The rise of insurtech startups are continuing to transform the insurance industry as we know it. From lightning speed claims to having a greater purpose, thanks to technology developments and advanced economics insurance is joining the growing industries being disrupted. While insurance does come with its challenges, a handful of insurtechs are proving to be successful. In this post we cover the insurance trends that show promise to make a big impact on the centuries old industry in 2018 and beyond.
There are approximately 4,000 Public Benefit Corporations (PBC) in the U.S. including companies Patagonia and Kickstarter. Declaring your business as a PBC means that the company is legally required to act responsibly and sustainably rather than simply “green-washing“, exaggerating a firm’s environmental or humanitarian contribution with the aim of increasing sales. Australia does not currently have the legislation in place to legally acknowledge PBCs, however businesses can volunteer to become a B-Corp, which is relatively similar but not legally binding.
Completely new entrant to the insurance market, Lemonade is the first and only insurance company to become a Public Benefit Corporation. Their unique business model considers premiums as if they are still the money of the policyholders. After claims have been paid, any leftover money is donated to the policyholder’s nominated charity. Not only does this concept transform the customers’ view of the insurance business and vice versa, but it is shown to reduce fraudulent claims. We can see this trend catching on!
Peer-to-peer insurance is not necessarily a new idea but it is recently gaining popularity among insurtechs looking to offer something different. Peer-to-Peer or P2P insurance is offered to groups of around 10 people looking for the same coverage. It started gaining traction with organisations like One Big Switch and Bought by Many; now with the rise of social media, finding a group of people to pool insurance with is easier than ever. In fact Friendsurance founder Tim Kunde credits Facebook for inspiring the idea for his Berlin-based startup.
The benefit of pooling your insurance with a group of people is that numbers should attract a discount; and for startups like Friendsurance, if no claims are made policy holders could receive as much as 40% back of their premium.
Friendsurance launched in Australia last year, offering a product covering bicycles and their riders direct to consumers, as well as additional products through partners. With around 18 companies worldwide, including Lemonade, offering various models of peer-to-peer insurance, it won’t be surprising if 2018 is the year P2P insurance really makes an impact.
Lightning Speed Claims
It’s no secret that the insurance industry has been a little slow in keeping pace with the advances of other industries. That is all about to change thanks to the introduction of AI, advanced algorithms and a revolution in business models. Speed proves to be a priority among today’s consumers, particularly for ‘millennials’.
One Israeli startup, PassportCard, is sure to make an impact on the travel insurance industry with their real-time payouts on travel medical claims. By giving customers an ‘insurance card’ that acts like a credit card, health care providers can be paid instantly and the patient has no out-of-pocket expenses. Not to mention the elimination of paperwork and a long claims process. We can see why this startup is already gaining a lot of attention!
A number of insurance startups are designing their business models by acknowledging aspects of insurance that have been deemed too risky by traditional insurance companies. They then re-imagine how to offer insurance coverage on such risks and still be profitable. They aim to shift focus from the firm to the customer, with the goal of attracting more of them.
Hippo is one such insurtech startup, turning home insurance on its head. Their customer-centric model takes advantage of big data, including municipal building records, and innovative technology, like satellite imagery and smart home devices; lowering their prices and streamlining the customer experience.
Hippo will happily insure homes against catastrophic weather events like hurricanes and wildfire. But perhaps their most impressive creation is their 60 second quote process, and a proactive 24/7 claims “concierge” who will book your family into a hotel after a house fire before discussing the claim details.
Insurance for Low Income Markets
Microinsurance has been described as “cheap policies aimed at those earning below $4 a day”, but can be any affordable insurance policy developed for those struggling financially. Microinsurance is gaining traction here in Australia but is particularly making an impact in developing countries where insurance was almost unheard of. Microinsurance has proven to reduce income shocks, increase school participation levels and boost health-care results.
One creative startup, BIMA, has teamed up with local telco companies to deliver microinsurance through prepaid mobile recharges. While BIMA practically gave away its products to begin with, it now covers 7 million people across Africa, Asia and Latin America, and is profiting from at least 3 of its 8 markets. BIMA has brought insurance to some of the world’s most disadvantaged groups, however there are still some groups who cannot afford or cannot access mobile phones who are missing out. Will microinsurance reach more remote areas in the future? It’s possible.
Insurance Fraud Detecting Technology
A handful of insurtech’s have been attempting to tackle the insurance industry’s mainstream issue of trust. There’s no denying that insurance companies’ trust of their customers is low, and vice versa. And with good reason; it is estimated that 50% of claims in Australia are fraudulent in nature, either being completely fake or exaggerated. Unfortunately this leads insurance firms to be sceptical of all claims, making the claim process arduous and long. Thus developing mistrust of insurance firms among consumers.
But if the fraud could be reduced, the trust would go up and claims could be approved more efficiently and more quickly, making all parties happy. That’s the theory behind Australian startup Huddle. Huddle has created software that uses machine learning and artificial intelligence to evaluate claim information, validate ID and analyse for any patterns that indicate fraud. Their software has been so successful that Huddle is able to approve claims in only 1 minute.
Shift Technology is another startup making headlines for it’s anti-fraud technology. Similarly, Shift Technology use AI and enormous data sets that recognise patterns and set off alerts of possible fraudulent claims. What’s not to like about this technology!
Are you predicting any Insurance Trends for 2018? We’d love to hear from you!