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Fintech & Finserv CX

Smarter, Friendlier Insurance is Here – And It’s All Thanks to Insurtech

The Emergence of Insurtech Startups Over the Last Ten Years is Resulting in Seismic Shifts to the Insurance Landscape

Today when we make a big financial decision, like which car to purchase or where to invest our money, we want it to be as easy, personalized and stress-free as ordering a pizza. 
So it’s no wonder that 86% of insurers believe innovation must happen at an increasingly rapid pace to retain a competitive edge. Being known as cold, impersonal and slow just doesn’t fly in a world that demands fast, individualized service every time. 

Enter insurtech. Similar to the way fintech is disrupting the financial services market, insurtech uses technology to develop innovative solutions within the insurance industry. Although insurance companies have managed to maintain the status quo for decades (if not centuries), the emergence of insurtech startups over the last 10 years is resulting in seismic shifts.

The rising stars of insurtech

While some insurtech companies are positioning themselves to challenge major insurers, others are working together with established companies to transform specific areas of the insurance landscape. In the Post’s 2020 Insurtech 100, these companies took the top three spots, and all three pose a significant threat to traditional ways of doing business:

  1. Lemonade – Based in New York City and founded in 2015, the insurtech uses an AI chatbot named Maya to deliver homeowners, renters and pet insurance with the goal of “zero paperwork and instant everything. Lemonade started trading in its initial public offering (IPO) in early July. It’s also a certified B-Corp, meaning social impact is built into its business model. Through their Giveback Program, every new customer chooses a charity to donate their unclaimed premiums to.
  2. WeSure – Created by Chinese company Tencent and embedded within their WeChat ecosystem, WeSure lets users buy insurance without ever leaving the app. The goal is to make purchasing health, auto and travel insurance accessible in a Chinese market where consumers have traditionally been apprehensive and therefore under-insured compared to the rest of the world. 
  3. Zhong An – Positioning itself as China’s first completely online insurance company, Zhong An raised an IPO of $1.5 billion in its first day and, as of 2018, had more than 400 millions customers with over 10 billion policies sold. Accenture attributes Zhong An’s success to three key factors: its ability to respond to changing customer needs, its intelligent technologies that provide immediate service, and its use of digital ecosystems (with over 300 partnerships) to sell insurance products.

Other notable companies on this year’s list include:

  1. Root, a paperless car insurance brand that uses your smartphone to measure your driving behavior and reduce your premiums
  2. Kin, a Chicago-based home insurance provider who simplifies and streamlines the home insurance process
  3. Insurify, a Cambridge, Massachusetts-based brand offering an innovative online insurance comparison experience for finding novel cost savings

How insurtech benefits consumers

Insurtech companies are on the rise primarily because they offer ultra-customized policies with better pricing and coverage to suit each individual. This diverges from traditional insurance, which uses general risk categories to ensure profitability for the company, but results in some people paying more than they should. Insurtech solutions use available data from devices, such as your GPS or FitBit, to build more specific risk categories and deliver competitive pricing.

By using individuals’ data, insurtech solutions are also better able to keep customers engaged than their more traditional counterparts, while at the same time actually helping them lower their risk levels and payments. For example, WeSure uses data analytics to provide real incentives, such as offering health insurance discounts if users get active every day.

In addition to more personalized solutions, insurtech companies offer fast, immediate customer service delivered by AI chatbots and voicebots. In fact, 97 percent of Zhong An’s customers communicate via chatbots only. This reflects the way more and more of today’s customers want to make purchases and access customer service across industries.

What’s in it for insurers?

Insurtech innovations result in more competitive pricing for consumers, but they can also produce cost savings for insurers too. For example, companies can cut operational costs by using virtual assistants powered by AI and deep learning to help policy seekers find the insurance coverage they need.

While some brokers may find their business disrupted by platforms like CoverHound, which helps people compare auto insurance rates and negotiate policies, there is also an opportunity for advisors to use insurtech AI and machine learning to optimize their services.

Delighting today’s policy seekers

Insurtech brands are building their value propositions of ease, accessibility and immediacy specifically to address the traditional pain points consumers encounter with established insurers. Perhaps the biggest boon to insurers incorporating insurtech is the ability to target a younger demographic of Millennials and Gen Zers who want fast, online, AI-powered solutions. 

Zhong An has successfully captured this market, with customers aged 18-39 accounting for 57.8% of policyholders. Lemonade, too, has built its business model to romance Millennial consumers.

Everything from its marketing to its social impact policies, is designed to appeal to policy seekers who care about saving time, having an easy experience, finding a personalized solution, getting the best possible price and knowing their dollars are doing good in the world. 

What’s next for insurtech?

As more insurtech startups aim to become licensed carriers and gain greater market share, they’re coming up against the complexities of a highly regulated insurance industry. The success of most major insurance companies is due to their cautious approach. And, of course, a cautious approach is diametrically opposed to the “move fast and break things” mentality of startup culture. 

The recent case of WeSure being fined by Chinese regulators for misleading advertising is just one example of the need for insurtech companies to appropriately manage risk and understand the regulatory landscape. Perhaps the biggest challenge lies in creating a model for how old and new can effectively collaborate with one another. Insurtechs will need to incorporate the skills and expertise of traditional insurers, just as established insurers will need to be willing to disrupt their culture, workforce and technology to leverage the possibilities of insurtech.

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