Bitesize InsurTech: Certua
June 9, 2017 Greg Brown
Certua is a robo life insurance startup that uses data to provide variable cover based on customers’ current financial needs.
How it works
- When customers buy the product they give Certua permission to access their live financial data e.g. bank account, ISA, credit-card and mortgage balances
- Certua’s AI algorithm monitors these live feeds and either increases or decreases the sum insured based on changing circumstances e.g. if the customer pays off their credit card debt, this will immediately be reflected in the value of their sum insured
This, in theory, allows the customer always to be adequately, never over, insured.
Certua make money by taking a share of premiums sold.
Tom Williams, CEO and co-founder, believes that there are two market trends that make life insurance ripe for disruption:
- Insurance carriers take a large cut of premium despite ‘doing little but purchasing reinsurance’
- There is readily available personal data, not widely used, that can improve pricing
Certua’s business model exploits these market trends by:
- Going straight to the reinsurer and only use primary carriers, in essence as a legal shell, to comply with regulations, such as Solvency II (for which the carrier is rewarded with a minimal fee)
- Using live open data sources to continually recalculate a customer’s risk exposure
Certua was founded in 2016. They are still in the earlier stages, as can be seen from the spartan website. One thing is clear, they have pulled together a strong senior team, including ex-CEO of Old Mutual, Jim Sutcliffe, serial entrepreneur and non-exec of AmTrust, John Levin and Chris Traynor, Chief Executive of BE Capital.
The company is currently developing partnerships with various data source providers, testing the platform, and are in late-stage talks with a global reinsurer. They aim to go live in Q3 of this year.
The Oxbow Partners view
This is an interesting proposition and taps into the zeitgeist of real-time customer data that has been made popular by the likes of Fitbit and Strava.
We can, however, see a few potential challenges:
Firstly, automating data access for all a customer’s financial relationships is essential to Certua’s profitability. Luckily, much like MyFutureNow (see last week’s Bitesize), Certua will benefit from PSD2, a European Regulation due to come into force in November 2017 for banks. PSD2 requires institutions to allow API access to customers’ account and payment details to approved third parties.
Secondly, we postulate that most people buy life insurance as a peace of mind purchase. The variable pricing could add a layer of uncertainty that will deter, rather than encourage, customer participation. Certua would argue that their variable pricing model reinforces ‘peace of mind’ from knowing you are covered for your current, not historic, circumstances.
Finally, insurers would argue that they add significantly more value than just ‘buying reinsurance’, for example marketing, distribution and product design. We would advise Certua not to underestimate the cost and effort of these activities for a digital startup. If you build it, they may not come.