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This is not a 'Top 5' review of Insurtechs but a personal view on five current operations - of the many hundreds - which I think are relevant, interesting, and useful. It's not certain, however, that they have what commentators call 'compelling' solutions which will sweep the market; some or all may fail being replaced by those with similar ideas, better execution, or just more luck. All of these are both transformative - 'disruptive' even - for their insurance industry sector, and fulfill practical real needs.
Where to start?
Out of the by the sheer volume of Insurtech startups, it is impossible to spot tomorrow's winners. So, with that thought firmly in mind, I used a simple method of scanning a selected sample of offerings and picking out anything different or original in concept; or something simple and practical which - like so many great innovations - is only obvious with hindsight.
I should add the necessary disclaimer that I have no interest or connection with the products offered here and am not recommending them.
With emerging weather patterns driven by man-made climate change, many businesses of all sizes are finding they have ever larger exposures to the risk of atmospheric conditions. Finding effective insurance to manage this was never easy and is now becoming more complex.
Meteo Protect- an insurance and reinsurance broker with a Lloyd's market cover-holder 'facility' with delegated underwriting authority from capital providers - has brough to market a new way of managing these risks.
To quote its own pitch, "it provides financial product that protect companies and institutions when weather conditions adversely impact their business or profits or generate additional costs."
According to its website, it can cover [currently] the agricultural sector for variation in prices, drought, flooding; the energy sector for a drop in sales or profits, electricity overconsumption or additional electricity production costs during peak hours; and other sectors suche as tourism for drop in visitors numbers, earnings volatility, cancellation.
In general, Meteo Protect offers to cover any risk anywhere arising from weather events, and this would presumably also include industrial and port facilities, real property, airports, crops, just to name some of the typical large risk insured on markets such as Lloyd's.
In essence, this cover bypasses the need for an agreed insured exposure at risk, or exposures from loss of business together with all the complexity of insurance wordings and continuos re-assessment and verification, which are traditionally required.
Its approach is simple: the insurere and insured, as part of the policy conditions, fix the right financial level of cover based on the insured's financial requirements, for which the latter pays a premium. The cover is designed then to 'compensate exactly or partially the losses incurred through adverse weather conditions. The compensation may be fixed when the weather index exceeds a predefined value or progressive if the losses caused by the weather increase in line with the index value.
The cover is then triggered when a certain type of atmospheric event - temperature, rainfall, wind speed - goes outside an agreed normal threshold, and payment made immediately without the need for further verification and claims handling.
The benefit of this approach is also that there is clarity on the risk and its pricing at the outset, and then, in a claim does occur, there is no need for the cost, complication and delary of traditional claims adjustment.
It's a simple concept but one that is only possibile with the use of AI to manage the calculation in modelling the financial impact of multiple risk scenarios for each client.
The fast-growing Smart Home market provides a large range of IoT applications to protect the home with such tools as internet enabled smoke-detectors, sensors, light switches, cameras and light bulbs.
The risk-management and technological aspect of this make it a natural partner for the insurance policy management. Neos has come up with an insurance risk-management product combining the two.
In fact, the combination of financial protection and technology (now that it exists) makes perfect sense for all home insurances - and many others.
In the past home buildings and contents insurance depended on warranties and exlusions to ensure that the insured acted as prudently as possible. Some well-known examples: failure to lock doors or windows, to install alarms, or otherwise secure the house would lead to rejection of claims for theft and vandalism; failure to switch off cooking appliances or gas leading to explosion or fire, or both would invalidate the policy for building's damage; or allowing one's pets to run wild likewise; and failure to keep heating on during freezing weather might invalidate the water damage cover.
All these problems are now - mainly - a thing of the past. The new solutions exemplified by Neos allow the insurer or insured to monitor videos, all the locks, points of entry, temperature, moisture, as well as controlling the central heating, fridge or any other appliances. There's even a tag for the dog to track its very movement. And all this can be done inexpensively as prices continue to fall.
All these can be tracked, alerts raised and preventive action taken. Combined with financial protection of the insurance policy, these powerful tools take insurance to far advanced and better level for both insurer and insured.
Italian insurer platform Axieme is one of the many peer-to-peer insurances making their appearance on the market today. I think that this will be more than just a gimmick which mimis peer-to-peer lending. That is because it includes within it the approach and practice of mutuality - one of the key basic concepts underlying insurance, practiced originally by ship-owners and still found today within certain parts of the personal and large risks sectors suche as Protection and Indemnity Clubs for shipping lines.
Axieme has the flexibility to offer a wide range of personal-lines or small business covers, by using the same P2P mutual model to all lines.
The business model is simple: Axieme is a regulated (by the Italian regulator ISVASS) intermediary - rather like a broker or underwriting agent - which has partnered with a number of insurers who provide the risk capital. It claims not to add any kind of commission on top of the insurance premium to the user as this is P2P but receives its income from its insurance partners for business they pass to them. Premium costs are thus kept as low as possible.
Potential clients can get a free quote provided by the algorithm immediately based on their own claims history and that of the groups which they join or create. People can band together with others with similar risks such as pet or car insurance and then request a quotation.
