GETS MEGA...

The insurers playing to win in virtual worlds

Aptitude Software’s Christophe Kasolowsky on why insurtechs should focus on their finance departments

TIME TO GROW UP INSIGHTS FROM Expert.ai ● ManyPets ● Deloitte ● Vitality ● Intelligent AI ● Koala

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Penni.io

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Moonshot Insurance

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Instabase

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Charles Taylor

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INSURTECH FOCUS

EVENTS

34 New kids on the block

20 Digital insurance… in person

Is blockchain the technology gateway to true insurance innovation?

49 Big table, few seats Aniqah Majid asks why, even now, there are so few women in positions of influence in the insurance industry

TRANSFORMATION 6 Time to grow up!

Aptitude Software’s Christophe Kasolowsky tells us why insurtechs must focus as much effort on financial management as they do on product innovation – or risk stunting their ambitions

12 A forward plan Stephen Casaceli from Deloitte and Aptitude Software’s Mark Aubin discuss how embracing an ‘always-on modernisation programme’ can carve out a new role for the central finance function

16 The Flash, The Hulk and Elastigirl… insurance superheroes assemble!

In the ever-growing insurance universe, insurtechs and insurers are sizing each other up and seeking the relationships that will help them to future-proof their organisations. In this shifting landscape, James Tall asks: who are the heroes, who are the underdogs, and who can bring them together?

AI & AUTOMATION 37 A greater understanding Insurers handle more data than possibly any other branch of financial services. Natural language technology to process and, more importantly, interpret it, will fundamentally change the way the industry operates, say expert.ai’s Daniele Cordioli and Chris Pearce from Esure

Greenwich, London – where hemispheres meet – was an appropriate place to bring legacy firms and insurtechs together for a show was both refreshing and surprising

23 Risk and rewards The ITC Asia Virtual Summit was a precursor to the region’s largest live insurtech event, to be held later in 2022.

We explore some of the key themes to emerge from it

CUSTOMER PATHWAYS 26 Kiss and sell

40 Play to win If gamification can help L&H insurers engage this generation of coverholders, Alex King considers how digital worlds could help lock in the next

42 AI, big data and ‘us’

Simon Bentholm, Chief Customer Officer of Penni.io, explains why digital partnerships are key to the new insurance distribution model

29 Up, up and away!

Koala is broadening insurers’ horizons when it comes to travel protection products in a post-pandemic world

32 The hybrid broker

As insurance speeds towards hyper-automation, Aniqah Majid weighs up the benefits and bear traps

44 Someone to watch over me Technology that predicts and helps protect policyholders against a range of threats is shifting the image of insurers

46 Judgement calls

Europe’s digital wunderkind, wefox, believes a broker network powered by humans is still the future of insurance.

Tomaso Mansutti, head of international partnerships at the company, tells us why

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Intelligent AI’s Anthony Peake was motivated by a tragedy to improve the quality of data used to identify risk. But with that comes great responsibility

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CONTENTS

THEINSURTECHVIEW »

2022 ISSUE#7

Some of you will be picking up this magazine for the first time at Insurtech Insights (ITI) Americas in New York, where a handful of high-profile IPOs in 20/21 saw insurtech stocks sell like hot bagels on a cold day on Wall Street – only for the price to then plummet, triggering some uncomfortable analysis.

The market can be a brutal place, especially if you’re little more than a startup. Which is why our interview with Aptitude Software’s Christophe Kasolowsky on page 6 is required reading for any insurtech with serious ambitions to scale – through capital investment of any sort.

As he points out: “The majority of the time, they will have started with a back office or finance function consisting of one person and a spreadsheet.” But, before they know it, they’re raising millions through a Series C round and are scrabbling to provide the sort of actuarial detail that can give investors or

potential M&A partners confidence.

Which is why Kasolowsky urges them to focus on their internal financial management. Boring it might be for a product-obsessed entrepreneur, but without these hidden figures giving substance to business strategy, all the innovation we discuss on the other pages of the magazine is unlikely to reach the wider market it so obviously deserves.

Sue Scott, Editor Enjoy the show!

Did you recognise Issue 6’s spine tingler? “A dog with two owners dies of hunger” is a Portuguese aphorism

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THEINSURTECHMAGAZINE2022 EXECUTIVE EDITOR Ali Paterson GENERAL MANAGER Chloe Butler EDITOR Sue Scott ART DIRECTOR Chris Swales

US CORRESPONDENT Jacob Bouer PHOTOGRAPHER Jordan “Dusty” Drew ONLINE EDITORS Eleanor Hazelton Lauren Towner ONLINE TEAM Lewis Johnson-Pitt Elvey Mensah-Afram

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SALES TEAM Tom Dickinson Shaun Routledge Nicole Efthymiou VIDEO TEAM Lewis Averillo-Singh Lea Jakobiak Oliver Chapman

ISSUE #7 FEATURE WRITERS Tracy Fletcher Martin Heminway Alex King Aniqah Majid Sue Scott James Tall Frank Tennyson

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Issue 7 | TheInsurtechMagazine

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TRANSFORMATION: THE INSURTECH FINANCE DEPARTMENT In many ways, insurtechs are late to the innovation party that fintechs have been enjoying for several years now.

Struggling to shake off its ‘necessary evil’ self-image, the insurance segment of the finance industry has, until recently, been characterised by minimal product innovation, paper-heavy processes and a less-than-stimulating customer experience.

Then, along came the insurtechs, putting the user front and centre and building the industry a new reputation as a form of guardian angel – helping to prevent disaster happening, but there to support when it does. With their focus on convenience, advice and reach, among the many gifts they brought to the industry were embedded insurance that’s built in at point of purchase; solutions that intuitively offered insurance, even before consumers were conscious they might need it; and a prevention-is-better-than-cure approach, particularly to life and property cover, using data insights to encourage customers to live healthier lives, and promoting connected devices that monitor and protect their assets.

AI and machine learning to make the most of wider data sources, robotic process automation to streamline claims management and payments, and superfast onboarding, were all core technologies used to deliver them.

As a result, many insurtechs have seen spectacular and rapid growth, with more than 20 unicorns foaled globally over the past six years, including the UK’s ManyPets, Germany’s wefox, Clearcover in the States, and PolicyBazaar in India. And, as the market has matured, merger and

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Aptitude Software’s Christophe Kasolowsky tells us why insurtechs must focus as much effort on financial management as they do on product innovation – or risk stunting their ambitions acquisition (M&A) activity has soared, driven not only by legacy institutions buying the competition, but also larger insurtech players themselves now flush for cash and hungry to build full-stack businesses. Lemonade, the AI-driven home and pet insurer in the US acquiring equally innovative Metromile in the auto insurance market late last year, was a case in point. Meanwhile, venture capital (VC) has been burning a hole in investors’ pockets, with insurtech rounds reaching record highs throughout 2021.

But insurtechs’ game-changing contributions will be short-lived and their ambitions – be it to attract VCs, launch initial public offerings (IPOs) or achieve a successful M&A and a golden ticket for their founders – will be thwarted if they don’t match their product and service innovation with sound regulatory and financial management, observes Christophe Kasolowsky from financial management solutions provider Aptitude Software.

“The problem insurtechs have is that, the majority of the time, they will have started with a back office or finance function consisting of one person and a spreadsheet,” he says. “They might have been a little bit more adventurous and

gone for an off-the-shelf Cloud solution, like Xero, but as they go beyond a certain scale, their boards, and particularly their non-executive directors, who are personally accountable for ensuring the organisation reports the numbers accurately and for making sure they comply with regulations, will want more detailed answers.

“Fast-growing organisations often reach that pivot point sooner than they think, and directors start getting nervous and want to dot the Is and cross all the Ts when it comes to fulfilling their fiduciary duties relating to finance and regulatory reporting. Some insurtechs aren’t ready for that and it becomes a scramble to then go and solve it.”

This failure to get their housekeeping right can, ironically, significantly dent their innovation potential.

“It’s almost like a brick wall, where their agility and innovative mindset are stopped in their tracks and they have to do things in a fairly boring, mundane, sequential way,” says Kasolowsky.

“And sometimes that can be a really difficult pill to swallow, because it will constrain how organisations do business going forward, and they will probably take a bit less risk.

“They might have to stop and think ‘let’s make sure we really understand what these numbers are telling us and make sure the actuaries get on top of that and do the stress testing before we go and acquire this tranche of customers’, whereas when they started out, they just had to get on and do.”

There is much talk of proportionality in regulatory reporting and

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various sandboxes have been initiated by financial authorities around the world to determine if and how reporting frameworks like Solvency II and the

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new IFRS 17 are an impediment to insurtech growth. But Kasolowsky believes requirements will only increase as this junior sector comes of age and attracts more attention. Having a close handle on their financial data and the means of accurately reporting it to key stakeholders – from their boards to regulators and potential investors – is therefore essential to any ambitious insurtech that’s serious about its future.

Aptitude offers proprietary finance management software solutions that help insurers ensure continuous compliance and transform their finance function. Its tools are designed for CFOs to effectively handle business monitoring and forecasting, accounting and revenue management, and financial and regulatory compliance. Its IFRS 17 Comply solution, for example, is helping insurtech wefox, one of the largest in Europe, to rapidly comply with IFRS 17 and support an aggressive growth strategy as it looks to launch new products and expand into new geographic markets.

In March, Aptitude launched Fynapse, an automated finance and accounting platform designed to give extreme performance, scalability, and data transparency. It drives continuous compliance while giving CFOs instant access to high-quality data, in real time, and at a lower total cost of ownership.

So, what shapes the specific financial management solutions insurtechs need? With radically different business models to their legacy counterparts, and innovation cultures, they tend to be more focussed on niche markets and rely more on outsourcing for key functions like underwriting, policy administration and, in some cases, actuarial activities.

They are often founded on the principles of high-automation/low-cost and high agility, using technologies including artificial intelligence, bionic underwriting, real-time satellite data and machine learning (ML) and artificial intelligence (AI) for public records sourcing, to streamline and optimise their services.

The problem insurtechs have is that, the majority of the time, they will have started with a back office or finance function consisting of one person and a spreadsheet Crucially – and what often puts the pressure on their finance function – is insurtechs’ tendency and desire to scale fast. Attracting ongoing funding to support their ambitions means meeting due diligence and financial and regulatory reporting requirements. Their CFOs also need to make sure they are in the right shape for initial public offerings, mergers and acquisitions and formulating exit strategies, all of which might come sooner than anticipated.

For these reasons, accurate, detailed and timely financial data is critical for forecasting, risk modelling, driving business development decisions and monitoring revenue flows, says Kasolowsky.

Issue 7 | TheInsurtechMagazine

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TRANSFORMATION: THE INSURTECH FINANCE DEPARTMENT “In short, insurtechs face all the traditional challenges of insurers, but also some quite unique ones.

“Insurance is an enormously competitive market and the first problem insurtechs have is that they’re up against really big, well-established organisations, which have the balance sheet, the customer reach and the ability to operate in a way that a small startup insurtech would struggle with, in terms of the amount of risk they can take and the kind of markets they can go into.

“Of course, the reason insurtechs exist is that they also do a lot of things a lot better than traditional insurers, which are reliant on some pretty old-fashioned technologies, especially around customer acquisition and claims,” Kasolowsky adds.

However, those established players are typically further along the maturation process, and insurtechs have no choice but to also come of age if they want to fulfil their true potential.

“Insurtechs are continuously having to fight for their existence, not least because big banking and insurance players have a very simple strategy when somebody gets a little bit too close to them, which is to buy them and take them out,” says Kasolowsky.

While such an outcome might well be the startups’ long-term strategy, they need to be in full control of the financial and business roadmap in order to execute on it at the time of their own choosing.

The question of scale One clear advantage insurtechs have over the leviathans is that they’re not having to unpick the IT spaghetti that tends to build up over decades of growth, and they are certainly not weighed down by manual processing. But, while incumbents’ back-office systems are notoriously clunky, at least they have them and the experienced staff to run them. And, in the area of regulation particularly, insurtechs often find they are running to catch up.

“New starters don’t get the economies of scale the big players do for things like regulation,” says Kasolowsky. “Big insurers have a relatively easy, cheaper way of getting to that level, in terms of cost and time requirement, and actually trying to work out what they’ve got to do.

“But there’s no technological shortcut for that. There are differing degrees to which they have to apply IFRS 17, for example, but, in the end, regulation is there for a purpose

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and, whether an insurtech or anything else, that’s what they’ve got to deal with.”

Nevertheless, he believes insurtechs can surmount this with the right approach.

“While a lot of the things I've highlighted are drags on progress, insurtechs’ abilities to drive innovation, and the fact they don't have to fight with legacy all the time, are really important in an insurance industry needing to catch up more than other areas of financial services. What’s unique about insurtechs is that they have very different cultures and business models, which help them drive innovation to always stay ahead of the game.

“Insurers’ operations are often still relatively vertically integrated. Insurtechs don't potentially need all that baggage, like IT functions and claims processing outfits, which can be automated and outsourced.

drivers like environmental, social and governance considerations. Strategic business insights and cost optimisation, says Kasolowsky, are vital to these, with granular financial data for forecasting, and analytics and AI to aid decision-making.

Ready-made financial management solutions, he believes, are their answer.

“The organisations that can stay nimble by choosing the right technology solutions, will be the winners, because it is still all about technology. It’s not about coming up with complex processes and hiring 100 people into finance,” he says. “As founders that have never had to think about auditors and regulators before, it’s about how they lean into what’s out there, technology-wise, which allows them to automate, and about making finance a better function to meet the objectives of stakeholders.”

Insurtechs are continuously having to fight for their existence, not least because big banking and insurance players have a very simple strategy when somebody gets a little bit too close to them, which is to buy them and take them out They’re able to do the obvious things a lot of insurers want to do, but they’re too big and are in a completely different place.

“The most exciting part, but also the thing that is going to cause insurtechs even more problems because they might get closer to the big insurers, is the fact they’re growing so fast. Couple that with the fact that innovative organisations have startup-type attitudes, but suddenly they’re getting so big and people start asking questions about whether they can deal with that scale, given everything that comes with it.”

If they want to inspire confidence among investors, he argues, their accounting and actuarial functions must be watertight, with processes enabling centralised control, scalability and speed to market, supporting their moves into new regions and customer segments. That will, by default, enhance their preparedness for the likely increase in regulatory oversight, whatever the region, as well as the impacts of market-wide

The right technology choices will also afford them the planning time and the data to formulate a long-term business strategy.

“Every insurtech should be really focussed on getting ahead and figuring out how to put themselves in the right place, rather than, in a state of panic, in the worst-case scenario, starting to professionalise all this and realising they’ve done the wrong sort of business and have to retrench,” adds Kasolowsky.

“I’ve seen this time and time and again in the fintech industry, where organisations have lost their licences and end up having to go into, let’s say, subprime in Latin America as their only option, rather than staying in the highly regulated European continent. And, of course, their investors are very unhappy about that.

“That’s where having a system to do what some insurtechs might consider to be the boring stuff, is critical to enabling the exciting things, the innovations and new customer propositions. ffnews.com

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TRANSFORMATION: THE INSURTECH FINANCE DEPARTMENT “First, they need a finance transformation roadmap, and the business case that sits behind that is really critical, because that allows them to make sure they understand, well in advance, what they’re solving for. And they should subject themselves, in that business case, to some very clear, measurable key performance indicators (KPIs) that allow them to chart their success, because it’s no good to say they need a finance function and finance systems, and whack them in, if they’re not in a position to get the best out of them.

