InsurTech Trends: Industry Experts Discuss Which Are Truly Innovative


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10 min read

Insurance technology (also known as InsurTech or InsureTech) is en vogue. Whether it’s a new model of underwriting or new tech that expedites the claims process, there has been a lot of interest in insurtech from entrepreneurs, venture capital financiers, and insurance carriers. InsurTech is transforming the insurance industry. But why?

The Rise of InsurTech

Insurance has been around a long time, and little has changed until very recently. (Lloyd’s first started underwriting insurance policies in a coffeeshop in 1688!) However, interest in insurtech has boomed in the last few years.

CB Insights reports that fundraising activity in the insurance tech space hit its highest annual total in 2016, most of which took place in early-stage rounds. Complete 2017 data will not be available until January 2018, though we already know that insurance tech startups raised $985 million in the second quarter of this year alone.

Why is insurtech so hot right now?

The insurance industry has a lot of problems. While some companies are making it a priority to stay at the forefront of technology and innovation, others are ill-equipped and are unable to compete — whether it be financially, technologically, or even human capital. Insurance regulations can also be a hindrance. This is where startups see opportunity.

InsurTech Innovations

Changes to the insurance industry are happening in a variety of ways.

Risk Assessment (How Companies Insure Consumers)

Insurance is all about risk. Many rating factors come into play when determining how much a consumer should pay in premium — or if the insurance carrier wants to insure that consumer at all. (In car insurance, for example, your age, location, type of car you drive, claims history, and even credit score can impact how much you pay in premium.) However, some companies are changing that:

Lemonade is a peer-to-peer (P2P) renters and homeowners insurance carrier operating in New York, California, New Jersey, and Illinois. Policyholders are placed into “peer groups,” and pay a monthly fixed fee which covers reinsurance and expenses, and uses the rest to pay out claims. Whatever unclaimed money is left over is donated to causes their policyholders care about in their annual “Giveback.”

Metromile is a pay-per-mile car insurance carrier available in California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia, and Washington. Policyholders are sent a telematics device that plugs into their vehicle’s on-board diagnostic (OBD-II) port and transmits driving data to help price their premium (comprising a monthly base rate and a per-mile rate).

Distribution (How Consumers Purchase Insurance Policies)

A recent Business Insider report by Maria Terekhova, Fintech Research Associate at Business Insider Intelligence UK, found that most of insurtech innovation has taken place on the consumer-facing and distribution side. “[T]he fastest-growing insurtech focus area among applicants this year is underwriting risk and loss prediction. This suggests that even the newest entrants have realized that the biggest opportunity for adding value lies in optimizing legacy insurers’ most fundamental, and therefore complex, operations, rather than in making largely cosmetic fixes.”

In traditional insurance models, consumers would contact an insurance agent or broker to shop for quotes and purchase a policy in person or on the phone. However, the rise of online shopping has resulted in some changes in distribution.

The Zebra is the nation’s most comprehensive and most visited online car insurance marketplace. It provides simple, real-time comparison of more than 1,800 car insurance products from over 200 companies nationwide. Consumers can find an array of educational resources on the website and can opt to speak with a licensed insurance agent, too.

This doesn’t mean that insurance agents are going away anytime soon. Insurance agents and brokers still play a large part in distribution.

Artificial Intelligence (AI) and Machine Learning (ML)

The most prominent examples of artificial intelligence and machine learning in the insurance industry are in collision and claims. Metromile’s AVA is an AI claims virtual assistant that streamlines the claims process. “She” collects details to help policyholders file a claim, like taking photos of a damaged vehicle, with the goal to resolve claims faster. Liberty Mutual’s technology incubator Solaria Labs houses personal insurance innovation labs out of Boston. Their AI Auto Damage Estimator was built using thousands of anonymized claims photos to give repair estimates post-crash. It also uses public data (auto theft, parking citations, crashes) to help drivers find the safest routes and parking spots.

Drones

In April 2016, USAA made headlines when it deployed drones to survey roof damage after a hailstorm in San Antonio. More than 15,000 homes were impacted. USAA deployed its fleet of drones, manned by inspectors, to speed up the claims process. Savings also exceeded more than 50 percent of a claim’s cost, the San Antonio Business Journal reported.

Internet of Things (IoT) and Connectivity

Although IoT has been around for a while, insurance carriers have just recently shown interest. Perhaps the popularity of Amazon Echo or Google Home have something to do with it. We can’t deny the prevalence in connected cars and homes — even cities. It is estimated that 50 billion devices will be connected by 2050!

Telematics devices, like Progressive’s Snapshot, have been using IoT to measure driver behavior and offer discounts for good driving habits. Homeowners are connecting their homes to security systems and thermostats (Nest is the most famous example of this), and while connected home insurance discounts aren’t widely available yet, these preventative measures can help save money on claims in the long run.

Cities are also seeing the value in this technology. Chicago’s Array of Things has been collecting data on environmental factors, air quality, traffic, and light intensity. The information is publicly available to anyone who might use it, like researchers and insurance carriers.

Virtual Reality (VR) and Augmented Reality (AR)

VR and AR are more than just video games and Snapchat filters. Virtual reality technology has been helping with training claims adjusters and agents. They can learn specialized skillsets through VR training — like HVAC installations and engine repair — improving safety and customers service. This also improves efficiency and saves carriers money along the way, too.

While augmented reality technology isn’t as widespread yet, there is opportunity to incorporate it into vehicles and driver’s education. Mini’s AR glasses will add a “digital layer” to drivers’ line of sight including driving directions and traveling speed. At CES 2017, automotive equipment suppliers Harman, Continental, and Visteon demonstrated AR concepts for windshield projections that may improve driving safety.

Data

You may have heard of a startup called Oscar that is shaking up the traditional healthcare model with their technology- and data-driven approach. Their CEO is a Stanford-trained data scientist who built their platform based on insurance claims, doctor directories, and electronic medical records data. (You can read all about how they use their data here.)

Data goes hand-in-hand with innovation. Artificial intelligence, machine learning, drones, and more all provide valuable information for startups and insurance carriers alike that help improve their products as well as save time and resources.

As startups continue to innovate, insurance carriers will see more opportunities for partnerships and acquisitions in order to improve their products.

What other exciting innovations are on the horizon? Is there anything that we’ve missed? Tell us in the comments below.

Twitter Chat Recap: The Latest in InsurTech

The Latest in InsurTech #ZebraChat took place on August 22. Here’s a recap of our conversation.

Q1.) What is InsurTech?

Q2.) Why do you think InsurTech has made headlines recently? (Think IoT, AI, VR, auto/home tech, etc.)

Q3.) What trends in InsurTech are overblown or overhyped, in your opinion?

Q4a.) IoT: Is it making a positive impact for consumers? Why or why not?

Q4b.) The popularity of drones is skyrocketing! What are some innovative ways insurers are utilizing drones?

Q4c.) Artificial intelligence: How are insurers taking advantage of it?

Q4d.) Autonomous vehicles: How is the insurance industry preparing for this new tech?

Q5.) With new tech often comes more data. Is more data beneficial, risky, or both?

Q6.) Finally, let’s be real. Insurance is a confusing topic. How can we use InsurTech to improve consumer education?