January 7, 2022
InsurTech has been around for around 12 years, and I am proud to say that I have played a small part in its evolution, in certain systems and services since day one. To get a feel at the scale and of how much money is being invested into the InsurTech sector, our team have pulled together some very interesting information, to set the scene:
Total tech spending in the insurance sector is estimated to be at almost £35 billion! In the first half of 2021, InsurTechs have raised £6.3 billion – surpassing the £6.2 billion raised for all of 2020 by more than $300 million. An exciting, very exciting investment occurred in the InsurTech space at Genasys just a few weeks ago, and you can read more about it here. While overall deal activity grew to 162 deals, up 11% compared with last quarter, a major driver of funding was the growth in mega-rounds (£100 million-plus funding), up to 15 deals. There are circa 750 InsurTech companies around the globe, which are addressing the needs of the gargantuan £4.5 trillion insurance industry, showing the sheer scale of business involved, and the importance of having the right system for your business to scale and grow.
No InsurTech system will be the complete finished article, due to the ever changing tech emerging and regulatory updates. We are seeing a growth of InsurTech partnerships, combining their solutions to provide a tailored solution to a specific line of business or distribution channel. Partnerships like this are becoming more and more common, such as our Cooper Rose Digital and Open GI collaboration with a UK MGA in 2021, for a D2C project (case study will be released soon).
New exciting business models are making headway in the industry, such as micro modular ecosystems, artificial intelligence and machine learning for data analysis, as well as UBI insurance, are beginning to emerge. What will truly change the nature of the industry is the shift away from the ‘out of the box’ solutions, cheap “Year 1” deals, manual process and lack of data ingratiation and interpretation. Utilising the data available to add value to the underwriting process, customer experience and claims journey, will ultimately lead to more satisfied customers. These happy customers will have a higher percentage chance of renewing, thus increasing the portfolio performance and loss/claims ratio.
At Cooper Rose Digital, we believe there are 10 reasons that InsurTech is here to stay and is the way forward in the Insurance sector.
The Cooper Rose Digital MD Daniel Longhi had this comment to say on his CRD InsurTech platform: “Our main driver, in providing InsurTech to our client, is to add value across the chain, this helps to output a net positive impact on the business, capital and operational efficiency. Our technology stack allows us to achieve this through tailored configuration and third party integrations. An InsurTech system must cater to not only the business, but also the clients themselves. Our insurance partners need to make profit, retain their clients and enhance their product portfolio. That is why we offer a tailored system for all our projects, at an affordable price to reliably achieve just that.”
1. Agile and fast configuration:
Having a tailored insurance solution to cater to the day 1 business operations is absolutely crucial, but changes do and will occur relatively often throughout the year. Having the ability to make the changes quickly, either via a self configuration tool, or through the development team is going to be the crucial factor in keeping the underwriting, document, email, commission etc working optimally.
We predict that targeted and informative consumer engagement will start to replace price as the key buying criterion. The result will be ‘sticky insurance’, creating stronger customer retention. This will require system features like CRM, tailored front end designs, data driven analytics, emailing features; all with a fast configuration and testing capabilities.
2. Micro modular architecture:
Technology needs to be flexible in more ways than just the configuration. To offer a true end-to-end solution a system should allow for third party integrations to enrich data sources, additional components and potentially existing solutions already in the business. Open API to all modules makes integrations a simple process and will add tremendous value to the product journey. Allowing clients the option to bring in third party systems or even retain some systems that have already been developed in house can save time and money. Flexible architecture and module integration is not as scary as some will make it out to be!
3. UBI & Telematics:
Traditionally, premiums are based on an application form and the answers collected. This leads to banded premium loadings which are more generalised then tailored to each individual. UBI or Usage Based Insurance, brings into the mix a whole new personalised risk dimension. By evaluating real life risk factors and variables as well as the traditional rating methods, such as: gender, weather conditions, driving frequency /speed, credit scores and heart rate, and insurance scores, an underwriting risk can be personalised to an individual, to name but a few. UBI allows the rating engine to enhance the level of data used in the underwriting, which can be based on each individual’s real-time driving behaviour.
In the example of car insurance, the scoring can try to predict if the driver is a more defensive, safe driver or one who utilises more aggressive, dangerous driving practices. Combined with traditional rating variables, UBI proves a better assessment of risk, insurers could offer the best drivers the appropriate rates and still maintain a reasonable level of profitability through lower number of claims being submitted.
Cooper Rose Digital are in advanced discussion with an exciting tech partner who offers UBI not just for vehicles, but also transit, haulage, cargo, boats and vessels. A public announcement on this exciting technology will be made available in Q1 2022.
4. Embedded Insurance and API driven:
“Embedded Insurance” (EI) is fast becoming the norm for both the insurer and insurance distributors, who are all becoming much more tech-savvy. Insurance products which were once sold as stand alone, can now much more easily be offered as a package, with bolt-on benefits such as legal protection, breakdown or liability can now be offered in a single and seamless journey. Insurers, MGAs and brokers need to own a modern, flexible IT architecture to be able to partner successfully with OEMs, retailers, call centres, etc. Making insurance distribution more flexible and adaptable
Much of the embedded insurance technology is being made more readily available and easy to incorporate through API driven architecture. Open APIs allow for multiple rates, docs, and data feeds to work simultaneously.