“The second priority is to have a target operating model (TOM), which isn’t just about the tech, but starts with defining the organisation and the finance function, then the policy framework they’ll adhere to (accounting standards, regulation and what that means for statutory reporting standards and regulatory returns, based on operating jurisdiction), the control framework (financial controls and how they’re going to make sure their accounts are timely and accurate) and their performance management framework. These will help answer questions around what good looks like, how much of their revenues any investment can cost, and how long it should take to produce results, etc. Get these things

right and their directors will be able to sign on the dotted line and say ‘I know these numbers are correct because we’ve got a robust control framework in place’.

“Then, they can look at the enabling factors, which are all about the technology they’re going to choose, what kind of data model they’ll use and how that will integrate with the data they already have.

“Lastly, and just as importantly, is what kind of people they’ll have operating it.

They can't just go and buy tech and hope it works, because it won’t.”

Kasolowsky says this robust technology package selection process enables them to choose technology that will work in the context of their whole operating model, not just helping them deal with issues today, but making them scalable for the future.

“The final pillar for getting this right is an implementation plan for their finance transformation,” he adds, “one that takes them through to the end and ensures they can implement their TOM, with interim transition states that allow them to look forward and say ‘in six months’ time, here’s what we will have put in place and this is the part of the business case we will have delivered upon’.

Each of these transition states needs to add value. None can be value-destroying, or result

in the organisation going backwards.

Each must also be sustainable so that, if the business were to stop its transformation, not only would they have delivered value, but they could also live with it. No transition phase should ever do harm, either, or make things worse.”

His advice to insurtechs on choosing the right financial technology support is that it needs to be agile, not a one-size-fits-all.

“It needs to be easily integrated with their back- and front end, and be customisable in a straightforward way. In financial services, and particularly in insurtech, the needs of the finance function are quite diverse, not least because accounting standards come down to the interpretation a particular business follows. So, at Aptitude, we develop our best-of-breed solutions on the principles of user-centricity and harnessing the latest technological solutions. That means the ability to leverage the computing power and speed of Cloud technologies that is just not available otherwise.

“We’re seeing an acceleration in the ability to deliver information much faster, enabling organisations to get access to the data they need, in a much more self-service way, to really unlock what finance is going to go and do.”

MANAGING THE HOCKEY STICK CURVE Rapid scaling puts huge pressure on the finance function at the heart of an ambitiously successful insurtech. Both Convex and wefox employed Aptitude solutions to help them achieve IFRS 17 compliance and navigate future growth.

Based in London and Bermuda, speciality insurer and reinsurer Convex, founded in 2015, specialises in complex risk and cites its ‘legacy-free balance sheet’ as a key selling point.

With an impressive $1.7billion of initial committed capital, it’s subsequently almost doubled its backing to $3.4billion.

The company’s offering includes marine, casualty, crisis management, energy, political risk, security risk, equine and livestock and aerospace cover.

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Group chairman and CEO Stephen Catlin – who previously led the Catlin Underwriting Agencies Syndicate at Lloyd’s for almost 30 years, before selling to XL in 2015 for £2.8billion – said he expects the group to reach not less than $3billion of gross written premium during 2022. Illustrating the ability of insurtechs to superscale, superfast, he observed it had taken 30 years to reach twice that figure with his previous business.

In July 2021, Berlin-based wefox raised $650million in the largest ever funding round for an insurtech anywhere in the world, putting its value at an estimated $3billion.

Co-founded by Julian Teicke, Fabian Wesemann and Dario Fazlic in 2014 as FinanceFox, a mobile app through which users could manage their existing insurance policies, the startup attracted

an undisclosed amount of seed capital from angel investors in 2015. But it swiftly upped the ante, securing $28million through angel and VC backing a year later, paving the way for it to rebrand as wefox, a digital insurer choosing to work through a broker network, and acquiring One Insurance along the way.

In 2019, it was back for more – securing $128million, this time from Mubadala Ventures, Salesforce Ventures (which had co-led investment in 2016), H14, Goldman Sachs, and CreditEase Fintech Investment Fund.

Last year’s record-breaking Series C round will enable wefox to expand across Europe and into the US and Asia, where it will encounter different regulatory regimes, and move beyond property and casualty and motor insurance, into life and health.

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TRANSFORMATION: THE LEGACY FINANCE DEPARTMENT

Forward Stephen Casaceli from Deloitte and Aptitude Software’s Mark Aubin discuss how embracing an ‘always-on modernisation programme’ can carve out a new role for the central finance function It was Lauren Bacall, the smart and sassy siren from the golden age of Hollywood, who is reported to have shared this wisdom: “Standing still is the fastest way of moving backwards in a rapidly changing world.”

Bacall could have read out a general ledger and made it sound sexy; but chief finance officers in legacy insurance companies would do well to carve her words into their desks. Because, according to Mark Aubin of Aptitude, a software company focussed exclusively on the digital CFO, and Stephen Casaceli of global management consultancy firm Deloitte, perpetual forward motion is now the name of the game when it comes to a back office function that has traditionally been structured around vicennial technology upgrades and a static reporting calendar.

That’s especially so in an era where merger and acquisition activity

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continues to set new records. Total deal volume across underwriters and brokers increased 40 per cent year-on-year through to December 31, 2021, according to Deloitte analysis, and there’s nothing to indicate that won’t continue in 2022, it said.

It’s those kinds of strategic decisions – to merge, to acquire or, indeed, to resist the same – that CFOs are now more frequently being asked to advise upon.

And, in a bull market, boards are impatient for answers: they want to know within hours, not at the next quarterly review, what the company’s position is.

“There is capital out there, we know, because corporations stopped spending [during COVID], or slowed or modified the way they spent, or looked at going to market in different ways, and there were savings as a result of expense management,” says Casaceli.

“And, if I’m a CFO, I want to be able to support my board immediately around an opportunity, rather than say ‘well, let’s wait until we close in June and see what liquidity we have’,” adds Aubin. “The big underlying piece of that is that systems should be automated in order to see the effect, in real-time, of a certain action on the books. That’s going to be huge for the innovative CFO, going forward.”

It’s also going to reposition finance within the organisation; instead of being a passive number cruncher, Aubin says the new generation of actuaries and financial analysts are beginning to work proactively across departments that were traditionally siloed from them, helping to address business KPIs. “A lot of the insurance CFOs that run our automation software are now focussed on goals like ‘how do we reduce customer churn?’, ‘how do we reduce any kind of ffnews.com

plan policy blip?’,” says Aubin. “They’re true business KPIs, and finance departments are now being skilled to find solutions to be able to address them directly.”

Cloud technology has undoubtedly been a key factor in creating this new paradigm, starting with self-selected simple back office Cloud-hosted services, followed by the forced adoption of others as the wider technology landscape changed. Larger insurers have tended to build their own Cloud or followed the banks’ lead in spinning off subsidiaries with Cloud-based cores. In Germany, the Trusted German Insurance Cloud was an example of a community Cloud formed for the benefit of the entire sector, locally. But adoption, generally, has been slow. That insurers have taken a relatively cautious approach to the technology, compared to other financial services, is perhaps understandable, given the highly sensitive nature of the personally identifiable information they hold, particularly on people’s health, and the regulatory framework in which they operate. ffnews.com

But the case for Cloud has now been made, says Casaceli: “Insurers are seeing the value proposition, they’re seeing the cost savings and maintenance advantages, they’re seeing the security. So, now it’s about making sure there is a true cultural shift, so that, as an insurer, I’m not building what I’ve always built, just ‘up there’.”

An example of that nostalgia is the desire to hang onto a thick general ledger – the old-world concept of a comprehensive and fairly static record of accounts sitting uncomfortably in a flexible new-world architecture and which can undermine the transformative power of the shift towards a matrix of solutions that would otherwise deliver continuous improvement and faster, more meaningful decisions.

It’s not that building a Cloud-based general ledger (GL) isn’t necessary, but a

If I’m a CFO, I want to be able to support my board immediately around an opportunity, rather than say ‘well, let’s wait until we close in June and see what liquidity we have’ Mark Aubin, Aptitude

Perpetual motion: Major technology upgrades just don’t cut it

big part of Aubin’s job is demonstrating the value of more agile subledger software that can be used to drive the business, day-to-day. As Casaceli puts it: “This isn’t to confuse the three-to-five-year view with the incremental, because the vision, the roadmap, the path, the strategy, all still needs to happen.”

“But the reason we believe in a subledger so strongly is that it gives a dynamic data foundational layer to make changes from,” says Aubin. “If you need to add additional reporting segments for a regulation, or track customer activity better, it’s easier to do that in a subledger system than it is in the GL.” It makes pitching business ideas to the board that much easier, too. “’We wanted to provide this new report for investors, but we’ve got to do this big project on the GL to enable that’, is not the answer they want to hear,” says Aubin. ”They want to understand ‘how can we do it quickly, with the tools and technologies that you have implemented?’. And that can be anything from buying a book of business or making an acquisition mid-month, to small things like how can customer churn be reduced by five per cent – for multi-billion-dollar insurers, that’s substantial materiality that you can focus on.”

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TRANSFORMATION: THE LEGACY FINANCE DEPARTMENT Casaceli has already seen a dramatic change in the way insurers consume big upgrades, not least because they’ve grown weary of the morale-sapping nature of major technology projects that deliver no demonstrable gains in the near term.

“Now, we’re seeing more of an always-on kind of modernisation journey,” he says.

“It used to be that you would buy a ledger system and implement it in house. The first thing you did was build out your FRICEW or your RICE objects, and list out the 400 ways in which you were going to completely change the system. The vendors have pretty much put the kybosh on that anyway with the restrictions they place, and rightly so.

Instead, vendors are saying, it’s about ‘what are those 20 to 40 things that really make Onward and upward: Smart firms are planning for what comes next

you special, and, for the rest of it, just go with what the industry does’. We’re seeing an acceptance of that. We’re seeing that no one wants to do those customisations anymore – the maintenance on them, the upgrades, the extra time to implement. The two elements together – evidence that it can be done by insurers that are seeing the savings, and vendors imposing restrictions – is really causing this shift in a meaningful way.”

Aubin says the goal should be to empower finance teams with an ecosystem of solutions so that ‘if, a year down the road, the technology provider, the IT department or the finance department finds a better solution, they can plug and play to get a more rapid outcome for the business driver they are looking for’.

“CFOs are telling us that they need to show incremental value,” continues Casaceli.

“So, when you look at the left-to-right architecture of the organisation, there’s the data ecosystem (sometimes disparate, sometimes more centralised), the middle area (the accounting hub or accounting rules engine, which really serves as the

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gateway to finance, where we take business events and turn them into accounting), and then the ledger, and I’ve seen projects start with any one of those three. At times, we’ve focussed on shoring up the data challenges before moving across; at others, we’ve started with a new GL. So there isn’t a silver bullet [in terms of where to start].

Rather, it’s about turning on all those capabilities, so that when the next thing comes down the road – a change to your reporting situation, or statutory requirements like IFRS 17 and LDTI (long duration targeted improvements required under generally accepted accounting principles by insurance regulators in the US ) – you have those pieces in play and it’s just a matter of tweaking or modifying.

just know they do them,” says Casaceli.

He forecasts a doubling down on efforts to penetrate these data fortresses: “Whether that is consolidation, movement to Cloud, maintenance, support, business process outsourcing – we know that’s probably one of the biggest challenges.”

The pain will be worth it, though, he says.

“Because when you have 50, 60, 70 admin systems, you are handicapped in what you are able to do quickly in each of them.”

It’s data which, more than anything else, is helping to redefine the relationship between CFOs and CTOs. “Because, once they’re focussed on those business goals, CFOs need to step back and say ‘what is the data I need to support that?’,” says Aubin. “And they’re going to find all those data foundations are separated in silos. So, now they need to think about how they get that data together because the power of having it in one place is that you can slice and dice it, then add additional, external market factors that might impact the business.”

The cumulative effect of these technology changes on those in the finance department could be significant.

“It’s no longer a back-office function,” says Aubin. “The finance department has become more of a strategic advisor [by “The general ledger adopting] solutions always got attention that bring all the data in the past [when it together in a true came to technology Stephen Casaceli, Deloitte enterprise subledger, investment] because that was pretty easy; it was the bright, shiny which will automate all the compliance and reporting you need, and disseminate it, too’. object of finance,” adds Casaceli. “But now “It’s an exciting time for accountants,” he we’re seeing this shift to a more sophisticated adds, “because they’re no longer focussed architecture, where we take in the data, on compliance and reporting, but rather usually in terms of business events, and strategic foresight, business insights, and have a centralised, governed, standardised supporting other areas of the organisation way of translating it into accounting events, with decisions.” then feeding that into the ledger.”

Insurers that have moved from decades This ‘gateway to finance’ approach often of doing things the way they were because requires going back to policy administration that was how they were always done, to systems to extract the data needed to having a finance department empowered provide transparency – and that can be especially hard. The age and sheer number of by data, equipped with agile technology and fully integrated into business strategy, these systems – particularly in life insurance could find themselves the focus of envy where 30, 40 or 50-year terms are not and, even, desire. Their modular systems unusual – is unique to this area of finance. and real-time financial insight make them “Many insurers grew by acquisition and, the new head-turners, even if they are no many times, that full merge on the back longer in the first flush of youth. end was not done. A lot of those policy As an elegantly ageing Bacall also once admin systems are doing functions that, to said: “I am not a has-been. I am a will-be.” be frank, not everyone understands, they

CFOs are telling us that they need to show incremental value

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TRANSFORMATION: BUILDING AN ECOSYSTEM

The Flash, The Hulk and Elastigirl... insurance heroes assemble! superh In the ever-growing insurance universe, insurtechs and insurers are sizing each other up and seeking the relationships that will help them to future-proof their organisations. In this shifting landscape, James Tall asks: who are the heroes, who are the underdogs and who can bring them together?

The insurance industry has typically been served by fragmented processes, driven by its legacy systems. But in the last few years, like many other sectors, it’s become more motivated to make use of the latest technology to improve operations and enhance underwriting, pricing and loss control capabilities.

Whether it’s machine learning, robotic process automation (RPA) or data aggregation and analytics, the bold rise of insurtech has heralded technological innovations designed to squeeze out cost efficiencies from the incumbent model.

The world’s investors are paying increasingly close attention to a sector that’s reshaping itself. Global venture capital investment in insurtech grew from $1.8billion in 2016 to $10.5billion in the first three quarters of 2021 alone.

But in this new world order, what are the respective roles of insurtech and legacy providers? In an ever-expanding insurance universe, what does each protagonist really offer? There are a lot of heavy hitters on display, but whose team is everyone really on?

One organisation that’s well-placed to offer the answers is EIS, a digital platform provider for insurers. The company

What’s your superpower?

Incumbents, insurtechs and facilitators together are an awesome team

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positions its proposition as ‘coretech’, which essentially means it works with insurers to help them to rebuild their business around the latest Cloud technology. EIS has more than 11,000 APIs in play and integrates with a number of insurtechs in its quest to future-proof the insurance industry.

