Insurance companies are being heavily disrupted. Their business model has been around for millenniums with very few changes to it. But this time is over. As people are increasingly distrustful of insurance while having a legal requirement to buy one, an increasing need for disruption has appeared, in terms of transparency, easiness and availability of choice. Startups have answered this call. Singapore, already known for being a Fintech hub, is one of the best examples of a country embracing disruption. The startup SingaporeLife, for instance, created an insurance company from scratch in 2014. It was the first digital company to receive a license by the government to distribute insurance. The government itself is pushing its startups with the creation of a regulatory sandbox for disruptive startups in the field of FinTech and InsurTech. Startups like PolicyPal have integrated this sandbox and therefore can benefit from an attractive regulatory framework and network to test and scale their solution.
These new solutions usually make a difference with their true digital native experience and an automated KYC (via face or picture recognition) that transfer cost efficiencies into value for customers.
At the end of September, we attended the InsurByte Conference in Singapore. This annual event organized by the Fintech Consortium gathers more than 300 insurance, technology and institutional experts to talk about the future of insurance and how technology will affect it. We have been able to hear from the experience of startups, traditional insurers and regulatory associations.
The insurance industry transformation isn’t fast enough
Overall, the panellists invited at the conference were pretty harsh on the current state of insurance companies. Matthias de Ferriere from Stark Group criticized the fake innovation effort of traditional insurers creating “Innovation Labs disconnected from the real business” just to “show shareholders they’re doing something”. The same observation was made by Grégoire Rastoul from UEX who commented: “they have departments calling themselves ‘Innovation’, ‘Transformation’, ‘Change’, but they didn’t transform, there is no delivery at the end. They do research but not development.” He blames rigid regulations and governance, “because innovative products are immediately absorbed by the compliance development.” Grégoire stresses that agility is key to disruption and that “insurers need to change their culture before they want to do Insurtech” while Matthias emphasizes on the need for insurers to address customers’ problems by being service-oriented and more transparent.
The issue of data ownership and management was also brought up as a growing concern in our data-driven society where these data become more and more valuable.
Some examples of good practices in the insurance industry have been brought up, though, such as the Firemark Labs in Australia and Singapore, backed by the Australian insurer IAG, that include incubation and innovation labs as well as a venture fund.
Case study: Insurtech startup GoBear’s visitors have been multiplied by 6 in a year
Marnix Zwart, SVP Product & Business Development from GoBear, deeply believes that people are willing to get insurance online. His company’s figures are quite impressive. Incorporated in 2014, the insurance comparator has jumped from 500 000 visitors last year to a whopping 3 million per month this year.
GoBear is able to give a quote with only 4 to 5 questions. Marnix followed: “People buy what other people buy, it’s as simple as that. We share reviews and give a coverage score”. Already comparing credit cards, loans, insurance (car, travel, accident), they will start life insurance this quarter. They plan to expand by giving traditional insurance players a “life dashboard” with insights on what people want (profile, product, price). They have already set up pilots with Allianz and Axa.
How can Blockchain impact the insurance industry?
Innovation in the value chain has also seen the emergence of new business models enabled by technologies such as the blockchain. Enabling a decentralized and inalienable record and transfer of data, the blockchain makes peer-to-peer insurance the new craze among insurance disrupters. Bandboo, for example, is a young Singaporean startup exploring that new model. Using a transparent blockchain ledger, they connect a community of people to insure each other. Through a small monthly fee, the policy-holders can turn themselves to the community when needed with no actual insurance company involved as the transparency and safety of the blockchain serves as a safeguard against any abuse. But Bandboo needs a significant mass of insurers (1000) to start operating.
The blockchain brings a lot of exciting opportunities for insurers as it changes both customers and companies’ behavior, introducing a new kind of trust in the relationship. The decentralized technology enhances:
– Profile Information storage: with no need to have a central warehouse, insurers will be able to underwrite risks based on dynamic profile information rather than having outdated financial statements.
– Process automatization: blockchain-enabled smart contracts will allow insurers to remove human stamping out of several processes. Bandboo and Policypal, for example, are exploring how to automatize the claim process through smart contracts
– Regulatory requirements: digital signatures will allow regulators to speed up their process making the whole value chain more efficient
In a nutshell, the insurance landscape is already and will continue to be subject to disruption. The emergence of new technologies, such as the blockchain is restoring trust and transparency, bringing new business models to life (P2P) and improving old ones. Overall, users have started going online to compare and subscribe to insurance policies with startups such as GoBear or PolicyPal. Traditional players need to adapt quickly to keep their consumer base.