The insurance market is a thriving worldwide industry, worth nearly$5 trillion globally, with hundreds of established players offering insurance to millions of people. However, there’s a revolution on the horizon...
The past few years have seen an explosion of technology in the public and private sectors, with knock-on ramifications for the way in which we do business. In the traditional insurance sector, which has been slow to modernise and adapt to a faster, more efficient way of offering its services to customers, this has the potential to hit hard. New entrants in the market are leveraging their knowledge of technology to create a quick, cheap and more customer-oriented service that can be accessed on the go.
InsurTech has been increasing in popularity for several years, but 2017in particularhas seen a huge boom in interest and in the number of start-ups in the well-established US and UK markets, as well as new markets in Asia, where a rising middle class offers insurers new opportunities for investment. Here’s a look at some of the most important developments across these key territories.
America has the most establishedInsurTechmarket in the world and dominates the industry across the globe. American firms received56% of global investment within the sector in 2016, pulling in $4.4bn in revenue between 2010 and 2016 as a result. The size and influence of the American market vastlyoutstripsall of its competitors, but the market is starting to see a move away from US domination towards markets abroad: business in Europe is steadily growing and Asia is emerging as a major player within the sector.
Nevertheless, Accenture research undertaken this year shows thatOscar Health, one of the firstInsurTechstart-ups to emerge onto the scene, is still one of the world’s largest players, pulling in $728 million in funding to date from numerous deals. Founded in 2012 with the aim of ‘changing theuserfaceof health insurance’, Oscar Health aims to provide its customers with health care plans and benefits they can easily understand. It also uses language process technology to connect its patients with doctors, enabling themgetprescriptions without ever leaving home.
New start-ups are also being established all the time and they have the potential to innovate the market even further. An example of which isMetroMile, a pay as you drive Insurer founded in 2011, which now receives282,000 views every month on its app. Offering its users flexibility, ease of use and an insurance scheme that is tailored to them, it points to a customer-oriented, quick-satisfaction way of delivering a service that is challenging the traditionally slower insurance legacy players.
Although slower to take off than its American counterpart, the UK is nevertheless the second largest insurance andInsurTechmarket in the world. Traditional insurance companies are playing a larger role within theInsurTechstartup market here than in America, with companies like Aviva declaring£100 million to invest over five yearsin early-stage businesses, and partnering with startups likeWealthifyandNeos.
This is part of an overall boom in the UK market, with more than£200 million having been investedinto InsurTech startups so far, amid a flood of interest from investors, which has resulted in a 422% rise in UK Insurtech activity in the first half of 2017. The UK is clearly capitalising on its position as the centre of European InsurTech investment and a worldwide centre of insurance, setting upaccelerator programmes like the UK’s Startupbootcamp, which mentor startup businesses and help them scale their growth.
All of this points to a healthy and growingInsurTechmarket in the UK, with companies likeNeosalready making their markonthe industry. Capitalising on therapid emergence of the Internet of Things,Neosprovides its customers with IoT hardware that lets the customer connect to vital aspects of their home, including smoke sensors, door sensors and wireless cameras. Providing up-to-date information to both the customer and the Insurer, its focus on software and ‘smart’ insurance is set to change the way we think about insurance as a whole and reinforce our perception of it as an easy-to-access, on-demand service.
Asia is undoubtedly the market which is benefitting most from the opportunities offered byInsurTech. The continent’s expanding economy and growing middle class, combined with a rapid rise in technology, means that the region is finally starting to see a change in its current position asmost underpenetrated insurancemarket in the world; indeed, some are predicting thatAsia’sInsurTechmarket will outstrip that of America’sin the near future.
Due to Asia’slarge population and geographical dispersion, establishing a traditional distribution model that works for everybody has been costly.Howeverthe rise of technology is providing entrepreneurs and established insurance players with different ways of appealing to a massive new audience, with insurance hubsSingapore and Hong Kongexperiencing a wave of new investment in InsurTech-related business deals. In turn, this is paving the way for established companies to take the plunge and invest in developing theirInsurTechcapabilities.
Many of these start-ups have been launched by expanding Chinese companies: for instance, retail giantAlibaba’s insurance company Zhong An, the first online-only insurance service provider, was launched in 2013. It distributes free return insurance through Taobao and has made a startling success of it,writing over 100 million policies in 2015.
During her lecture in Lloyd’s on the fourth industrial revolution in October,Lloyd’s CEO Inga Beale highlightedthat in the world’s first IPO of anInsurTechfirm, Zhong An had raisedUS$1.5bn (£1.1bn) in September. This was also the biggest financial technology offering in the Hong Kong market's history. Another example isFanhau, a prominent financial services provider expanding its online base by launching Baoxia.com, which allows customers to directly compare and then purchase insurance products. It seems that in Asia, the emergingInsurTechmarket will likely be dominated by established names with capital to invest, rather than entrepreneurs.
Technology is Taking Off
Buoyed by expanding markets and an ever-improving range of software, InsurTech startups are rapidly becoming serious competition for their more traditional insurance counterparts. From the US, where entrepreneurs have cornered the market in healthcare insurance, to Asia, where technology giants are backing the next wave of insurance services, aimed at reaching a larger audience than ever before, it’s clear that insurance is entering a new era.
At IDEX, we pride ourselves on keeping ahead of the changing market, so we can better provide an expert service across all levels of insurance.