The five trends driving insurtech, live from DIA 2018

by Simon Kaesler and Felix Schollmeier

There are new digital players in the insurance sector. These so-called “insurtechs,” technology-led companies that enter the insurance sector, are taking advantage of new technologies to provide coverage to a more digitally savvy customer base. At the Digital Insurance Agenda (DIA) in Amsterdam, one of the largest insurtech events in Europe, we found five key emerging trends:

1. Ecosystems and platforms

Customers are not seeking services; they are looking for solutions. The Japanese e-commerce and Internet company Rakuten presented its expansive ecosystem model, which integrates several services on a shared platform to best address the needs of customers. While insurers have traditionally played a more passive role in their customers' lives, this is changing as companies establish their own platforms and integrate their services into established ones. The Chinese digital insurer ZhongAn, for example, has partnered with several of China’s biggest Internet groups to create a vast insurance ecosystem that allows users to buy insurance products directly through retail sites. ZhongAn launched in 2013 and today has 450 million customers.

Participating in ecosystems allows insurance players to add value through network effects—for instance, by leveraging allies’ already-established platforms—and to integrate insurance services into other products. An example of the latter is the cooperation between building insurers and home insurers, together with GROHE Sense, a smart-home solution with water-leakage sensors that mitigates risk. Many insurtechs that presented at DIA, such as Imburse and Amodo,offer standardized application programming interfaces (APIs) for seamless integration across different systems.

Another aspect of this trend is the emergence of third-party insurance platforms that allow insurers and even noninsurers inside the ecosystem to build insurance products and services conveniently. Players such as Element, Outsystems, and Socotra demonstrated onstage how a new insurance product or service could be built in minutes.

2. Artificial intelligence

Artificial intelligence (AI) tools are emerging at many points in the customer journey and will reshape claims, distribution, underwriting, and pricing. Particularly innovative in the insurtech space are tools based on computer vision and natural-language processing. The insurtech Pixoneye, a data analytics SaaS company, provides computer-vision technology that can analyze a customer's public online photo galleries to create a personal risk profile. The insurtech Enterprise Bot builds chatbots based on natural-language processing and machine-learning algorithms that can understand and act on customer queries without labor-intensive and expensive human intervention. It can further measure the sentiment of a query and directly connect a customer to a human agent if it senses the customer is not satisfied.

3. Item insurance

New players are emerging that aim to provide customers with transparent coverage and the flexibility to decide what to insure—and also, often, when. This idea of “insurance as a service,” allowing people to insure items only when they are in use, reflects how policies are increasingly being tailored to the customer. Insurtechs such as buzzvault and Valoo offer an easy way to make an inventory of possessions via video or photo to give users an accurate picture of what they own. To determine the value of these items, Valoo uses an algorithm that draws data from the biggest marketplaces and considers an item’s condition. buzzvault provides customers with an overview of their possessions and gives them the full flexibility of adding or removing items from the insurance policy at any time. Similarly, Slice allows owners renting out their homes to pay for coverage only for the time they are renting them—not a minute or a penny more.

4. Engagement innovation

In the insurance industry today, customer trust can be low and the technologies dated. But customers want a digital experience tailored to their needs. Insurtechs offer new value propositions that generate customer engagement. Gamification can be a way for insurers to do that; by providing chatbots or mobile tools to set up a policy or file a claim, they can make traditionally cumbersome processes more engaging and integrated into their customers’ lives. Wrisk, for example, has an app that helps the “connected generation” interact with their insurer with the same ease and speed they expect in other commercial relationships. Wrisk’s approach is based on the principle of macroinsurance,” where all of a customer’s policies are visible on one individually determined platform. Another insurtech, Bought By Many, demonstrated highly personalized experiences in pet insurance, including gifts on pets’ birthdays and personalized letters in response to claims.

5. Automated claims processing

Customers are increasingly ready to leave manual claims processes behind and move to a purely digital self-service model. To capture the full value of digital, insurers should think about the entire customer-claims journey— from a digital first notification of loss (FNOL) via live video or images from the scene of an accident to an automated settlement. By fully automating back-office processes and decisions traditionally made by claims handlers, claims can be settled more quickly and effectively. Insurtech Carpe Data presented solutions for insurers to identify fraudulent claims and fast-track payments for legitimate ones.

Customers could benefit significantly from services such as an automated verification of car repair estimates and invoices as well as automatic reimbursements as soon as the repair invoice has been verified. Digital tools can also support and assist the decisions of claims handlers, leading to better outcomes. Insurtech Xtract provides a claims tool that aggregates and visualizes crash data for the auto-insurance industry, captures generic crash data at the FNOL, and delivers actionable insights to claims handlers so they can make liability decisions swiftly, deflect fraud, and triage vehicle damage.

DIA has brought together insurtechs with leading insurers and other players in the insurance world, and it’s clear that the start-ups are no longer just disruptors; they can be service providers and partners, too. Traditional insurers can draw inspiration from insurtechs, which are not shy about innovation nor constrained by an inflexible corporate structure. The insurtechs can learn a lot from incumbents, which are already established in the market and have a wealth of data and expertise. At DIA, many insurtechs presented solutions onstage jointly with insurance companies. Insurtechs and incumbents share the common goal of providing the best services to their customers, and as this conference has shown, both can profit by working together to do so.

Simon Kaesler is a partner in McKinsey’s Frankfurt office, and Felix Schollmeier is an associate partner in the Munich office.