“At the moment, insurtechs are fairly point-focussed,” says its head of strategy for EMEA, Rory Yates. “This means that they can solve a particular problem particularly well. But things now need to go much deeper in our industry.

“We passionately believe that insurers have got to shift their platform into a new

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place to be able to get the most out of the growing range of insurtechs. We see this as enabling insurers to act like insurtechs, through their core technology.

“This involves the enterprise design of insurers fundamentally changing.

And in terms of where insurtechs are going, I think they’ll increasingly want to integrate and build new ecosystems, because they’re then solving more of the problems that insurers face.”

In a recent episode of the podcast EIS Coretalk, recorded live at Insurtech Insights Europe 2022, panellists considered whether insurtechs are the superheroes or victims of the insurance industry.

Host Edward Halsey of challenger insurance broker hubb, suggested that insurtechs could be seen as Thanos, ultimately a wrecker of worlds, albeit with good intentions. It’s certainly a volatile

time for insurtechs as they reveal their true identities and face a world filled with both opportunity and threat.

While one could argue that insurtech has moved past the peak of the hype cycle, with success stories like ManyPets (formerly Bought By Many), which now has more than 500,000 risks on its books across three countries, challenges remain in the aftermath of the pandemic and continued economic disruption.

“It’s healthy, but at the same time it’s really hard for some of the smaller players, because it’s hard getting that visibility and conversation,” explains Charlotte Halkett, its chief commercial officer.

“If insurtechs are the speedboats out there in the oceans of the industry, then, when the waters are really choppy, it’s hard to get the attention and stabilise themselves. They normally don’t have a very long runway. But I’m excited by what the speedboats can do, because we need new ideas, and in a really uncertain world, this is our superpower.”

“The insurtechs are fantastic,” adds Tony Grosso, chief marketing officer at EIS. “They’re often point solutions that are solving a real problem in the market that the traditional insurers weren’t able to solve. They’re built with the most modern technologies, with the right business architectures. They’re customer-centred, not product-centred, and they’re open and therefore able to provide the best digital experience.

“But”, he says, “many of them lack scalability; they lack the breadth to support the enterprise of an incumbent insurer.”

While they may see a need for tweaks under the hood, the good news is that the traditional carriers do also see the value of working with insurtechs. The incumbents are reminiscent of Captain America – trustworthy and dependable, but relying on some Avengers-style partners to help them catch up fast in a world where everything has moved on.

“Over the last decade, when it comes to working with insurtechs, we’ve seen this evolution from ‘yeah, OK – we need it.

It’s adapting to what we’re doing – like Lego brick’ to ‘yeah, that’s not really relevant – or it’s not going to be big enough’,” says Lisa Wardlaw, global head of insurance with Geosite, which helps large insurance companies modernise their workflows and leverage data.

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TRANSFORMATION: BUILDING AN INSURANCE ECOSYSTEM “But ultimately, what’s facing all of us – carrier and insurtech alike – is that the expectation of customers is outpacing all sides. We need to become firm allies, but we need to extend it beyond something that’s basic automation. We need to actually create a new space in the market. In a world where crypto and non-fungible tokens (NFTs) and all these things are coming to light, we may not be ‘cool’ anymore, but we are the industry that actually made the intangible tangible. Let’s remember that and push our ambitions. We need to play bigger in the digital economy.”

This is where a Tony Stark-like concept like coretech comes in – the architecture of the future that supports greater depth of product and service. Coretech can perhaps be viewed as a great equaliser that can better fuse insurtech and insurer: the enabler of the future of insurance.

Being a superhero isn't always about how fast you can run.

It’s about helping however you can, wherever you’re needed most The Flash An often-wondered-about scenario in the emotive world of superhero lore and the plethora of online chatrooms is who would win in a battle between The Flash and The Hulk – or indeed, would their respective strengths make them the perfect team?

This provocative scenario mirrors the relationship between insurtechs and incumbents in many ways.

“There are incredible, important characteristics on both sides,” says Halkett.

“Insurtechs represent The Flash with their speed and agility, and the ability to quickly go to the heart of where the problem is.

But it really is all about teamwork and communication – recognising why the incumbents have been around for 100, 150 years. They have an incredible depth of understanding and the ability to weather the market and its associated risks. They’re a solid proposition.”

It’s fair to say that the shiny new insurtechs have the edge when it comes to getting close to customers and looking for

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new solutions. They’re usually less weighed down by company politics and have the freedom to be more disruptive. At the same time, an incumbent really has the depth of data, the expertise, understands regulatory parameters and can influence the direction the market goes in. When the two come together, it can be very powerful.

“I definitely agree that insurers are like The Hulk, especially with those chunky legacy systems,” adds Wardlaw. “I would also add another superhero to the team – think ‘Plastic Man’, or ‘Elastigirl’. I think we need to be much more fluid and elastic in our ability to serve customers and to bring technology to its rightful destination.

“I think what happens so many times is that, as carriers, we stop that fluidity. It can take three months to get a proof of concept approved by the board, but what we miss is that none of us will change our industry if we don’t get the new solution to the market, to the end customers.

Being elastic, in my mind, would be one of the biggest strengths needed, and would also complement what the insurtechs need, in terms of pace, timing and decisions.”

If insurtechs are The Flash, insurers The Hulk, then it follows that the likes of EIS, as a coretech provider, can fulfil the desired role of an Elastigirl. This is the mash-up the industry needs, and it could help to overcome ‘the villains’ of the piece.

“Fear of change is a problem,” adds Halkett. “I hear that from across the industry, particularly a fear of companies from adjacent industries moving in – whether it’s retailers that can offer amazing customer experiences, or entrants from the banking industry and so on.”

“What I’d put out there is that there’s nobody in a better position than the people in this room [Geosite, EIS, ManyPets and the assembled industry delegates] to serve the needs of customers looking to

take the fear of risks away from their lives.

We understand those risks and what it takes to navigate them. We can help people to mitigate them, change them and let people live the life they want to live.”

Another villain lurking in the shadows is the historically rigid nature of the insurance industry.

“I’m an accountant by trade, so I’ve got an inherently linear nature,” explained Wardlaw. “But one of the problems I recognise we face is an over-indexing of our linear nature, which may have brought us up to previous great heights but is now becoming a bit like our kryptonite.

“We need to overcome this quickly. We need to become better at introducing non-linear strategies that help us to evolve, adapt and problem solve. It’s like we’re all on the same hamster wheel, and we all think that if we just take the speed up a notch, we’re winning. We do need to run at a fast pace, but we may also need to throw ourselves off the wheel once in a while and run in unchartered terrain.”

The future of the insurance industry will be shaped by the new dynamics between insurtech and insurer.

Like the longed-for DC and Marvel crossover, protagonists will come together to explore new dimensions and fight existential threats. They will need the right weapons.

They need technology that acts like the bite of a spider, not kyptonite; a catalyst to supercharge their powers.

“If we believe that the future of insurance is going to be different to its past, why would we think that technologies built to support the insurance of yesteryear are going to take us forward,” says Grosso.

“We’re going to need to treat customers as a channel; offer them the products and services they want and need, when they want and need them. We therefore need to build customer-centred systems, not product-centred ones, to become the insurers we want to be, not the insurers that our legacy systems allow us to be.

That’s the real superpower for the insurers of the future.”

I put the brains and the brawn together. And now look at me. Best of both worlds The Hulk

I’m at the top of my game. I’m right up there with the big dogs!

Elastigirl

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EVENTS: INSURTECH INSIGHTS EUROPE

Digital insurance... in person Greenwich, London – where hemispheres meet – was an appropriate place to bring legacy firms and insurtechs together for a show that Aniqah Majid found both refreshing and surprising It was the biggest in-person industry gathering in the last three years.

From insurance bigwigs Generali and Zurich to trailblazing disruptors Arma Karma and wefox, they all made the pilgrimage to London to discuss the most exciting innovations happening in insurance.

What I assumed would be a dry introduction to the industry, Insurtech Insights (ITI) Europe defied all my expectations. With its bustling promotion halls and densely packed stages, the excitement among attendees for this most intangible of financial services was very tangible indeed. These were not the stiff and serious experts I had anticipated, but impassioned people with a common goal: to make insurance better – committed, even, to stepping up to the role allocated to them by insurtech Wakam’s CEO Olivier Jaillon in his recent book, The Intangible Age. He sees insurance providers as ‘social and economic stabilisers, equipping societies with the tools needed to withstand the shocks triggered by a growing number of heightened risks’. Among the 4,000 people at ITI were insurtechs, insurers

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and VC investors, all apparently sharing a similar vision.

Talks kicked off with Allianz board member Sirma Boshnakova and her keynote address ‘A seamless and borderless world: building technology with a heart’. As one of the first talks of the event, senses were on high alert, with spectators discreetly exchanging their own thoughts on digitisation and the future.

The CEO of Allianz Partners reflected on the growing use of digitised solutions, but insisted that insurance must maintain its ‘human touch’. The concern Boshnakova was addressing comes from the alienation customers could face if digitisation was to be taken to extremes.

“It’s about addressing all of the customers’ needs – instead of just fixing a problem – and providing peace of mind throughout their daily lives,” she said.

What the customer really, really wants and how the industry can use digital to identify and deliver it, was a key theme for many speakers, including CEO of wefox, Julian Teicke. Teicke told the audience how his company, now valued at around $3billion, saw giving agents a digital platform to work on is better for insurers in the long run. Wefox itself grossed €90million in revenues in the first quarter of 2022, on the back of just such a model.

Who’s buying what, where With the onset of COVID-19 and growing online activity, the relationship between customers and agents is in perpetual flux, factors like geography and insurance types acting as determinants. In Europe, 72 per

cent of consumers interviewed by researchers at Insurance Nexus, part of Reuters Events, said they preferred to engage with insurers directly through their websites, 38 per cent through aggregators and only 23 per cent through the agent/broker channel. In North America, the picture was slightly different. The broker channel was significantly more popular, with 43 per cent citing it as their favourite, 57 per cent choosing online and 29 per cent saying they would prefer an aggregator. But, from baby boomers to Gen-Zers, the responses showed ‘the vast majority of respondents selected multiple channels – meaning that the omni-channel engagement trend is continuing’, researchers said.

The tectonic shifts in consumer demographics were echoed throughout the conference, cropping up in panel discussions and showcases. Insurers are now undoubtedly dealing with an audience more comfortable with online buying, demanding more in terms of immediate services and varied products. The topic of embedded insurance was inescapable.

Insurance products ‘bundled’ with other non-financial services have existed for some time; it’s the method of delivery that’s changed. How and how far the industry should embrace that was the hot focus. Panels dissected whether embedding insurance products into third-party avenues was a positive change in the customer journey, others questioned if it was a gamble for insurance companies and their underwriting process. ffnews.com

Leaders and providers in this movement include Penni.io, Cover Genius and Tigerlab, which all enthusiastically used their booths to point to datasets and diagrams in an attempt to persuade any attendees unsure about the embedded phenomenon. The consensus that emerged was that such a product was imperative and a natural feature of today’s digital marketplaces.

Daniel Malmvärn, chief commercial officer of Tigerlab, said: “Embedded insurance [has] been around for a while, but is gaining prominence because it allows people to sell anything online, whilst adding insurance to the process.

As we know, insurance does not sell itself, [and] it is good to have quick integration digitally online, so you can add insurance for a fraction of the price of the product, but provide great value to the customer.”

Bitesize and parametric insurance were also discussed – both a direct consequence of changes caused by the pandemic and climate change, which had brought a whole new audience to the industry. Innovators – from Urban Jungle, which offers a range of alternative contents-related insurance suited to post-COVID lifestyles, to ICEYE, which

large-scale flooding, life and health and even pet insurers were concentrating on promoting wellness, while legacy insurers – among them AXA XL – were concerned with avoiding catastrophic loss by addressing big issues such as climate change and public health.

Ben Smyth, CEO of subscription-based insurer Arma Karma, spoke at a panel on the impact big tech has had on insurance distribution. The company markets predominately to 18-to-35-year-old consumers, usually viewed as ‘high-risk’, and insures individual products, from tablets to musical instruments. By prioritising this group, Smyth believes the industry can close the ‘knowledge gap’ about insurance among nearly all consumers.

He blames existing insurance players for failing to adequately cater for younger people in the past, thereby perpetuating the notion of them being a high-risk group.

To reach these young people, Arma Karma has adapted to their preferred methods of communication; posting memes on Twitter and partnering with TikTok influencers.

Interviewing Smyth was refreshing. As a young consumer myself, engaging with insurance in a laborious, paper-based way, can build an aversion to such ‘serious’

customers outside the transactional processes of onboarding, renewal and claims management as the reason for this.

Insurtechs which showcased and spoke at the event sought a different way to talk about insurance, one which didn't leave consumers – or, indeed the event’s attendees – jaded or disillusioned.

In one of the most exhilarating panels, speakers rumbled back and forth on industry successes and trends.

Heavy-hitters in the discussion included Anthony Grosso of EIS Group and Ed Halsey of hubb (which stands for honest, user-based broking), who have collaborated extensively on EIS’s Coretalk, a talk show-inspired web series presented

by Halsey. Hubb also generates its own video and news content, delivering an unorthodox and entertaining spin on insurance and broking.

Speaking outside of the panel session, Rory Yates, business leader and strategist at EIS, talked about the relationship between insurance and technology, and how it has evolved.

“Insurance is getting to a tipping point right now, where it’s getting more confident about what its future is going to look like. It’s asking the right questions

Insurance is more confident about what its future is going to look like. It’s asking the right questions of the technology providers.

So, I think we're all going to move to a more positive place Rory Yates, EIS develops bespoke products for property and casualty insurers, based on data from its always-on SAR satellite constellation – have been the main beneficiaries of that.

Looking around the conference, it was clear this was the era of B2B, the biggest insurtechs focussed on helping to enhance carriers, expand the range of products and leverage new distribution channels to deliver the modern policies that meet the needs of today’s consumers.

As a consequence of the high cost of servicing those needs, preventative insurance solutions took centre stage.

From young people and COVID cover to whole communities threatened by ffnews.com

talk. Getting down with the younger generation and finding ways to engage with a demographic often misunderstood by the industry, Arma Karma represented, to me, the meaning of customer focus.

As Smyth says, though, it’s not just the young generation who struggle to grasp what insurance is all about. The Price Of Accuracy: Consumer Attitudes To Data And Insurance, a report by the Association of British Insurers in 2019, had already established that many more were bemused, illustrated by the fact that 44 per cent of consumers of all ages were not confident they understood how their premiums were calculated. Many point to insurers’ inability to engage with

of the technology providers. We haven’t just imagined this technology platform into being without having those insights from the industry. So, I think we’re all going to move to a more positive place.”

Attendees from Asia to Ohio itched to talk to and banter with fellow innovators at ITI – the frustrations of Zoom meetings and dial-ins had exhausted everyone.

And, as part of London Insurtech Week, there were plenty more opportunities to engage face to face. As partners including Vitesse and Amazon Web Services hosted contact events for delegates beyond the conference, from luncheons to five-a-side football, on one thing everyone agreed: it was good to be back.

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EVENTS: ITC ASIA Heavy weather?

The insurtech industry is prepared for change

Risks and rewards The ITC Asia Virtual Summit was a precursor to the region’s largest live insurtech event to be held later in 2022.

