Bitesize InsurTech Does Breakfast: ITC 2017
November 2, 2017 Greg Brown
On the 19th October we held a Bitesize InsurTech breakfast to share perspectives on InsurTech Connect 2017 (ITC 2017). We had three speakers:
- Insurer view: Matt Churchill, Head of Hiscox Futures
- Investor view: Daniel Ross, Partner at Yellowwoods ventures
- Advisor view: Greg Brown, Partner at Oxbow Partners
In this blog we share what was said and the implications for the insurance industry. In case you missed them, we also wrote brief summaries of ITC 2017 and Digital Insurance Agenda (DIA) 2017 immediately after the events.
Matt Churchill, Head of Hiscox Futures
Matt had three main observations from ITC 2017.
First, insurers are in a strong position and their biggest opportunity in Matt’s opinion is product innovation: “Product is our core skill. We are well placed to innovate around the product”. Product innovation is particularly useful for targeting underinsured consumers like millennials, who hold all their wealth in gadgets but are rarely insured.
Second, despite their strong position, insurers will need help innovating and startups can help, particularly in areas such as Artificial Intelligence (AI). This demand for support from insurers was apparent at ITC; as a result, startups have made a notable shift away from disruptive models towards collaborative models.
Finally, no one is coming to ‘steal our lunch’. No startup has come close to threatening incumbents. Despite the noise, Lemonade have yet to reach $20m GWP (as of October 2017). However, Matt does believe there are opportunities in the distribution space, particularly the use of AI and chatbots: “I’ve yet to see any truly innovative propositions using chatbots such as Alexa”.
Daniel Ross, Partner at Yellowwoods Ventures
Yellowwoods is a strategic investor whose portfolio heartland is sub-Saharan Africa. In insurance, it invests, amongst other areas, in startups that improve operations with tools such as data and analytics. Daniel identified three trends in InsurTech from his visit to ITC 2017.
First, like Matt, Daniel sees the focus shifting from disruption to collaboration. For example:
- Insurer – startup partnerships: Bought By Many and Munich Re Digital Partners
- Startup – startup partnerships: Lemonade’s API which allows white-labelling of Lemonade’s renters insurance in third party apps
- Insurer spin-outs: Arity (from Allstate) that provides driving data and modelling expertise to evaluate driver risk
Second, Daniel saw many more startups focusing on operational efficiency and pricing optimisation through technologies such as AI, which was well represented at ITC. For example, DataRobot, an AI platform, is helping insurers optimise pricing models.
Finally, Daniel has a concern about startup overvaluation coming out of ITC: “in this market you have to be very picky to succeed. We are very cautious about getting involved in the valuation arms race”.
Greg Brown, Partner at Oxbow Partners
Greg identified data and analytics (D&A) as a big theme at ITC 2017. Notable data and analytics startups present at ITC included:
- Orbital Insight who are using satellite imagery that can see through clouds to create more accurate flood maps for insurers
- Planck Re who are using publicly available data including photos, and AI to understand SMB business risks and pre-fill insurance forms.
- Modjoul who provide an IOT connected belt for workers to that tracks movement and can identify unsafe practices that might lead to accidents and insurance claims
We believe this is a response to insurers prioritising data and analytics, which was identified in a recent Oxbow Partners benchmarking study. Most insurers surveyed identified data and analytics as a key differentiator over the next 2-3 years. (If you are interested in finding out more about this study please email Greg Brown).
Greg also noted that InsurTech is no longer the feeding frenzy of 2016, meaning that leading startups are becoming more selective of partners. Insurers need to focus on three things to succeed:
1. Attract the best startups
Leading startups are being more selective about which insurers they choose to engage with. They are no longer saying yes to every meeting. Insurers can no longer just offer space, money and access to consumers and expect to attract the best startups. Insurers need to be able to demonstrate that they are truly open minded about innovating and can provide evidence of tangible traction with startups.
2. Seamless onboarding of startups
Insurers need to demonstrate their ability to onboard startups efficiently. This means getting startups past traditionally complex internal governance such as procurement and data security. Startups are increasingly frustrated with insurers who cannot solve these prosaic problems and will avoid insurers with a poor reputation.
One solution for insurers is to develop what we call ‘startup grade processes’. These processes are designed to enable fast onboarding for small and nimble organisations, whilst still maintaining governance integrity.
3. Create valuable joint propositions
It’s all well and good having a relationship with startups. Unless you can define a joint proposition that is better than existing market propositions the relationship has no value. Insurers need to start by getting a deep understanding of customer needs and build the proposition around that. We have developed a proposition design approach specifically for the insurance industry that can help (re)insurers and brokers build valuable propositions based on real market needs.