Once a quote is accepted, cover commences and the premiums paid in are allocated to separate pools of funds which are managed by the algorithm and backed by the insurance companies' capital for liquidity and regulatory purposes.
The big difference between this and traditional insurance agency products is that Axieme's groups insured members pay premiums with no added intermediary costs, no frictional management costs, and according to their risk profile (indicted by a star rating system). Two other key benefits are firstly that good claims records are rewarded by returns of premium and discount at renewal (the opposite applies to bad records), and secondly that all insureds know that they are sharing similar risks with likeminded and - they hope - sensible people who want to minimise risk and claims as far as possible.
To sum up, this model uses Insurtech to offer a micro-mutuality with almost perfect fit for the membership of each group and the ability to develop new insurances to meet very specific niche insurance needs.
Clearly at only the beginning, this product and concept has a long way to run yet.
RiskGenius fills a gap that really has needed filling for many years: policy wordings management. And this is not just 'document management' involving indexation and retrieval of documents but the fully integrated management of the intellectual property of insurance carrier wordings.
Until recently, the process of maintaining and developing the insurance wordings was arduous in the extreme, hampered not just by the continuing use of paper, but the great difficulty in structuring and manipulating it digitally. A combination of librarians lawyers, underwriters, claims and general management get involved in the never-ending process of maintaining and checking policy-wordings, for both competitive and compliance reasons. Nothing could be worse than the rogue underwriter agreeing covers outside of underwriting guidelines - or even beyond the insurer's own reinsurance policy terms and conditions!
This key IP area requires a huge amount of effort and cost and RiskGenius help to reduce both while increasing management control with the application of machine learning by offering tools in modules for the five key typical 'pain points':
- 'Compare' - Removes the need for time consuming and error prone review using by hand or spreadsheet, to identify similar policy language by allowing users to compare insurance clauses from forms and endorsements side-by-side. The system can identify and categorize each clause, thus enabling users select a clause category and review results across multiple policies. Users have at their disposal all tools or redlining, commenting and full-search capabilities.
- 'Rules' - Handles the perennial problem of integrating third-party policy-wording for underwriting and review, where underwriters are often under time pressure to identify modified clause language and adapt and integrate it into their own policies. The Rules module enable underwriting rules for the review of incoming policies, so as to scan clauses for conflicts and coverage, with compare to those of the company.
- 'Manuscripting' - Frees underwriters from the inefficiencies of manual drafting with their preferred language or special clause where they have no easy access to a library of forms, endorsements and bound policies. This module allows an underwriter to research and create custom policy language for forms and endorsements, providing Google-like search capabilities across a policy library, with relevant selected and incorporated into the RiskGenius policy builder.
- 'Compliance' - Enable underwriters to share new clauses with legal teams for approval, something which did not exist previously because legal department did not have the proper platform to verify clauses. Underwriters can also now easily identify previously approved policy language when reviewing a new proposal and can also comment on or redline proposed language in one central location.
- 'Analytics' - Search engine for the unstructured data in forms and endorsements to help find the right policy language. Tracking policy language across a library of policies is impossible with flat document libraries and so by combining machine learning algorithms and advanced mathematical models, this module uncovers data insights that cannot be detected with the human eye.
All in all, a practical tool to solve a long-standing issue.
Hailing from Germany, MotionsCloud, offers an app to fill the space in the loss-adjuster, surveyor and claims-handling world.
Its strapline nicely encapsulates what it's about:
"All in one mobile & AI solution to reduce insurance claim cost and claim cycle time from days to hours."
It's a very short website but everything seems to depend on the demo. There's a good list of insurance giants behind the accelerator where MotionsCloud is based.
The point here is that there really is a need to speed up and improve claims handling process, especially for large risks internationally.
In the past, there was always a long time lag from appointing a surveyor or other expert to visiting the site of the claim, taking the photos, questioning those involved, surveying, writing the notes and then issuing the report. It could take weeks - sometimes months - before presenting it to the claims handler, often thousands of miles away.
MotionsCloud offers an end-to-end service supported by AI to move swiftly through the key stages of:
- Real-time estimations of exposure or loss using an algorithm thus adding in an almost instantaneous systematic approach and removing subjectivity
- High quality evidence collection and storage in all formats e.g. scans, photos, documents - all very difficult to do on site, in the past
- Secure storage or all data thus avoiding loss (due to confusion/inefficiency in the communications chain) or theft of these
- Remote co-working and co-operation with full access to the materials in the claims file for swifter settlement by eliminating the need for repeated transmissions to multiple people over distributed locations
The use of an app fits well with the nature of this work. Surveyors and others, are highly mobile and do all work on site, with little time to go back to the office to work on their material.
This approach, which is rather an obvious development based on existing technology, should become standard from now on using AI and possibly AR/VR to augment the capabilities of all those in the claims handling process.
It is a truism to state that Insurtech is disrupting, or at the very least, changing the insurance landscape for the better. What is surprising though is that this common-sense work on long-standing problems is only now being addressed.
My guess is that the best Insurtechs, rather than heading for the esoteric, will - must - focus on providing the solutions of highest utility.