Here are some of the key themes to emerge from it…

The Asian insurance industry is teeming with digital life.

From blockchain-based claims processing to satellite verification software, the global east has set a lucrative precedent for the rest of the world to follow its experimental lead.

More than $20billion was invested into insurtech in the Asia Pacific in the five years before the pandemic hit, according to a report from Standard Chartered Bank, which observed that global insurers are ‘engaged in a race to attract market share by embracing digital solutions to drive efficient distribution, and create an excellent customer experience’. It predicted that market expansion in Asia Pacific will play a major role in driving the global industry’s growth over the next decade, not least because China alone is the second biggest insurance market in the world.

Other notable hotspots in this region include the Indian life insurance market, which is expected to see a compound annual growth rate of 10.1 per cent by 2027, attributed to the growing adoption of technology. ffnews.com

The 2022 InsureTech Connect Asia Virtual Summit saw industry leaders from sectors including property and casualty (P&C), commercial, life and health (L&H) and reinsurance come together to discuss what makes this region particularly ripe for opportunity.

These were some of the key takeaways.

COVID is the biggest catalyst for change, particularly in L&H insurance Tech topics at the Summit ranged from back-office automation to online customer preferences. But you couldn’t get away from the impact that the events of 2020 had on the industry.

“What short-circuited sales cycles for the life insurance industry was COVID, it wasn’t any particular technology,” said Kalai Natarajan, general manager of digital solutions and marketing at Dai-ichi Life Asia Pacific.

In the panel discussion ‘How Are Insurtechs And Digital Insurers Changing The Way Insurance Is Done?’, Natarajan described the many ways in which COVID changed working practices and products, including remote selling and delivery of enhanced underwriting solutions, bitesize or usage-based insurance, telemedicine and home-based services.

During the first 12 months of the pandemic, industry growth stalled worldwide, with insurance companies appearing to experience a slowdown in gross written premiums (GWP), especially

in the life sector, according to the OECD (Organisation for Economic Cooperation and Development). But bounceback has been strong, with Swiss Re now predicting above-trend GWP growth of 3.3 per cent in 2022, and the industry expected to break through the $7trillion total premium ceiling by mid-year.

Natarajan stressed that internal relationships within insurance companies need to change if new technologies are to work effectively to deliver this growth.

“There needs to be a commitment on every level of the organisation, from the ground up,” she said. “That is becoming easier because the people at the working level are looking around and seeing the changes that are happening.”

A Swiss Re COVID-19 consumer survey in Asia Pacific in 2021, found that almost two-thirds of customers were still concerned about their health. Nearly half felt that they needed more medical insurance and a third believed they were under-insured for potential income loss resulting from disease, long-term disability or death of a main household breadwinner.

A shift in focus towards younger customers is driving change Standard Chartered Bank’s report also found that insurers in Asia Pacific are adapting to a much younger customer base for L&H insurance, where they are focussing more on preventative healthcare and offering rewards, using gamification and wellness advice to personalise products.

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EVENTS: ITC ASIA And yet, Chirag Jindal, the head of Vincent Shi, head of Greater China and insurance, Americas, at ServiceNow, in his SEA at global insurance consultancy presentation ‘Improving Loss Ratios And ReMark, explained the importance of The Claims Experience‘, acknowledged that: insurers offering wellness advice in a way “When we spoke to our carriers, everyone that ‘the value and benefit of the insurance agreed that we don't have a unified system product become more tangible’ to young that tracks the end-to-end journey. And, people. During a panel called ‘Innovating when we think about interaction, front-end Customer Experiences For The Post-Covid engagement can be quick and easy only if Digital Generation‘, Shi observed that it’s tied with the back office.” customers who are engaged with their In its recent whitepaper, Automating The physical fitness today are more likely Back Office – A Smart Guide For Insurance to be conscious of the need to safeguard Companies, Blue Prism highlighted more their future health – and, therefore, are accurate results and less bias as among the more inclined to favour coverage. key benefits of automating But Max Tiong, vice back-office operations, president of digital while a Deloitte survey transformation office found that the adoption of at the NTUC Income robotic process automation insurance co-operative, (RPA) increased accuracy stressed that delivering by 90 per cent, productivity the hyper-personalisation by 86 per cent, and cut demanded by younger costs by 59 per cent. customers, required better Edmund Situmorang, The Blue Prism connectivity across all Prodigi whitepaper suggested financial services. some of the biggest “We have to connect our automation gains could be found in agents, our digital channels, our stores, onboarding process, document processing [so] all of these give the same level and verification – mirroring, in fact, of experience in personalisation to the much of online consumers’ experience same customer,” he said. elsewhere, said Jindal.

Echoing Tiong’s thoughts, Tobias Puhse, “Your customers and distributors are VP and head of innovation and customer used to the Uber, the DoorDash, the Venmo solutions, Asia Pacific, at Mastercard, of the world, and they are demanding that said: “When you go to a website, if you’re a experience from insurance carriers, too, returning customer it will suggest products especially their claims organisation.” for you, different types of offers and rewards that you wouldn’t experience if you walked into an NTUC or grocery store.”

Distributed ledger technologies

Blockchain is a technology that is unavoidable and inevitable for all of us

Data analytics is key to automation

could vastly accelerate touchless claims processing

With the number of data points – from medical records to driving history – collected by insurance companies, automated front- and back-office claims processing should be a given.

Reuters has highlighted the region’s exceptional use of data analytics to offer more personalised, on-demand, contextual insurance through companies like Bajaj Finserv, which recently launched an app with frictionless access to insurance products, including a subscription-based wallet and COVID cover.

And implementing automated solutions with AI and ML in the end-to-end claims process would not only cut down the time it takes to process a claim, but also reduce the cost and free up staff to deploy elsewhere.

Advocates of distributed ledger – or blockchain – technologies (DLTs) believe their implementation can remedy crucial issues currently plaguing insurers, specifically when it comes to cost reduction and administration. That was the message from a discussion around ‘Delivering Smart Contracts Through Intelligent Information Management‘.

For any DLT virgins, Dom Braun, CEO of Lykke Business, explained: “Smart contracts are nothing but a computer program or a code, which reflects, for example, an insurance term agreed by counterparties, between an insurer and a client. An event will trigger at the end of the day, and automate the execution of the smart contract, according to the terms set out

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in the agreement, with immediate settlement or payout.” The agreements are stored in an encrypted blockchain.

Employing DLT in claims processing is probably the use case with most potential, because all the counterparties involved in a claim would have real-time access to a blockchain ledger, relieving insurers of their traditional time- and cost-heavy role of intermediary. A new report by Juniper Research, Blockchain In Financial Services: Key Opportunities, Vendor Strategies & Market Forecasts 2021-2030, expects adoption of blockchain-based insurance claims to result in more than $10billion in savings globally by 2024. But these self-executing programmes could also be used in other scenarios, including underwriting, issuance and verification.

Edmund Situmorang, CTO of Indonesian digital broker Prodigi, said it had been convinced of the value of DLTs in the area of personal data handling.

“The three-dimensional work of blockchain has helped us to understand that there is no other way of doing security in terms of keeping integrity of data,” he sais. “Blockchain is a technology that is unavoidable and inevitable for all of us. It is something we should all be looking into.”

InsureTech Connect Asia 2022 is the region’s largest insurtech event, offering access to the largest and most comprehensive gathering of tech entrepreneurs, investors, and insurance industry executives from across the APAC region. ITC Asia will be held from 7 – 9 June 2022 at Suntec Singapore Convention & Exhibition Centre. Get 20 per cent off current prices when you use the promo code: FF20.

Register now to secure your spot.

For more information, visit https:// asia.insuretechconnect.com ffnews.com

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CUSTOMER PATHWAYS: PARTNERSHIPS

l l e d s n a s s Ki

Simon Bentholm, Chief Customer Officer of Penni.io, explains why digital partnerships are key to the new insurance distribution model “We still hear, now and then, insurance companies saying ‘are we sure that consumers are interested in taking this insurance digitally?’,” says Simon Bentholm, chief customer officer of insurtech Penni.io.

It must be difficult to know how to respond to that, given evidence of consumer demand for digital financial

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services has been staring the industry in the face for a while now. According to findings from the EY Global Insurance Consumer Survey, while only 28 per cent of consumers in Europe favoured digital contact with their agents before 2020, that increased to 43 per cent during the pandemic. And, most telling perhaps – insurance being, historically, a product sought by an older demographic – 65 per cent of 45- to 64-year-olds said they would now happily use an app to manage their policy.

“We have an industry that for 20 years has been enacting a self-fulfilling prophecy, thinking that the end user does not want to interact with them digitally,” says Bentholm. “They then

make poor solutions which the customer does not want.”

He believes that, as the consumer knowledge gap in technology dissolves, and more services are enabled online, digital selling is an imperative. And, according to Penni.io’s most recent Embedded Insurance Index, customers don’t just want to purchase products digitally – they don’t even want to have to go looking for them.

Embedded insurance has been a frenzied topic of debate among insurers for a while now, but consumers are perhaps better acquainted with it than they’re given credit for. After all, from British Airways to Ryanair, the travel industry has been offering insurance, ffnews.com

bundled into flights, since long before the pandemic. So, fully integrating insurance into the user experience is not as big a behavioural leap for them as it is, perhaps, for the industry.

Simply put, embedding products is a tool that insurers can use to directly hack into someone else’s established customer base, from car buyers to jet-setters. In the automotive sector, manufacturers are already teaming up with insurers to provide usage-based driver cover, making use of onboard connected vehicle technology; and you can now find end-to-end product warranties embedded with purchases of general consumer goods over e-commerce platforms such as Amazon. It is a consequential innovation for the digital consumer’s needs.

But, the challenge for carriers and brokers is how to develop this new sales model while not surrendering their relationship with the insured at point-ofsale – the kiss and dismiss scenario.

“If you’re only looking at the point-of- sale, you are only looking at a transaction between a partner, or embedder, and an end-customer, where you only have one shot at selling the insurance,” says Bentholm. “Rather, it’s about looking at the extended value chain of the product and saying ‘what are the digital touchpoints around that?’.”

Penni.io’s embedded distribution solution for insurers helps to address that issue by putting insurance clients in control of the way their services are integrated into other providers’ channels, and in such a way that they don’t lose their identity and can capture the client for the longer term. The data-backed Penni Connect platform uses customisable widgets and built-in plugs; its API-driven and Cloud-native architecture creating an ecosystem for personalised insurance integration, designed to future-proof clients against what might otherwise be one of the perils of open finance – creeping disintermediation – while at the same time maximising the opportunities.

“With embedded insurance, presentation and customer needs are key; if they cannot buy insurance tactfully and digitally, they are less likely to engage with the product at all,” says Bentholm.

Understanding why consumers decline ffnews.com

insurance is as important as gathering data on those who select it, and the Penni Connect Studio tool does both.

Insurance is all about context, says Bentholm.

“So, it’s about what it’s connected to, where it’s placed, what it’s embedded with. Banks already know that it is hard to sell a bank loan. It’s a lot easier for the one selling the car to sell the car loan because nobody wants a loan, but they want the car,” he adds.

THE NUMBERS GAME While, according to last year’s Accenture Insurance Consumer Study, the traditional insurance agent will always have a higher conversion rate because customers are more likely to buy a complex product from a trusted advisor, ‘that single agent is extremely expensive and not scalable’, observes Bentholm.

“With embedded insurance, you can hit millions of consumers a day for the same cost of one agent, and, while you may have a lower conversion rate, the numbers are higher.”

There’s good evidence that these customers are highly sensitised to the product, too. A 2021 report, The Global Risk Landscape After COVID-19: What Role For Insurance?, published by the Geneva Association, found that 40 per cent of retail customers considered life and health insurance more important now, while 50 per cent of business owners place higher value on having business interruption cover, group life and health and liability insurance. Meanwhile, a 600 per cent post-COVID increase in cyberattacks has sparked a surge in the cyberinsurance market, from $5.25billion in 2019 to $11.09billion in 2022, according to GlobalData.

Bentholm points out: “Embedded insurance is the only distribution methodology where the costs are diminishing for the next policy… the only distribution methodology where your impact on the result will be more than just your top line because you’re looking at cutting five, 10, and in some of our cases, 15 per cent off the cost of sale.”

In other words, insurers can expand their reach by surfacing a whole new segment of customers who are sensitised to protecting their investment at key moments in someone else’s customer experience journey, then replicating that with multiple distribution partners without changing the IT or the underwriting process – and at a lower cost of customer acquisition.

Partnerships with third-party providers like Pennio.io are becoming increasingly attractive in the insurance industry. In February this year, US insurer Travelers acquired the assets of the insurtech and embedded insurance provider Trōv; the following month, another embedder, INSHUR, expanded its partnership with Cloud-native CMS provider Five Sigma to handle its claims operations. While all the indications are that the industry thrives and innovates when such partnerships are formed, Penni.io’s report also revealed that the success of a partnership with an embedder is heavily determined by the input of the insurer.

Insurance companies cannot enter partnerships with the burden of antiquated legacy systems holding everyone back.

“Insurers must go into it with a digital mindset, one where the top found numbers are most important; maintaining partnerships on a scale that is one-to-many rather than one-to-one,” says Bentholm.

That embedded insurance is becoming increasingly popular with retail customers is beyond doubt. The 2021 Embedded Insurance Report from Cover Genius, found that, globally, 70 per cent of bank customers are interested in bank-embedded insurance, based on transactional data. With the market projected to be worth $722billion by 2030, it’s is likely to become a standard touchpoint for all online buyers’ journeys.

The end-goal is not to make people hyper-aware of insurance with every transaction, as that would do more to irritate than reassure them, but to be visible to people where there is a perception of risk, says Bentholm.

“It’s about saying ‘here, I give you peace of mind. Go live your life’.”

It’s the only distribution methodology we have where the costs are diminishing for the next policy

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CUSTOMER PATHWAYS: TRAVEL PROTECTION

Up, up and away!

For thousands of UK holidaymakers looking forward to their first trip abroad in two years, Easter 2022 was a crushing disappointment.

With more than 1,300 scheduled routes cancelled over the four-day bank holiday weekend, airlines and airports struggled to cope with staff shortages as demand spiked by 50 per cent to 75 per cent compared to

pre-pandemic levels.

Travellers who’d been alerted in advance to changes to their travel plans could count themselves lucky; others were unexpectedly stranded for hours, watching blank departure boards, spending their holiday cash in overpriced airport lounges and wondering if it was worth all the effort. They no doubt also wondered when and if they’d get their money back.

The chaos was a reputational disaster for an industry still in fragile recovery from COVID-19, now also having to deal with soaring fuel costs, recruitment ffnews.com

Koala is broadening insurers’ horizons when it comes to travel protection products in a post-pandemic world. We spoke to Co-founder Ugo Weyl issues, sporadic lockdowns in Asia, and disruption caused by the war in Ukraine.

It led some forecasters to extend the date by which they now expect air traffic to

return to pre-pandemic levels, to the second quarter of 2025.