5. Advanced data analytics capabilities:
The InsurTech sector is in the midst of a digital revolution. Legacy systems are being replaced and cost effective digital infrastructure is readily available to manage large volumes of data, anywhere in the world to meet the demands of today’s digital consumers. Insurance companies, MGAs, brokers and start ups are all leveraging the value of data in different ways. Big data analytics play a major role in getting detailed, granular insights of the customer, forecasting their needs, and allowing for more personalised assessments into their unique risk parameters to get the most relevant quotes.
An exciting partnership, for a new module collaboration is soon to be announced at Cooper Rose Digital, involving a new 'Artificial Intelligence/ Machine Learning' powered big data visualisation tool, along with some state of the art / cutting edge big data, value add services around that. More to come on this very soon.
Big data will continue to be a major force and will soon become a necessity for companies in this digital era to offer competitive quotes for their products, in line with the competition.
6. Digital capabilities for secure remote working:
With today’s modern technology, remote software deployment and strong security features, users can safely and in a controlled manner, access software from anywhere in the world. InsurTech solutions today will all have a permission matrix, security overlay and a cloud database, all of the above allows for remote access from anywhere, which has become a much more prevalent necessity over the last few years, following lockdowns.
The Cooper Rose Digital CTO, Austen Jones, was keen to add: "Lockdowns aside there is a growing push from the userbase to be able to work flexibly and CRD’s systems are built with this in mind and are by your side whether you are working from home or ankle-deep in mud at a cattle auction generating policies on your tablet."
7. Data enrichment tools:
InsurTech companies have been some of the key drivers in being a powerful tool to pull and push data between third parties data enrichment tools. Using the example of wearable devices, such as smartwatches, mobile phones and even heart monitors, tech companies have access to a wealth of customer data. We predict that the growth and evolution of smart glasses may even have a place in some insurance claims in the near future, once the technology has evolved further, and the chaos of data protection and retention has a resolution.
Motor insurance, home insurance and even life insurance have become more popular in the last few years by utilising external devices to provide additional information. One area that has started to explore the data enrichment tools is the agricultural space, by attaching devices to animals to track position, heart rate etc, as well as crops, by having small devices in the fields monitoring humidity, temperature and even diseases.
8. Insure as you go:
The ability to have an insurance policy, which can be switched on or off, at the click of a button, or after a certain time, or just by stepping out of your vehicle is expected to be widely accepted in the near future. Though the cost of microinsurance would be higher, the millennial attitude towards insurance cover is expected to drive the adoption.
Microinsurance has also been well-received by the incumbents. Several major insurance organizations have formed a microinsurance consortium and microinsurance venture incubator (MVI). The group is currently evaluating opportunities to deliver risk protection to underserved markets in Latin America, Africa, and the emerging Asian market.
9. Information security (claims/fraud detection):
Information security is paramount in the insurance sector, it is one of the key principles that underpin any solution we provide. Security by design is the mantra that we follow, ensuring Confidentiality, Integrity and Availability in our products. This triad is further augmented by the Accountability and Audit. Our microarchitecture delivers full granularity of roles and responsibilities and a full audit that helps our client satisfy these requirements in line with their own security policies. We measure the effectiveness of the underlying security controls by third party penetration testing.
A fraudulent claim is discovered once every 5 minutes in the UK alone, and worldwide an estimated 10% of insurance claims are fraudulent. Insurance companies face a challenging job discovering these fraudulent claims, with different strategies implemented between insurance lines. Many out of the box fraud solutions on the market today are rules-based, making it much easier for would-be fraudsters to get around. However, predictive analysis, AI and ML, on the other hand, use a combination of rules, modelling, text mining, database searches, and exception reporting to identify fraud sooner and more effectively at each stage of the claims cycle. Finding a suitable fraud detection for your specialty line of insurance is crucial in addressing this, and the numbers speak for themselves in the amount of value this can bring to the business.
10. Economies of scale and business collaboration
With so many specialists in the InsurTech space, and with APIs being of such importance, giving the customers the choice to incorporate different tech partners into the ecosystem; can provide a massive competitive edge. Having a core insurance system like CRD, a specialist claims provider, a global payment gateway provider, an AI driven big data analytics company; are no longer multi year projects, costing millions, in fact, these can be built and launched in a matter of months! Allowing organizations to add to their suite of SaaS features in such an easy way, so as to focus on the key areas that need to be digitised.
InsurTech organisations today have to collaborate and provide tailored solutions to the client’s unique needs. We believe that strategic alliance, partnerships and collaboration will become far more commonplace and allow the industry to truly express itself and build solutions that meet the end consumer’s needs, run efficiently and provide data driven underwriting for profitable books of business, and running with strong claims loss ratios.
To learn about CRD’s tailored InsurTech solutions and how to accelerate revenue, increase customer retention, while reducing overheads , schedule a demo today.
Join our growing list of worldwide clients that rely on CRD across lines of insurance, including Commercial, Agricultural, Motor, Health, P&L, Personal Lines, and much more. Find out what Cooper Rose Digital can do for your business.