One function of the increasingly high customer expectations related to advances in the FinTech industry has been the emergence of ‘InsurTech’. As the name suggests, InsurTech is focused on innovation in the insurance industry in connection with the giant strides made in FinTech. The insurance industry is presently experiencing as much disruption as other sectors. For example, significant advances in products like wearables and autonomous cars, and the revolution induced by the Internet of Things (IoT), are important reasons the insurance industry has been forced to step up its pace. Insurance companies seeking to innovate amid technological disruption will be compelled to pay close attention to the IoT, with its likely potential to completely overhaul their business models. The IoT brings to the table a multitude of new data sources that insurers can make use of to better understand risk and satisfy new types of demand coming from clients, potentially leading to new types of insurance. As IoT, together with Artificial Intelligence, accounted for EUR 636 million in InsurTech funding globally in 2016 (almost half of the total global funding in InsurTech), there are a number of clear examples of disruptive technologies changing the insurance landscape.

As cutting-edge startups and their technology are the driver of disruption, we put them in the spotlight. At StartUs Insights, our unit dedicated to Innovation Scouting and Open Innovation, we run an extensive analysis on 14.000 startups, discovering several innovation areas which will impact the insurance industry in the near future. To shed light on the application and potential of the most disruptive of these emerging technologies, we decided to outline the most dominant innovation areas. As our focus lies on introducing leading-edge startups, we provide one example for each innovation area to highlight existing cooperation potential.

Connected Car

With the emerging trend of connected cars, insurers can use an individual’s driving data to better assess and understand the potential risk of accident. This opens the door for innovative insurance policy offers such as usage-based insurance, alternatively named “pay as you drive”. In this model, individuals pay a premium dependent on their type of vehicle, the amount of time and distance driven, as well as historical driving behavior.

Swedish startup Automile has developed a Software as a Service (SaaS) solution that includes various perks such as driver identification, real-time tracking, and geofencing technology to improve safety. Additionally, the startup provides information in the form of a report to the driver aiding them to decrease their premium by sending alerts in the event of driving above the speed limit or other poor driving behavior.

Connected Car

Will this innovation area disrupt the industry?

Connected Home

When it comes to home insurance, IoT devices prove themselves to be imperative. Smart sensors collect various data on a variety of things within the home, from temperature and weather to water and energy consumption. As an example, such sensors can warn against leakages so that intervention can take place before real damage is done. As such homes have a much lower likelihood of burglary, insurance companies are willing to offer home insurance discounts for those that have an alarm system installed.

Netatmo, a smart home startup based in France, offers a comprehensive security system, and a weather system including a personal weather station alongside wind and rain measurements. Netatmo also covers air care and energy optimization within the home.

Connected Home

Will this innovation area disrupt the industry?

Connected Me (eHealth)

The Internet of Things has a considerable impact on health insurance, as the rise of wearables enables insurance companies to offer lower premiums for those who e.g. exercise regularly, the proof of which comes from data collected from their wearable gadgets. Some companies even offer monetary prizes to customers who exercise above a certain threshold. Incentivized this way, individuals are likely to make healthier life choices, ultimately leading to insurance companies having to pay out less.

Nire of Spain offers a customized health plan for each user, covering nutrition, physical activity, emotional aid, and health management. Nire’s digital solution services multiple industries, and insurers can benefit from such a solution by keeping their clients healthier, thus playing out less in health insurance claims.

Connected Me (eHealth)

Will this innovation area disrupt the industry?

Big Data

As IoT makes far more data points available, this wealth of information can put insurers at a great advantage as they gain important insights. Big data adds value to the insurance industry in three of its major areas: life, health, and standard insurance. Consequently, big data will also adjust the way people buy insurance, and the industry is expected to undergo transformation on a large scale over the next two decades. For example, big data will make the seemingly endless onboarding and health risk assessment process redundant. Instead, it will enable the discovery of interesting and accurate predictors of risk that do not involve asking people questions.

London-based Tractable uses Artificial Intelligence (AI) to make the information collected from big data visible and understandable. Specialized on Insurance and Medical Imagery for visual representations of a body’s interior, this startup promises organizations to “perform like never before”.

Big Data

Will this innovation area disrupt the industry?

Artificial Intelligence

With big data increasingly playing such a significant role, it becomes of absolute importance that this data is handled safely and well. This is where AI comes in. Insurance companies have at least three advantages when using AI: 1) they are able to process greater amounts of data, 2) they have the possibility to scale analytics across the company, and 3) AI will help them in developing their predictive accuracy. These advantages will ultimately result in higher efficiency, effectiveness and provide better risk selection and assessment.

Paris-based Shift Technology implements Artificial Intelligence in the effort to help insurers save money by fighting fraud. The startup’s SaaS solution ensures that “efficient algorithms are tailored to reproduce fraud handlers’ deductive reasoning, making investigations quicker and easier than ever”.

Artificial Intelligence

Will this innovation area disrupt the industry?

Blockchain

Having been embraced by FinTech blockchain technology has equally valid application areas in the realm of InsurTech. Blockchain has provided insurers with the opportunity to positively impact their entire value chain. Despite having lagged in terms of the adoption of technology, the insurance industry can reap multiple benefits by embracing blockchain, such as increasing the effectiveness of pricing and fraud detection, reduced administrative costs, and the facilitation of growth.

UK startup Safeshare uses blockchain technology to provide insurance solutions targeting the sharing and on-demand economy, thereby potentially increasing consumer confidence in these areas. One of the advantages they offer is their short-notice insurances available for varying time spans at competitive rates.

Blockchain

Will this innovation area disrupt the industry?

Peer-To-Peer (P2P) Insurance

The peer-to-peer (P2P) insurance model emerged in 2010, though much has changed since then. Its main advantage is its potential to reduce fraud, due to the fact that by design, it gives individuals the incentive to make claims only if it is truly necessary. Startups operating as P2P insurers generally have different business models, though a common feature is the focus grouping customers and thus pooling their risks using P2P protocols. Though some claim the model is too complicated to implement, it has led to the third wave of P2P: the self-governing model.

VERSICHERIX, Switzerland’s first P2P insurance company, aims to give customers a better deal by, essentially, putting them first – something which, according to the founders, has not yet been the case in this industry. VERSICHERIX promises to give their customers “an easy-to-use, customer-centric way to get insurance” as they are looking for “individual insurance coverage on the spot and which is usage-driven”.

Peer-To-Peer (P2P) Insurance

Will this innovation area disrupt the industry?

The InsurTech sector holds a promising future, and insurance companies are already taking notice. Many players in this area partner with startups to help them innovate and adjust their business model to gain competitive advantage. The seven innovation areas outlined in this breakdown are just a few of the key digital drivers we identified. As customer requirements change and emerging technologies continue to expand, challenging existing structures and transforming the entire industry, companies that act proactively will emerge as industry leaders. When executed well, innovation in insurance will benefit the consumer as well as industry players. As demonstrated in this breakdown, startups are in the front seat of emerging innovation areas and disruptive technologies. Collaborating with them provides insurers with a strong competitive advantage. StartUs Insights assists this process by providing actionable innovation intelligence on startup driven innovation in this sector.


StartUs Insights provides actionable intelligence on startup driven innovation.
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Author Andra Cataniciu|Design Luca Nagy|Executive Editor Susi Wallner|Copy Editor David Prasser, Iryna Bursuk, Glenn Leaper|Web Development Reza Rastgoo