Travel insurers have, similarly, had to deal with a rollercoaster two years. First, they were hit by an avalanche of claims, triggered by a global movement ban, putting analogue processes under extreme pressure. That was quickly followed by a shift in public sentiment around travel insurance, many concluding that the comprehensive policies they’d routinely taken in the past and barely looked at, didn’t stand up to scrutiny in this new and unpredictable travel environment. And, perhaps most importantly, the insurance industry as a whole had to figure out ways

to work with distributors to inspire public confidence in travel again – or they were all in the soup. Airlines in particular, which had viewed cross-selling insurance simply as a revenue generator, began to see it as a way to add value to their product and get nervous customers, literally, back on board.

It was into this maelstrom that Paris-based B2B insurtech startup Koala stuck a parametric paw.

Launched in 2018 by Ugo Weyl, Léo Tordjman and Antony Mechin, the Koala

team had been preparing to release the company’s first product in 2020 – an option for customers to be automatically compensated if their flight is delayed, cancelled or diverted, it can be bundled via an API into a travel company’s booking process. True to Koala’s vision for providing travel protection ‘with no exclusions, no proof and compensating travellers as soon a disruption occurs’, it stripped away several layers of complexity to offer an ultimate user experience, which also lowered claims management costs. Its flight disruption and missed connection protection are underpinned by parametric technology.

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CUSTOMER PATHWAYS: TRAVEL PROTECTION “When somebody buys a product, we live trace the flights associated with it. We know at any point in time whether that specific customer will get the flight. If they get to the airport and have missed the connection, they will already have a new ticket in their email,” explains Weyl.

Koala is among a new generation of insurtechs that can’t be neatly categorised.

Registered as a brokerage, its revenue stream is two-fold: it takes commission as a broker/managing general agent on every insurance policy sold, but, at its core, Koala is a financial solution design company, combining multiple data streams and building machine learning algorithms to create bespoke, paperless products within an automated management process. It puts its ‘techspertise’ at the disposal of others and licenses its products and software, working with companies up, down and across the insurance and travel industries.

Among its early design and delivery partners were insurance distributor Wakam, which now markets a leading flight disruption product, and Koala’s reinsurer Swiss Re, for which it helped build a dynamic pricing algorithm that leverages machine learning to predict the cost of any flight in the world being cancelled or missed.

But in the spring of 2020, no one was going anywhere and Koala had to think fast on its little feet. “We were lucky because we were small when COVID-19 hit. It was easier for us to adapt,” recalls Weyl.

And what it came up with was a non-insurance protection product called Flex. Sold to businesses from airlines to hotels, ferry companies to campsites, it gives travellers peace of mind that they can cancel their trip in a single click, with no supporting documents or reason required, and get a pre-defined lump sum back in their account instantly.

Probably more accurately described as a change-of-mind guarantee – or warranty, depending on how it’s marketed – Flex isn’t subject to restrictions that apply in some regions around who can sell travel insurance and how. Importantly, it gave airlines offering value-destroying flexi-fares, with no cancellation or change fees to encourage bookings, an exit strategy when the market started to recover.

Flex proved to be the sweetener that would open doors for Koala.

“When we were selling it, we had partners saying ‘I’d like to distribute it, but I

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also need more traditional coverage and I’d prefer not to have two or three providers, so can you source it for me?’,” says Weyl.

So, Koala now also works as an aggregator, offering its products alongside more traditional comprehensive medical and repatriation cover for any traveller, regardless of where they have to get back to in the event of an emergency. It overcomes the problem operators have in finding multiple insurers with licences in different regions to cover every traveller.

In February, French travel search engine Kayak launched a digitised travel protection platform, based on Koala tech, offering Flex alongside its Comprehensive insurance, Kayak’s own studies having revealed that about half of French adults were planning

extra reassurance from operators, John-Lee Saez, director of Kayak Europe, saw in Koala ‘a great opportunity to build a new kind of no-nonsense protection’.

Another online travel agency, will soon go a step further by incorporating Koala products into a full guarantee that comes with any booking and gives flexibility to customers to change travel their arrangements. It’s this full bundling of digital financial services, which can be offered alongside more structured insurance products, which Weyl believes will differentiate operators in the long term and, in the short term, aid the industry’s recovery.

“Embedded insurance has been a feature of travel for a while – when you buy a trip, you get offered insurance or you pay with a credit card and insurance comes with it. But bundling other types of financial services has several advantages. When you sell insurance, five-to 25 per cent of people will buy your product; when you start bundling, you go to 100 per cent. Everyone is covered and it decreases the price of protection per person.

This is where the travel industry is going, if operators realise there’s great value for the end consumer and it works.”

Despite the pent-up demand for travel, 2022 isn’t shaping up to be a great year for the industry, with ongoing staff shortages causing operating difficulties and soaring costs likely to inflate prices.

Axa’s Morazin also revealed the company had moved from ‘a price negotiation approach to a real mutual understanding of the risks and the definition of a common strategy’ as it helps operators recover from two years of attrition. Part of that is recognising what customers really want – the insurer has signed an agreement with Etihad Airways, for instance, to offer optional products based on a customer’s profile.

Partnerships with intrepid technology explorers like Koala are likely to become more common as the industry adapts.

And, if you’re sitting on your suitcase in Terminal 4 at Heathrow at the moment, that’s got to be good news.

Bundling these other types of financial services has several advantages.

This is where the travel industry is going, if operators realise there’s great value for the end consumer and it works

to buy travel insurance this year. A quarter, however, didn’t trust insurers, around 40 per cent said policies were unclear and misleading, and just under a third anticipated getting bogged down in any subsequent claims process. Another report from end-to-end travel insurance and protection provider Collinson, in April, showed that 39 per cent of the UK travellers it surveyed were no longer nervous about travel because of changing COVID-19 guidelines, but 38 per cent still were, and 48 per cent were concerned about losing money due to COVID-related cancellations.

While insurance giant AXA’s senior VP of global travel, Erick Morazin, recently predicted ‘very strong growth in travel insurance sales’ with a tendency for travellers to ‘over-consume travel assurance and assistance products’ as they sought

ffnews.com

CUSTOMER PATHWAYS: BROKER NETWORKS

Thehybridbroker

Europe’s digital wunderkind, wefox, believes a broker network powered by humans is still the future of insurance.

Tomaso Mansutti, head of international partnerships at the company, tells us why There is probably no more oversimplified and overworked word in the insurtech industry than digitisation. It has seized the cultural zeitgeist of insurers across the globe as the be-all-and-end-all of modernisation.

It’s not hard to see why. E-commerce and ever-more-sophisticated APIs have cemented digital as the standard means

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of communicating B2B and B2C. As it stands, around 62.5 per cent of the world’s population uses the internet, more than half of whom access it through their smartphones, according to DataReportal's Digital Around The World research report.

And, looking at just one type of insurance, in just one country, in 2019 Statista found that over half of the UK population bought vehicle cover online, 62.4 per cent of them drivers over the age of 65.

There are 20 million households with motor insurance in the UK – the maths speaks for itself. Digitisation is something insurers couldn’t ignore.

From automating onboarding through to claims, and developing tools built

around Cloud-native platforms, digital insurance is now at scale. So, where does that leave the traditional human agent, who’s powered this industry for so long? Dead in the dust, trampled by an army of robots?

No, very much alive and kicking, according to wefox.

Founded in Germany, in 2015, by CEO Julian Teicke, CFO Fabian Wesemann and CRO Dario Fazlic, the insurtech’s primary focus currently is property and casualty, auto, and household products, underwritten by Munich Re. By using sophisticated technology and automating 80 per cent of its processes, it’s built one of the biggest insurtechs in Europe, last valued at $3billion – and all of that via a ffnews.com

network of brokers with blood, not data streams, pumping through their veins.

“Clients want digital services. They want to be able to reach insurers on Sundays while sitting on their couch. But, they also want a physical touchpoint,” says Tomaso Mansutti, also head of international partnerships at the company.

Working through more than 3,000 brokers, both exclusive agents and partner advisors, wefox’s B2B platform relieves them of the administrative burden of sales and claims management, allowing them to concentrate on their customer-facing advisory role – in effect, acting as the human face of wefox. At the same time, the carrier’s online reach puts the agents in touch with a much larger customer base than they’d be able to achieve on their own. It’s a mutually beneficial relationship, says Mansutti.

“Technologies are not only a more effective management of all the lifecycle of a policy, but also a smarter and faster engagement with the clients, delivering them what they demand and expect.”

A SYMBIOTIC RELATIONSHIP Last year, PropertyCasualty360 published its 2021 Independent Agent Survey, in which it found that many agents believed technology was an asset – but in some areas more than others. When asked what part of the agent-client experience was best-suited to an online service, 85.5 per cent said the payment of premiums, while 68.6 per cent thought answering routine questions was also better executed via online channels. These findings mirror other customer preference surveys. There is clearly an acknowledgement that repetitive admin tasks are best streamlined with AI and machine learning solutions, for the benefit of agent and policyholder.

But the survey also found an overwhelming majority of agents (78.8 per cent) believed one area where online services couldn’t out-perform humans was in establishing client trust. That finding aligns with the importance that customers, of all ages, attach to their intermediaries.

A 2022 report from Agentero, The Age Of The New & Improved Intermediary, found that 78 per cent of consumers who had worked with an insurance agent before would do so again – and this from a sample of 1,000 respondents, aged from 18 to 75.

That said, there was a fair amount of ffnews.com

scepticism among Gen Z respondents.

They were more likely than any other age group to question the impartiality of intermediaries when offering advice, and were less convinced that their insurance agent really understood their needs. For these younger, digitally native customers, then, perhaps the more digitally advanced a product is, the more reassured they will be.

For wefox, the agents’ needs and the clients’ needs are not that different. Like customers, agents value options and support. Providing them with a platform where they have access to real-time data and predictive tools benefits their relationships with customers because it gives them more evidence to decide on an insurance product, one which the customer can agree is the right one.

And insurers similarly need to cultivate a level of trust with the advisors they work with so that, together, they can optimise product delivery. That’s why wefox spends time cultivating its broker network.

Advisors who act exclusively for the insurer are not only offered paperless sales tools and lead generation, they’re also plugged into what wefox describes as ‘a big family’, a non-hierarchical organisation with a personal advisor and training and

Clients want digital services.

They want to be able to reach insurers on Sundays while sitting on their couch. But, they also want a physical touchpoint specialisation offered as the agent builds their own sales structure. Those who opt for a partnership arrangement have a dedicated portal, straightforward rates and contracts, access to fast claims processing and the ability to offer customers a self-managed digital account.

“We give them the fertile soil where they can plant their talents and make them grow,” says Mansutti. “By giving them an area where they can expand their capabilities and collaborate with others, we make the whole group grow, too, because it’s not only a question of working by themselves, but around others.”

The human-plus-machine formula clearly works; wefox is one of the fastest-growing

insurtechs in Europe, live in five countries with 500,000 customers, and expected to tip into group profit in 2023.

The majority of that growth came after the end of 2019. The events of the following year short-circuited a number of insurance processes previously performed manually, like onboarding and verification; adopting digital alternatives was less about experimentation during the pandemic and more about making the process as remote as possible to contain the virus. But it also prompted an increase in demand for new types of insurance. EY’s Global Insurance Consumer Survey In Times Of COVID-19 found that 68 per cent of respondents were interested in usage-based insurance for cars, for example, with mileage and Internet of Things (IoT) technologies used to inform policies. Cyber and subscriptionbased insurance are also relatively new to the sector, but have skyrocketed in demand; for cyber alone, the global market is predicted to exceed $20billion in gross written premium by 2025.

Advisors need support to meet this changing market, says Mansutti. “Our platforms help these advisors deliver the best policies to their customers, and we also provide risk mapping for clients – it’s not just the selling of the product, but understanding their needs.”

He sees a future in which the IoT and insurers using real-time data will increasingly educate consumers, not only on the type of product best suited to them at that moment, but also on understanding the risk. The wefox broker network can help to do that.

“There is currently no effort, for example, being put into understanding your car,” says Mansutti. “This is important for the future of autonomous driving. Being able to understand the advanced driving assistance systems will help you understand which car to buy. And insurers need to arrive at the moment when the client is assessing the risk – whether it’s buying a car or a house, we need to be present with the best state-of-the-art products to help them.”

While wefox isn’t alone among a third wave of insurtechs to leverage the broker network, it’s been particularly successful in finding a model that extracts value from the component parts of a human-and-machine, hybrid solution.

The robots might be coming, but as equal partners, not a threat.

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INSURTECH FOCUS: BLOCKCHAIN

s d i k w e N e h t on ck Blo way technology Is blockchain the gate vation? to true insurance inno

Etymologically speaking, blockchain is exactly what it says on the tin.

A decentralised ledger that, among other things, facilitates the process of recording and tracking assets (house, car, land, etc), each unique transaction is encrypted and grouped into ‘blocks’ of data. Once filled, they are linked to previous blocks of data, creating the immutable chain of record that sets this apart from traditional, table-based data stores.

Most widely used for exchanging cryptocurrencies, blockchain’s decentralised nature allows almost complete transparency, as those with access to it in its public, private or

Giant leap: Insurers will face an opportunity that’s ‘too big to miss’

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ffnews.com

permissioned-access formats, can see transactions in real-time.

Most of the financial sector has warmed to the technology, but insurers remain more tempered. Noise around blockchain use in the sector has grown louder, though, in the last year. Currently still experimental, its adoption by insurance is guaranteed due to other, existential forces, affecting the industry.

“The emergence of decentralised finance non-fungible tokens and, more recently, the metaverse should lead, as any new technology will, to new insurance needs,” says Olivier Jaillon, chief executive and chief product officer of embedded insurance provider Wakam.

“Therefore, an insurance market related to these products should emerge with a progressive standardisation of available insurance products.”

The emergence of decentralised finance non-fungible tokens and, more recently, the metaverse should lead, as any new technology will, to new insurance needs Olivier Jaillon, Wakam

Wakam is a B2B insurtech that provides bespoke, white-label embedded insurance solutions for insurance companies.

With a focus on both usage-based and self-service insurance, clients can ‘create their own product’ when it comes to insurance staples like health and wellness, professional and mobility, as well as more specialised markets – for example, renters or micro-insurance. As well as using APIs for its embedding process, Wakam has a history with blockchain technology.

In 2018, the company was one of the first in the industry to utilise a private blockchain in its management system, initially using Sequence by Chain, and then Quorum. Its private nature allowed Wakam to freely exchange information with clients and record a high volume of their transactions, which clients could oversee in real time.

“We opened our blockchain and created our first insurance policies using it, over two years ago,” says Jaillon.“Today, ffnews.com

there are 600,000 active contracts across various insurance products. This grows by 10 per cent each month, in line with our partner growth. This makes us one of the biggest case studies in the world.”

Wakam has recently adopted the Tezos blockchain ecosystem, in the process becoming what’s known as a ‘corporate baker’ as it transitions from private to public blockchain use.

The Tezos (XTZ) blockchain uses a consensus algorithm based on a liquid proof of stake mechanism (LPoS).

Block creators, called ‘bakers’, fulfil – in an eco-friendly way – the same role as ‘miners’ in previous blockchain generations. Each block is created by a randomly selected baker, endorsed by other bakers, and validated by the rest of the network. Bakers put up their stake in Tezos as collateral to ensure that blocks are validated correctly, incentivising network participation and ensuring network security. By becoming a baker on the Tezos blockchain, Wakam joins more than 350 bakers around the world who participate every day in securing the network.

The scope of blockchain is not limited to data storage, as Wakam has found: insurers can integrate the technology in almost every automated process.

ClaimShare is an insurtech working in the fraud and risk assessment field, which uses blockchain to allow insurers to collaborate and enhance their fraud detection systems. It’s aimed at detecting ‘double-dipping’, whereby a customer makes multiple claims for the same event with different insurers. This duplicate claim filing is thought to be responsible for five to 10 per cent of insurance fraud but has, hitherto, been virtually undetectable because there is no industry data-sharing standard and regulation anyway restricts the sharing of sensitive, personal information. ClaimShare uses the private Corda blockchain to allow insurers to put public claims data on a ledger so that others can check if any claims they’ve received have already been paid out.

In motor insurance, State Farm and United Services Automobile Association (USAA) are examples of companies that have fully integrated blockchain technology into their subrogation claims processing. It followed a two-year trial to see how

effective blockchain was in relieving both organisations of the laborious paperwork attached to pursuing third parties responsible for their respective customers’ losses. They are now inviting others to join the network.

“Blockchain could change insurance forever, it is such a clear use case,” says Leon Gauhman, founder and chief product and strategy officer at digital consultancy firm Elsewhen. “However, regulators are nowhere close to dealing with it.

“There is a lot more to be done on lower-hanging fruit. Insurance today hasn’t changed much in terms of manual processes, the customer experience, in most cases, is shocking.”

Gauhman highlights a stubborn issue still holding back insurers when it comes to trying new things: as one of the oldest businesses in the world, it relies on the principle ‘if it’s not broken, don’t fix it’.

A recent study by the Capgemini Research Institute found that, out of 204 insurance organisations interviewed, only 18 per cent could be called what Capgemini defines as a ‘digital master’.

These findings showed that most insurers don’t have the technical capabilities or work culture to handle the plethora of data at their disposal, let alone feel comfortable with blockchain innovation. “[Insurers] inevitably have to introduce these changes because this is where we are going,” says Gauhman. “It will also come from the pressure being applied by employees themselves, who want more efficient ways of working.”

Blockchain could change insurance forever, it is such a clear use case Leon Gauhman, Elsewhen

Insurers who are not willing to take risks with new technology, stand to lose out on evergreen gains, says Gauhman.

He theorises an alternative type of insurance, mirroring what’s happening elsewhere in the financial services industry.

“I wonder if something will start emerging, alongside the alternative financial services system and alternative internet that is starting to emerge, which will have insurance products?” he says.

“And then the opportunity will be too big to miss.”

Issue 7 | TheInsurtechMagazine

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AI & AUTOMATION: NLU Great minds: Could advances in AI redefine the industry?

A greater understanding Insurers handle a greater variety of data than possibly any other branch of financial services. Natural language technology to process and, more importantly, interpret it, will fundamentally change the way the industry operates, say expert.ai’s Daniele Cordioli and Chris Pearce from esure

Anyone familiar with the work of comedian Steve Coogan and the antics of his alter ego Alan Partridge, may recall a scene where the hapless DJ tries to order a cinema ticket on the phone, via a speech recognition bot.

It’s 90 seconds of delicious torture, as he repeats the word ‘Inception’ over and over again, using different intonation and inflection with increasing levels of desperation and, ultimately, despair.

It’s only when you start breaking down what computers need to be programmed with – or machine-learn – that you realise just how awesome our brains are when it comes to understanding the complexities of language, its context, nuance, sentiment and syntax – and then responding appropriately.

Natural language understanding (NLU) is all about eliminating those elements of the written and spoken word that are lost in translation between us and ‘them’, thereby ensuring that the right outcome is achieved through natural language processing (NLP).

It’s a branch of AI that has actually been around since the beginning of early computing and it’s said that, back in ffnews.com

the 1950s, a translation from Russian to English was the first example of a natural language application. It’s an apocryphal tale: a computer was asked to translate the biblical saying ‘the spirit is willing but the flesh is weak’ into Russian, and then back into English where it reappeared as ‘the vodka is good but the meat is rotten’.

It was clearly early days… but it does illustrate the crucial role of NLU in recognising not just what has been said or written, but, more importantly, the intention behind it.

A lot of water has flowed under the digital bridge between human and machine cognition since the 50s, of course, and machine-learned nuance and context inform exchanges in so much of our everyday lives and over multiple channels today.

Developments in NLU allow us to have what feel more like proper conversations with virtual assistants like Alexa, Siri and Cortana and, as a result, they know, for instance, that we probably want a local weather forecast when we ask ‘Alexa, what’s it like outside?’, rather than a description of the street on which we live or indeed an existential summary of geopolitical events.

Understanding is key to progress of any sort – and it’s fundamental to how we leverage the sheer superior lifting power of computers when we want to do things faster, more accurately and more profitably.

Intelligent at the core The case for broader AI adoption in insurance had already been made before the events of the past two years brought any laggards abruptly face-to-face with it.

In 2019, Lexis Nexis’ The State of Artificial Intelligence And Machine Learning In The Insurance Industry report, suggested those that had adopted AI and machine learning witnessed 88 per cent faster claims settlement, 88 per cent better cross-selling, 87 per cent better fraud detection, 85 per cent better risk scoring, 80 per cent improved pricing decisions, and 78 per cent improved profitability, when compared to those that had not. Three years on, insurance businesses must be brave enough to rethink their structure and model, rather than just tinkering at the edges with AI, says Daniele Cordioli, head of solutions consulting EMEA for Expert.ai, a specialist in NLU. They should put it at the core of their operations.

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AI & AUTOMATION: NLU The challenge for data scientists, meanwhile, is to accelerate the sophistication of NLU so that they can confidently apply AI across organisations to address three key issues for insurers, which Cordioli identifies as: reducing processing time, eliminating bias and improving risk and pricing, all of which have positive outcomes for the industry, the company and the individual policy holder.

“Insurance is at least five-to-10 years behind [other financial services], in terms of technology adoption and innovation,” says Cordioli. “But the pandemic dramatically changed perception and awareness. The carriers realised, during lockdown, that they couldn’t properly sell, they couldn’t sense the risk. In other words, they couldn’t guarantee business continuity. So, something had to change – and, thankfully, it is.”

The objective appears to be shifting from a detect-and-repay model, to prevent- and-predict Daniele Cordioli, expert.ai

Chris Pearce, head of data science at esure Group, a UK-based personal lines insurer, agrees: “You’ll see the vast majority of companies now aiming towards digital models – self-serve, multiple touchpoints, applications – forming a core part of the strategy and technology. Data and AI is at the heart of these ambitions.”

Insurance is undoubtedly data-rich, possibly with more access than any other branch of financial services to granular and very personal information about customers: their health status, driving habits and attitudes to high-risk pursuits, for example.

Data is food for AI, and the more it can gorge on, the more likely it is that technology of this kind can make a real difference – and not just in customer-facing processes (those chatbots that so befuddled Alan Partridge) but also in back-office applications that are of more importance to insurers than ever before. Just a couple of months into the pandemic in 2020, a Celent report, Property Casualty Insurers Weighing In On Emerging Technologies, showed 67 per cent of large property and casualty insurers

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had identified cost reduction and process improvement as key business targets, and those challenges haven’t gone away – but they can be addressed with NLU and NLP. Such sequential solutions can apply structure and interpretation to complex, language-based documents in the claims process, for example, to reduce underwriting leakage and substantially increase the accuracy of a policy review.

“I can identify tangible benefits [for using AI underpinned by NLU] in better risk assessment, for example,” says Cordioli.

“There is also better knowledge of the customer base and behaviour, which impacts customer engagement and claim management, too.

“The more data you have, the better you can profile the customer and extract a lot of relevant knowledge. You also get better awareness of the risk exposure. In the last year, we’ve found a lot of interest in the space of cyber policy review, for example.

“Insurers’ overall objective appears to be shifting from a detect-and-repay model, to a prevent-and-predict one.”

So, there are big plusses for insurers using this branch of data science. But what about customers? They continually provide unstructured data via multiple touchpoints, so how does AI transform this into something of benefit?

Pearce says: “AI can uncover the minutiae of details and interactions we have, which can often be missed by the human ear or eye, help refine process proposition and create new ways of dealing with, prioritising and supporting the myriad of needs our customers have.”

Cordioli continues: “The policyholder will see a quicker processing time for claims submissions, for example.

“Having more data, being able to process this data, and extract more knowledge from it, allows insurers to be more reactive in their engagement with the customer.

“Another benefit is objectivity. Artificial intelligence can remove some of the bias that is part of being human. We can introduce this technology across the entire value chain, and expect it to work in the same way, with less subjectivity.

“The third benefit is a better assessment of the analysis we are doing, around risk, for example, and being able to link risk and pricing in a better way, so there is tangible benefit for policyholders.”

But, he stresses, artificially-intelligent technology will achieve its maximum potential only if it’s seen as a catalyst for deeper change within the organisation.

“It’s not a case of plug and play – put AI into a company and, like magic, everything works. You have to create a culture around it; a transformation has to start.”

Pearce agrees. “AI is not just about predictive modelling, chatbots and recommendation systems,” he says. “It’s about a company mindset, a cultural change, and a unified approach across the business. It’s about bringing cross-functional collaboration, human creativity and hard science together, harmoniously and robustly, in order to understand and meet the needs of the people you service. All of that often adds up to transformation. But, if you do that right, then AI becomes the driving engine of decision-making.”

“Technology and data are just two of the four pillars that are fundamental to successfully delivering a product; we also take into consideration people and process,” says Cordioli. “By people, I am not only referring to data scientists and everyone working in the ecosystem of AI, but also stakeholders and people in the business units who have to embrace the process and methodology.”

Never has this scale of change at once represented an opportunity to radically alter brand, mission, the way the market works and the products on offer Chris Pearce, esure

Assuming that is successful, how will these tools affect the industry?

“Never has this scale of change at once represented an opportunity to radically alter brand, mission, the way the market works and the products on offer,” believes Pearce.

While Cordioli says becoming more technology driven will ‘probably be the only way to compete in the market in the next 10 years’.

“The cool term ‘insurtech’ will probably disappear, because all insurers will be insurtechs,” he says. ffnews.com

Ohio is Within a Two-Hour Flight of Nearly 3/4 of the Financial Services Industry in the U.S. and Canada

AI & AUTOMATION: GAMIFICATION AND THE METAVERSE The next step: Insurance presence in virtual worlds is a logical extension of gamification

Play to win!

If gamification can help life and health insurers engage this generation of coverholders, Alex King considers how digital worlds could lock in the next They say anyone can sell an umbrella in a rainstorm. So it was that, during a deadly, once-in-a-century pandemic, life and health (L&H) insurance providers began reporting double-digit increases in policy purchases, with an 18.5 per cent spike in the US in March 2020.

If you want truly stunning sales figures, though, consider this: during the pandemic period, Corona beer saw consumption soar by 40 per cent in the UK, and by 20 per cent globally. L&H insurers might question why a brand whose name – given the circumstances – might have put punters off, in fact out-classed sales of financial protection for life, health and wealth.

The answer, perhaps, lies in consumers’ disengagement from what were once considered essential policies. According to research from global financial services organisation LIMRA, the percentage of American adults with a life insurance policy dropped from 63 per cent in 2010 to just over half in 2020. A recent Deloitte survey found that only 20 per cent of those who’d never had mortality

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coverage were interested in buying it. According to Swiss Re, the global mortality protection gap now sits at $114trillion. Taken together, those stats add up to a gigantic opportunity as well as a reflection of just how slowly the insurance industry has adapted to the demands of modern consumers. But there are promising – even exciting – signs of movement from this famously risk-averse industry.

As David Priestly, who became chief digital officer at Vitality, the innovative digital health insurance in 2017, recently explained: “If you just concentrate on trying to deliver value for your customers and creating an exceptional experience, more often than not, you’re going to do the right thing.” Which means touchpoints are now seen as a priority.

Millennials spend an average of six hours per day on their phones, across an average of 80 apps, yet their insurance provider ordinarily makes contact just twice a year – once with a renewal email, and once with a receipt. Smartphone absorption is an open goal that L&H insurers have been scuffing the ball wide of for years. Now they’re beginning to hit

the net, leaning on gamification as an appealing, youthful way to generate dozens, if not hundreds, of touch points per customer per year.

Vitality was one of the first L&H insurers to gamify health insurance, incentivising policyholders to lead healthier lifestyles with premium reductions and a rewards scheme full of healthy treats.

Several other insurers have since followed its lead, building game-like mechanisms of their own. Sproutt, the Connecticut-based life insurer, opted for a Quality of Life Index to score customers’ ‘hidden health’, as revealed by AI and predictive analytics. Its 15-minute quiz generates a score that is immediately accompanied by bespoke health and wellbeing advice.

The health score generated by Zurich-based Dacadoo’s Wheel of Life, meanwhile, is based on an astonishing 300 million patient hours of data.

Dacadoo sells this scoring system to insurers, alongside a digital lifestyle coach and points-based rewards, which can be redeemed in an online store.

Then there’s London-based YuLife, which offers group life insurance to ffnews.com

employers. Overseen by the insurer’s digital mascot, Yugi the giraffe, YuLife users earn YuCoins: one for every mile they walk, or one for every two minutes they spend in mindfulness. Users can progress through Candy Crush-style levels, earning SnapChat-style streaks. Banked YuCoins are exchanged for vouchers to shop at the likes of Amazon, ASOS and Fitbit. The firm even has a chief wellbeing officer, in the form of BBC Breakfast’s Dr. Rangan Chatterjee.

If all that sounds like a Millennial fever dream, you’re beginning to sense the direction of travel for an industry once associated with all things grey, dour-faced and dismal. Through this approach, insurers are building new relationships with their customers – becoming ‘sticky’, even indispensable, and using the resultant increase in user data to generate more accurate, bespoke advice.

YuLife’s vibrant offerings are underpinned by a loftier goal. Having found that 65 per cent of employees say they’d do more physical activity if they were rewarded by their employer for doing so, YuLife is among a growing cadre of L&H insurers that believe gamified health objectives could actually make us all better and happier – reducing premiums for consumers and the volume of claims for insurers while benefitting society more broadly.

Whether or not that will turn out to be the case – and some doubt has been cast on these hopes by academic research into the benefits of health wearables – it’s certainly a more engaging value proposition than the ‘have kids; get life insurance’ sell of the past few decades. It’s bringing young customers through the door, touching on areas of their lives that are meaningful and fun.

As YuLife’s chief product and technology officer, Josh Hart, recently told Business Leader: “For years, life insurance had simply been death coverage; we wanted life insurance to focus on life, and harnessing the latest technologies – AI, app development and the metaverse – was inevitably going to be key in realising that goal.”

YuLife’s ‘Yuniverse’, a virtual world of coins, quests and challenges, qualifies as a metaverse in the broadest sense: an immersive digital space in which consumers are expected to spend more and more of their time and money in the coming decades. In the wider constellation of metaverse platforms, opportunity knocks for forward-thinking businesses. ffnews.com

A BRAVE NEW WORLD Since Facebook ‘went Meta’ in October 2021, active wear brands Adidas, Puma and Under Armour have announced their involvement in what is now being called Web3.0. Ex-footballers David Beckham and John Terry have been dabbling in the digital economy, the former as global ambassador of the DigitalBits blockchain, the latter in an ill-fated launch of a batch of NFTs. Most relevant to L&H insurance providers is the OliveX Fitness Metaverse, a digital health and fitness company that’s taking full advantage of play-to-earn experiences in virtual worlds. In The Sandbox metaverse, the firm is working with a number of fitness brands to create digital clones of their products as NFTs. OliveX has also created a DOSE token, earned through running in the virtual game Dustland Runner, which it claims to be the world’s first blockchain fitness game, rewarding exercise with coveted digital items in a virtual world.

At hubb, we co-work for two hours a day in the metaverse so that, when the metaverse does become a success, guess what? We’re two or three years ahead Ed Halsey, hubb

All this might sound far-fetched, but it’s not a far cry from what L&H insurers have been building over the past half-decade through progressive gamification. So, might moving into the metaverse be the insurance industry’s next leap forward?

Ed Halsey, COO and co-founder of hubb, the Glasgow-based challenger broker that claims to be the first metaverse-ready insurer, reckons it’s possible.

“There are opportunities there to create new kinds of experiences,” he says. “In insurance, we do a lot of golf days, for instance. So, what if hubb held the first Metaverse Open – everything branded and everything sponsored, and an award ceremony with a speech about hubb and what we do.

“At hubb, we co-work for two hours a day in the metaverse so that, when the metaverse does become a success, guess what, we’re two or three years ahead. Our

staff already have familiarity, we have a lot of assets – we’re not playing catch up. Plus, early adoption is cheaper, it’s less saturated, and there’s way more visibility for brands, which is why I think the big brands have doubled down on it.”

It’s not especially common for insurers to be ahead of the curve, but in encouraging healthy lifestyles via gamification in virtual communities, L&H insurers are in on something that the world’s biggest fitness and leisure brands agree could take off.

And what about insurance in the metaverse itself – is it fanciful or inevitable?

Renjit Philip, director of Boxx Insurance, a Canada-headquartered cyber-security and cyber-insurance specialist, has commented: “My take on insurance in the brave new world of Web3 and blockchains is that solutions will have to be developed on chain. ‘Old world’ insurance will need to be supplemented by metaverse versions of reinsurers, brokers and insurance companies that natively exist on chain and will run as DAOs (decentralised autonomous organisations), incentivising their customers and employees with appropriate tokenomics.”

“I’ll bet that, within the next 10 years, somebody, somewhere manages to find a way to get a virus into the metaverse that can be transferred between avatars,” predicts Halsey. “We need certain things to play out so that we understand what the risks will be. But the industry could begin collecting that data now – with small policies for certain digital assets.”

Taking out insurance incase your avatar gets sick sounds absurd – but only as ridiculous as the concept of Bitcoin and Facebook did in the early days. Perhaps, after the intrepid first insurers make their way into the metaverse, the industry will come to realise that there’s a whole other world to tap into, albeit one where the principles of insurance on terra firma still apply. As Halsey says: “Insurance should only ever be used as a tool that protects against those risks that can’t be avoided, and, in theory, risk can be avoided in the metaverse – because it’s designed.”

Doppelgängers may or may not turn out to be invincible, but in this more vulnerable dimension, the real power of the metaverse is in offering insurers a way to up their game and reduce risk by further engaging customers, protecting health and wealth.

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AI & AUTOMATION: THE AGE OF HYPER-AUTOMATION

AI, BIG DATA AND ‘US’ As insurance speeds towards hyper-automation, Aniqah Majid weighs up the benefits and bear traps

Automation has been imperative to the insurance industry for decades.

With the inception of ACORD, the sector’s standards-setting organisation, in 1970, and the IBM personal computer, large-scale machine processing used by insurance firms and independent agents was an obvious response to rapid consumer growth and demand.

Aviva was one of the first to bring automation to scale with its pensions division in the early 2010s. It employed a low-code, Cloud-based task management platform provided by Appian that integrated with the data contained in its legacy infrastructure and was used to match employee skills to claims cases.

The insurer saw a 40 per cent increase in efficiency, with customer queries

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resolved in a matter of minutes.

Encouraged by the results, and as the insurance landscape became more competitive, Aviva went on to install 40 automated applications, all of them running on top of existing infrastructure in pensions, health and general insurance.

The ball was rolling and others followed.

Between 2016 and 2021, the amount insurance companies spent on IT increased by around 650 per cent, according to Statista. Now, the arms race is between AI and robotic process automation (RPA).

MOVING UP A GEAR Used together, AI and RPA herald the new era of hyper-automation.

“It’s about automating non-standard variables,” Leon Fretz, the financial services director of insurance and investment at Microsoft UK, explained during a recent webinar. “(It’s about processing) outside of the normal factors, that require more intelligence and insight than robotic processing automation [alone].”

In real life, that translates in motor insurance, for example, to RPA assessing individual factors around a claim while the likelihood of fraud as part of the risk assessment is predicted through AI. A report released last year from McKinsey, Insurance 2030 – The Impact Of AI On The Future Of Insurance, presented a controversial image of hyper-automation, claiming that by the end of this decade, virtually all decisions an insurance company makes, from underwriting to claims processing, will be informed by AI. It based that projection on the inexorable desire to prioritise customer experience and maximise profits, all the while cutting costs.

Insurers, said McKinsey, will ensure this through the adoption of big data tools and specialised learning models.

Bastiaan De Goei, the insurance industry leader at Instabase, explains: “Unlike the first document-understanding solutions, which were template-based or rules-based, today’s deep learning models understand a document’s context and content in its raw form and can process highly variable and complex documents without human intervention. They become smarter over time, generalising their learnings across diverse document types and evolving, using human-in-the-loop processes.” ffnews.com

Instabase allows insurers to develop fully-automated business processing applications with the use of unstructured data. The platform extracts and digitises crucial customer documents, which insurers can use to automate any paper-based process, such as claims.

“The paper-intensive and process-driven work culture in the insurance industry make it the right candidate for automation,” adds Shashi Bhargava, EVP head of the product and solutions group at Datamatics.

“Policy issuance, document verification, premium calculation, customer onboarding, claims processing and claims validation are some of the popular automation use cases for insurance companies. Automation will ensure faster turnaround and better compliance along with tighter cost control, and help insurance companies stay competitive.”

Datamatics, which uses AI and robotics to enhance its business management services, recently partnered with Parascript to offer accessible and accurate document recognition software.

The area said to benefit most from intelligent automation is claims processing – by far the largest and most complex job of the insurer, from handling claim requests to assessing the loss and making settlements, it straddles a number of traditionally siloed departments and their data. Historically, this point-to-point process would take anywhere between a couple of weeks and a couple of months to complete. Hyper-automation looks to streamline it, utilising AI to gather and verify information, and integrated RPA to process it in a matter of days or hours.

The absence of human intervention in the back office – from the first notice of loss (FNOL) to the claim settlement, otherwise known as touchless claims processing – has been led by companies including Quadient and Genpact.

A further step, taken by Guidewire, among others, is to offer virtual claims assessments to policyholders and loss adjusters. With the AI-based software company Plnar, Guidewire can assess and manage claims using 3D models of rooms and damage, which it develops from photographs taken by an insured’s or loss adjuster’s tablet or mobile phone, that is combined with policyholder data.

Automated claims processing has been ffnews.com

shown to dramatically speed up settlement time while achieving consistent accuracy and eliminating a huge number of manual interventions. In early 2021, a trial by Zurich in partnership with Sprout.ai, cut property claims settlement to under 24 hours by introducing automated policy checking, using natural language processing (NLP) and knowledge graphs.

According to McKinsey, by employing advanced automation, insurers can cut the overall cost of a claims journey by 30 per cent.

“Modern automation platforms like Instabase allow insurers to develop and implement such solutions quickly,” De Goei explains. “The platform has more than 140 ready-to-use building blocks such as digitisation, splitting, classification or extracting. These building blocks can be stitched together and easily create a customised workflow. In its own right, this is very useful and effectively allows an organisation to tackle nearly any complex workflow that today relies on manual document review.”

This level of efficiency has already infused big insurtechs like Shift and Lemonade, the latter of which has taken another important step in using AI to mitigate predictive discrimination.

A human workforce is still crucial to the industry. Survey after survey indicates that customers of all ages value the interaction Skeptics have sounded the alarm on the customer-facing aspect of the automation process, warning that the algorithmic nature of AI processing can cultivate a specific bias towards a narrow demographic (archetypal white male).

The concern over AI bias is justified to some degree; the tool has repeatedly teetered towards the red zone in job recruitment and social media advertising, which unfairly screens out some groups.

The main issue here, and one which continues to contaminate the use of AI in insurance, is the lack of comprehensive, unbiased data. A change in the type of data insurers use for processing will strongly benefit their automation efforts,

and re-win the trust of customers.

But what about the trust of staff?

The industry has already seen job numbers impacted by hyper-automation, and yet a 2019 PwC report, Financial Services: Preparing For Tomorrow’s Workforce Today, found that the biggest barrier to digital innovation was not technology, but the lack of skilled teams and a shortage of talent. A human workforce is still crucial to the industry in other ways. Survey after survey indicates that customers of all ages value the interaction. Perhaps the bigger dilemma is not the loss of staff but the training needed to prepare them for an increasingly human/AI blended workspace.

De Goei describes how automation can act as a subordinate tool for professionals: “The automation of rote tasks such as finding data points, manually transcribing data into a downstream system, asking for missing information or checking for duplicates, allows highly qualified adjusters and underwriters to focus on their core tasks of adjusting and underwriting.

“We found this leads to higher employee satisfaction and retention.

It also allows these critical employees to focus more on their customers, whether they face off to brokers or policyholders. Along with higher accuracy and faster processes, this additional client focus leads to significantly higher customer satisfaction.”

Given the rate at which technology is developing, reskilling is as much an imperative to insurance as automation is.

There is some cause for optimism.

Mercer’s 2021 Global Talent Trends – Insurance Industry Outlook report, found that this industry is one-and-a-half times more likely than others to focus on developing skills related to automation.

The report shared that the majority of insurers did intend to implement some form of upskilling: 63 per cent had identified, or planned to identify, new skills and capabilities for post-COVID operations.

The goal of automation was never to outpace the expertise of the agent, but to facilitate them. The advent of hyper-automation does not change this.

Be it customer preference or speed of facilitation, both man and machine are needed in the insurance space; together they create equilibrium.

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AI & AUTOMATION: PREVENTATIVE INSURANCE

Someone to watch over me Technology that predicts and helps protect policyholders against a range of threats is shifting the image of insurers The overwhelming majority of us have for too long accepted that the only contact we will have with our insurers is at the point of renewal or claim.

But a growing band of nimble and progressive companies are pushing hard to turn those traditional industry values on their head by proactively working with their customers to both reduce risks in an ever-more complicated world and, vitally, build satisfaction, happiness and loyalty.

One such player at the vanguard of the preventative insurance revolution is Paris-based Moonshot Insurance, an insurance-as-a-service platform spun out, in 2017, by French industry giant Société Générale Assurances. Using data as the cornerstone of its operations, Moonshot Insurance started by offering parametric-driven cover for the travel industry, automatically triggering claims for policyholders without them having to prove loss or, indeed, even notify the insurer.

“We can detect that the flight is late in real time. We can detect that you missed your connection. We can detect that you have lost your bag, which you have registered at the airline desk. All this helps us to bring a new customer experience,” says co-founder and CMO Nicolas Serceau.

“Say you are waiting at the airport and the flight is late. We will straightaway send you a voucher to grant you access to an airport lounge so that you can rest and wait for the departure time of your flight.”

Serceau is convinced there is a vast and largely untapped potential for parametric insurance linked to weather-related events in particular, ranging from agriculture to tourism, using photo data analysis taken from satellites and real-time monitoring of water temperatures, for example.

“There are billions and billions of assets

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to be insured,” he says. But with reducing risks and improving customer experience still very much its ethos, Moonshot Insurance is now moving into new preventative markets, including a soon-to-be-introduced, groundbreaking cyberbullying policy in partnership with mobile app Bodyguard, to help parents protect children against online harm.

The Bodyguard app uses natural language processing (NLP) algorithms to detect and analyse the contents of messages on most commonly used social media platforms, to block inappropriate content in real time and alert parents. It will first be offered in France, Germany, Italy and Spain but the insurtech is already assessing a move into the UK market, despite added complexities caused by Brexit.

“Cyberinsurance is moving a step forward by helping to prevent the risk from occurring with this early detection,” says Serceau. “We include FAQs or best practices on how to use social networks as well, and how to manage bullying.”

Lisa Orme, Capgemini And, if the app isn’t able to prevent the risk from occurring, then the insurer will take on the cost of addressing any consequential impact on the child.

The company is also using preventative insurance to protect against identity theft.

“We have a preventive solution that will detect your personal data on the dark web – for example, if your credit card number is detected on the dark web, we will send you an alert,” Serceau says.

“To me, that’s the great benefit of parametric insurance and preventive insurance. They bring benefits to the insurer because they will reduce its risk.

They bring benefits to the client because Prevent and protect: they give great experience.

Insurers are rebranding “For the first time in insurance, the their image

If insurers are not nimble enough and they don't use this time now, they should be looking over their shoulders because big tech are not too far behind

ffnews.com

Parametric insurance and preventative insurance bring benefits to the insurer because they will reduce its risk. They bring benefits to the client because they give great experience Nicolas Serceau, Moonshot Insurance

ffnews.com

customer will be paying for something that will be concrete, that will give them alerts on a daily basis. Before, the customer was paying for nothing to occur and the benefits were only seen in a small percentage of cases. That’s the root of the bad image insurance has from a client perspective.

“With preventive insurance, you have the capacity to demonstrate – not just tell your clients – that you are by their side every day, at every moment, protecting them when the big things happen but also protecting them by preventing the risk from occurring in the first place.

“So, the image of insurance with clients improves, then, potentially, the business grows and the premiums go down because, with prevention, there is less risk.”

Serceau’s viewpoint is widely shared by others in the preventative insurance market. Health insurers are perhaps the most experienced in working alongside their customers to help improve their lives and, thereby, reduce risks and claims.

But Ali Hasan, UK chief medical and healthcare officer for life and health insurtech Vitality, is convinced that a paradigm shift is occurring beyond that.

“You’ll see health insurance, life insurance, property insurers, every group being a lot more mission-focussed, thinking about the impact they can have for people,” Hasan told a recent panel at Insurtech Insights. “The reduction of claims that you have is a positive benefit, but all the value-added services that you can have – improving health, reducing accidents, reducing problems – are actually the really positive outcome that insurers can bring alongside avoiding the claim.”

Raphael Vullierme, co-founder of Luko, which uses deep learning and smart energy technology to protect some 300,000 households across Germany, France and Spain, has proof positive of the benefits of that stronger customer engagement. Early analysis of the 30 per cent of Luko’s customers who use its premium Telemetry For Homes product shows that the company retains them three times longer and the loss ratio is up to 20 per cent lower.

“We definitely see that there is appetite from the consumer to have something more than just a legal contract, and to actually create a relationship to protect their assets,” notes Vullierme.

A similar picture is painted by Guy Farley, founder of ManyPets (formerly Bought By Many, insurance, which is being rebranded in the UK).

“A concrete example for us is that we’ve launched a wellness product in the US, which is more analogous to a savings plan to cover regular treatments with the vet, and that’s way outselling the targets we had when we set it up, so we'll be bringing that product back to the UK,” says Farley.

“Pet owners are prepared to undertake the preventative stuff and if we can incentivise that, that’s great for us as well.”

A general appetite among consumers for preventative insurance is also underscored by the findings of a new survey by global IT services consultancy Capgemini. In a poll of 5,000 respondents across 16 countries, almost seven in 10 said they would be interested in preventive solutions and 53 per cent of those said they would be prepared to pay a premium for them.

Hasan is convinced the industry should quickly build on that potential to the benefit of the insured and insurers alike.

“I tend to think about preventative support, about shared value, about engagement and what it brings to customers, on four different axes.

“Firstly, ultimately, is the customer impact; how their health, how their outcomes, how their day-to-day life is improved, whatever line of insurance you’re supporting.

“The second one is in terms of brand; how you understand how you’re known, how your purpose is really communicated and how you inspire a wider ecosystem.

“The third one is customer retention, because, I think, the more they engage, the happier they’re likely to be, the more benefit they’re seeing from the product and the more they are retained.

“And, finally, I think all of those positive benefits across those three domains would translate into increased attraction of the market and sustainable growth, too.”

Lisa Orme, a senior director in the insurance team at Capgemini, however, cautions that insurers have no time for complacency in an industry where digitisation and the use of granular data to better know customers and their needs is fast becoming a ‘must have’. She says: “If insurers are not nimble enough and they don’t use this time now, they should be looking over their shoulders because big tech are not too far behind.”

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AI & AUTOMATION: RESPONSIBLE AI

Judgementcalls Intelligent AI’s Anthony Peake was motivated by a tragedy to improve the quality of data used to identify risk.

But with that comes great responsibility

“The reason we started Intelligent AI was Grenfell Tower.”

Anthony Peake, co-founder and CEO of the platform for risk underwriters, is talking about the night in June 2017 when fire ripped through a 24-storey block of flats in West London, leaving 72 people dead and exposing a shocking catalogue of safety failures. From the combustible cladding that fed the flames, to the woeful lack of readily available, detailed information on the building’s construction and layout that hampered rescue efforts, the data that might have flagged Grenfell as a disaster waiting to happen had never been fully collated or, more importantly, shared. Insurers were as much in the dark as anyone else.

Like many watching the tragedy unfold live on TV, Peake, who’d spent a lifetime in IT, was first appalled and then angry that information technology could have been used to avert this and other disasters, but wasn’t.

At the time of the Grenfell Tower fire, Peake was already involved in analysing fire service call-out data on behalf of insurers elsewhere, and he was curious to see the records for the block. It emerged that firefighters had been called to the tower 15 times during the previous year, but no claims had been made by residents as half did not have insurance, and the other half could not afford it, so there was no obvious data trail to inform any underwriting process.

“You had two different views of risk, one side completely blind (insurers) the other side (fire services) data-rich.

And none of the insurers involved with Grenfell at that time were looking at fire service call-out data,” says Peake.

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And so, with insurance professional Neil Strickland, he set about creating a solution that made sure insurers did see the full picture, using AI, data analytics and satellite image analysis to help deliver more accurate real-time commercial property underwriting and risk management – an improvement that, crucially, could save lives.

Intelligent AI plugs the knowledge gaps by taking a ‘digital twin’ approach to generating a statement of value (SoV), the file of information, often compiled manually, that traditionally underpins risk assessments – and which, according to Intelligent AI, often only contains 40 per cent of the available data. The insurtech uses AI to first cleanse, then analyse and compile data from more than 300 sources to create a virtual 3-D mirror image of a property. This visual representation of a SoV not only provides an assessment of the precise property, but also of the surrounding area in which it sits.

Such an approach to information gathering means that autonomous machines are surfacing and making judgement calls on ever more granular data in complex situations. And, while better data is of obvious benefit in terms of preventing loss of life and reducing the liability on insurers’ books, it potentially raises questions over its ethical collection and use. That’s a judgement call Anthony Peake is well aware of, which is why he’s currently working with Innovate UK on its ethical AI project.

You could unlock data that an insurer did not have, and present a profile of an organisation as riskier than the insurer initially thought With growing reliance on immediate automated services, AI is fast becoming an integral part of insurance, but in parallel to its growing presence is the call for more robust regulation and

surveillance of autonomous processes.

IBM found that, while 71 per cent of insurers have data-centric products and services in their portfolios, many still lack a cohesive data strategy. And yet the information and level of detail they have access to is only likely to grow. According to Accenture’s 2021 Global Insurance Consumer Study, seven out of 10 people would share their data, including medical records and driving habits, with insurers if it meant more personalised pricing.

The responsible application of AI in determining outcomes based on this data requires insurers to do two things: ensure transparency in their sourcing of data and, secondly, monitor for bias in decision-making algorithms.

Since last year, heavy-hitters like Google and Microsoft have committed to encouraging more ethical digital practices, providing advice on data security and AI development to the wider industry. And, in 2021, Intelligent AI teamed up with tech organisation Digital Catapult as part the Innovate UK ethical AI project, which aims to increase support for companies like Peake’s as they develop and deploy AI. The aim is to make sure it is used in a way that does not unintentionally harm any individual or society at large.

“When you unlock a lot of data, you create profiles of organisations, in our case commercial businesses,” says Peake.

“Along with some of the consortium members, I was very concerned that, quite often, you could unlock data that an insurer did not have, and, in our process, for example, present a profile of an organisation as riskier than the insurer initially thought.”

A big area of focus for the Innovate UK project was to make sure that AI does not discriminate against smaller companies in particular. For large businesses, insurers often look past potential risk as they are guaranteed reliable returns, but this often does not extend to SMEs.

Unintended consequences Though the road to unbiased claims processing is paved with good intentions, ffnews.com

regulators underestimate the sophistication of this feat. Algorithms work by locating patterns, and they are slow in taking individual context into account. One case, in private real estate, which was investigated in a study by the University of California, Berkeley, illustrates the point. It found that black American homeowners were being charged mortgage rates of interest that were, on average, 5.3 basis points higher than those of their white counterparts.

The algorithmic lenders studied matched rates of interest to location, not a race, so the resulting bias was indirect, but the unfair impact in the real world was obvious. And it illustrates the challenge involved in monitoring algorithms.

The current insurance landscape is being propelled by multiple forces – both internal and external – towards the adoption of AI-backed risk management.

But there is an urgent need to address any biases hidden in legacy datasets used to train predictive models, otherwise policyholders and wider society will begin to question whether their claims are being treated fairly,

consistently and honestly. Insurers are aware of the danger and have taken steps to combat it. In the States, insurer Lemonade has proposed a solution through uniform loss ratio (ULR).

When AI identifies a pattern among a demographic, it can highlight it, not as data on which to base claims, but as an unfair anomaly to avoid. Enough of this data will accumulate to then be comprehensive enough that the process cannot discriminate against that demographic. Lemonade uses the analogy of the rate of police arrests and how the algorithm would correct this: “As data accumulates, the ‘been arrested’ group would subdivide, because the AI would detect that, for certain people, being arrested is less predictive of future claims than for others. The algorithm would self-correct, adjusting the weighting of this data to compensate for human bias.”

While Lemonade is modifying its algorithms to unlearn biases, Aviva is providing policyholders with the option to have either machine or human-led claims processing. So, insurers are finding ways to balance AI to deliver large-scale, transparent services. Meanwhile, the Solvency II directive also insists insurers make their AI-based systems and performance results as digestible as possible for consumers, be that in risk management or claims processing.

Peake says the industry must understand that ‘if you take old data and build new models, you will end up with old biases on a large scale’, but that can be addressed.

“In the ethical framework developed with Innovate UK, we have ensured companies need to be fully aware of such bias and account for this in the training data. Also, that people have a right to query the results, have a clear point of contact, and a simple way to ask for corrections.”

A tragedy waiting to happen: Better insight into data might have helped at Grenfell Tower

ffnews.com

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2022

NEW NORMAL, NEW FORMAT PFF Communities continues in 2022 parisfintechforum.com

INSURTECH FOCUS: WOMEN IN INSURANCE

Aniqah Majid asks why, even now, there are so few women in positions of influence in the insurance industry Though it fairs better than most industries in the race for gender equality, insurance has a long way to go before it reaches any sort of finishing line.

Women make up a sizeable chunk of the industry, yet its reputation for inclusiveness is less convincing the further you look up the organisation. Be it due to pay disparity, unsuitable work environments, or cultures that fail to incentivise female talent, women are thin on the ground when it comes to positions of influence in both incumbents and insurtechs.

According to data from Statista, full- and part-time working women averaged around 45 per cent of the overall UK insurance workforce in 2021, the sample coming from the HMRC Pay As You Earn records.

In the US, women dominate the industry.

A 2018 report from Million Women Mentors, Women In Insurance: Leading To Action, showed they accounted for around 60 per cent of the workforce every year since 2007. This number consists of insurance claims and policy clerks (86 per cent), underwriters (62.5 per cent) and claims adjusters, appraisers and ffnews.com

its progressive attributes when it comes investigators (62.2 per cent). Compared to diversity, insurtech has the same issues to women’s representation in the general as the mainstream insurance market,” US labour market (46.8 per cent), the observes Joanne Butler, head of product figures look healthy. But have to search marketing and pre-sales at Charles Taylor, hard to find women in leadership roles. a UK insurtech providing claims solutions Globally, women made up 23 per cent of and technology to the global insurance C-suite executives, 10 per cent of CEOs and market. “A cursory look at many of the just eight per cent of board members in the leading insurtech players indicates many re/insurance industry in 2021, according of the senior positions are held by men.” to SwissRe study Gender Diversity In The Even now, the succession of a woman Re/insurance Industry: For A Sustainable CEO or board member is heralded as an Future. Data released a year earlier by industry first, instead of standard practice. the London Market Group (LMG), which This August, the century-old protection looked into the balance of men and women and indemnity (P&I) insurer, American in London’s specialist insurance and P&I Club, will welcome its first female CEO. reinsurance sector, showed that 29 per cent Dorothea Ioannou, who moves up from of re/insurers had no women in what the her previous position of country’s Financial Conduct deputy COO. While a great Authority calls ‘controlled personal achievement functions’, the most senior for Ioannou, even she jobs in the industry. At acknowledges that her the time, LMG’s chairman, progress to the top is Matthew Moore, called a phenomenon. the findings ‘disappointing’ On her appointment, and pointed to a waste of Ioannou said: “I am thrilled female talent, saying it was and excited with this ‘inadequate to the needs new appointment, which, of our industry going as a woman, carries with forward’. He also said the it not only responsibility London Market Group and significance for our was ‘energetically and organisation but also, transparently seeking to as a first in the P&I sector, remedy the gender gaps’.

Joanne Butler, for the marine insurance “There has been a lot of Charles Taylor industry in general.” talk about the fact that, for all

There has been a lot of talk about the fact that, for all its progressive attributes when it comes to diversity, insurtech has the same issues as the mainstream insurance market

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INSURTECH FOCUS: WOMEN IN INSURANCE So, why are women being made to etch on the glass ceiling for a seat at the table, especially given there’s plenty of evidence to suggest their presence in the corridors of power has a direct impact on the bottom line? That earlier SwissRe report found that re/insurers with a higher proportion of women in C-suite and board positions outperform others by three-to-four points in terms of return on equity (ROE), and it’s by no means the only study to find a correlation between gender diversity and business performance.

There are several theories as to why having women at the top contributes enhanced financial success, but could it be because they tend to create a more positive and, therefore, more productive culture all the way down the organisation?

McKinsey found in its 2021 annual Women In The Workplace report, for example, that employees felt female managers supported them the most, emotionally and professionally, during the pandemic.

insurer Sheila’s Wheels was founded on the back of research that discovered women have different needs to men when it comes to cover, particularly around possessions they carry in the car with them. On the flip side, men pay 26 per cent more for their insurance than women, according to research from MoneySuperMarket, due to factors such as occupation and their tendency to buy more expensive motors.

The difference in behaviour and attitude goes to show that, when it comes to insurance of all types, women want different things – in some regions, even down to who introduces them to the policy. A 2020 study carried out in the Democratic Republic of Congo by the World Bank, The Role of Gender In Agent

Findings from the Chartered Insurance Institute, in 2018, showed that the pay gap across 199 insurers, brokers, financial and other insurance-related firms was around 24 per cent – double the national 12 per cent median across all industries. Three years later, Statista put the mean gender pay gap of full-time employees in the financial and insurance sector in the UK even higher, at around 26.5 per cent.

There’s no reason, of course, why women couldn’t help correct that by founding their own insurtechs. But, according to Crunchbase, there are still only 162 of those, which raised a total of $2.6billion in funding rounds to March 2022. And that’s out of 655 insurtechs whose funding rounds captured a total of $16.2billion.

Battling to break through In the retail insurance market, where female buyer numbers are growing exponentially, women’s absence from leadership positions is even more of a puzzle, given that they instinctively connect with Banking, found that at least half of customers. women were more likely By 2030, female to adopt digital financial policyholders will earn services if introduced to the insurance industry them by a female agent. $1.7trillion, the majority Renu Ann Joseph, of that growth coming founder and CEO of data from the life and health analytics insurtech, sectors, according to the Luminant Analytics, firmly Renu Ann Joseph, International Finance believes that diversity Luminant Analytics Corporation. It surveyed brings in different women across the world for its She For viewpoints and, thus, different ways of Shield: Insure Women To Better Protect All solving problems – be it in sales, claims, report and found that, as their income analytics, product or regulation. increased, so too did their desire to protect “Old ways will not open new doors,” she what they had through insurance. says. “Insurance needs to be able to open According to the report, women want new doors to stand up to competition options and variety, whether they have a against tech companies and to attract talent. family or not. Transparency with their Diversity is a big driver of that openness.” insurers is a priority, and they are more loyal A former analyst and VP for SwissRe, to insurers who understand what they need. Joseph is currently also head of Virtido’s Insurance catering for women is not a new Centre for Data Science and AI. Industry concept. Scottish Widows was set up in 1815 is aware of the lack of diversity and is to take care of women and children who lost actively moving to combat it, she says. their fathers, brothers and husbands in the A good place to start, then, might be Napoleonic Wars. More recently, online car addressing the gender pay gap.

Diversity brings in different viewpoints, and thus different ways of solving problems – whether it is sales, claims, analytics, product or regulation

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A long way to parity: Women make up just eight per cent of board members in re/insurance globally, says SwissRe

According to Joseph: “Looking at the statistics for company performance, we find that [all] companies with female founders perform 63 per cent better than those of their male peers. Performance being of key interest to potential investors, it remains a bit of a mystery as to why there is still such a male pattern to investments.”

She points to three startup insurtechs that were acquired or placed into run-off in 2020 – Brolly, founded by Phoebe Hugh, Coverly, started by Jodi Cartwright, and Buzzvault, led by Becky Downing. Would they have attracted investment to continue longer had they been run by men?

In March this year, the Million Women Mentors Women In Insurance Initiative (WII) announced that it will be conducting its second data collection effort, calling on insurance companies to offer up their information on employee demographics, accounting for gender as well as race. Its previous exercise revealed groundbreaking insights, from pay gaps to employee loyalty.

It will be interesting to see what progress – if any – has been made in four years. ffnews.com

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