Digital Transformation in Commercial Insurance industry

The insurance industry has been very risk averse industry. Traditional carriers have been typically laggard in adopting emerging technologies until 2010s. However, insurance companies has not been new to big data, predictive analytics and modeling. They have been designing, selling and servicing data products to many industries and consumers. With advent of AI and technology capabilities to mine unstructured data from several new sources and sensors, insurance industry is going through a significant disruption. With arrival of native digital customers, digital workforce and the consumer last experience with Amazon-Apple products, the customer centricity has become focus of every insurance carrier. Bigdata, AI/ML, Drones, Mobile, RPA, Blockchain, AR/VR/MR, intelligent process redefinitions, smart home automation, wearables, IOT sensors and telematics are all here in the insurance industry. They are bringing in hundreds of starts ups who are redefining the insurance business and operating models.

Approximately 1,500 Insurtech startups are currently operating around the world. Additionally, more than $9 billion in disclosed capital has been committed to over 700 Insurtech investments over the past five years. As per Bain research, about 60% of these startups offer marketing and distribution solutions, including simplified customer interfaces; about 40% sell hardware and software that help insurers streamline claims processing; and about 20% provide analytics-led solutions for product development and pricing. By using AI and ML, these tech firms have built expertise in underwriting and claims processing thereby collectively posing a major competitive threat to incumbent insurers.

The commercial landscape is a very complex business. In last couple of years, few Insurtech have started up with focus on agency business for small commercial. Small commercial rating has been a losing proposition for most agents and brokers. According to Insurance Journal, there have been many attempts to make small commercial rating more efficient, but the cost of obtaining a policy quote remains high and often unprofitable for agencies.

Here are some of the upcoming insurtechs in commercial insurance landscape:

·        xagent was built by agents for agents and delivers on the promise of a truly independent single-entry multi-quote exchange for standard and surplus lines business insurance in all 50 states. xagent combines deep agency expertise with top insurance technology talent to create simple, intuitive multi-carrier premium quote, bind and access options.

·        Bold Penguin, a start-up known for its online marketplace portal for commercial lines property/casualty agents where different agents, agencies, brokers, carriers, MGAs, Insurtechs can come in and trade risks based on their desired appetite and get the right quote in record time. Company worked with Progressive on recently launched new online quoting platform for small business owners, BusinessQuote Explorer? (BQX).

·        Ask Kodiak’s cloud-based, software platform helps commercial and specialty property/casualty insurers market their products to independent agents, providing them with real-time carrier appetite information, eligibility requirements, and product highlights for rating, quoting and underwriting decisions. Ask Kodiak is kind of like Kayak.com for commercial insurance. It is much better than the SharePoint portals, agency visits, and email blasts of the past.

·        Corvus leverages big data and Internet-of-Things technologies to put tools and insight into the hands of middle market brokers and their clients to help predict and prevent loss. Its about a three-year-old, Boston-based insurance company that uses data across more than 50 criterias. Much of the data it extracts comes from IOT sensors that can be used to predict the likelihood of a claim, for example as pressure on a roof owing to the weight of snow. But it also relies on other data from all around, including videos, mobile phones and social media and turns them into tools for risk management. The company is focused for now on the food and pharmaceutical industries because both use sensors everywhere — on vehicles, machines, HVAC systems — for insurance and for regulatory reasons.

·        ThreatInformer is founded to provide cyber risk intelligence to the insurance industry. The startup delivers tools for users to transform the way risks are written. Based on a security-as-a-service platform, ThreatInformer combines threat data, security assessments and environmental factors to help users see the full risk picture.

·        Digital Fineprint is a software-as-a-service platform. It uses machine learning technology to help commercial insurance firms attract and retain customers, namely small-to-medium sized enterprises. It takes open data available online: for example, government statistics, social posts and data from websites of individual companies, and then combines that data with an insurer’s own data to create a single view of prospects and customers. It then deploys machine learning algorithms to better predict customer needs.

·        Digital Risks is an insurance specialist built for tech companies. It offers a flexible, pay monthly Insurance-as-a-Service model. A founder of a company can start out by protecting his laptop and end up with employer liability insurance and insurance against data breaches as his company grows.

·        Insly is a cloud based platform for insurance brokers. It is essentially a customer relationship management (CRM) platform – for the insurance sector. The user can search and manage clients, policies, objects and payments in one place. It is cloud based, so brokers can access the system from anywhere.

·        CaseGlide is the leading case management system for insurance companies and their attorneys. It streamlines collaboration, automates routine processes, and creates transformative business intelligence. It has created custom-tailored solutions for insurers, including case management, reporting and analytics, etc.

·        INZMO is an advanced fully-digital insurance platform which creates value and enhances the experience of insuring for all parties involved in all key stages. It helps insurers to become digital; helps corporates to increase their value proposition with insurance; and helps customers to instant manage their insurance.

·        INSHUR is a mobile-first provider of commercial auto insurance for TLC drivers. The mobile app allows TLC drivers to quote, purchase and service their insurance policies at their convenience.

·        Verisk InsurTech includes a fleet of aircraft that ceaselessly collects data about structures throughout North America; it includes automated estimating, computer vision, new risk models, vast databases that provide critical insight through artificial intelligence, and much more. Last June, it launched Cyber Underwriting Report, a new InsurTech solution that can help insurers underwrite a wide variety of risks in the growing cyber market with increased speed and precision.

As predicted by Aon Inpoint, US Commercial insurance market is expected to grow to a $900 billion market by 2021. The most rapid growth of premiums will be seen in cyber insurance products. Over the past five years, cyber premiums have grown significantly at 23 percent annually. By 2021, Aon predicts that worldwide cyber premiums will be worth $4 billion, a compound annual growth rate of 14.1 percent. Munich Re estimates that the market volume for cyber insurance will grow to $9B by 2020; more than double the value for cyber insurance in 2017. In addition, Aon expects the financial institutions, mining and minerals, and technology and media sectors will expand rapidly in comparison to other industry segments.

The rise of Insurtechs will continue in coming few years. It will be driven by AI/ML and digital capabilities to connect with customers, brokers and agents. However, it will not threaten the existence of large traditional players. The future business model will evolve where Insurtech will become channels and collaborate with large carriers. For example, Allianz recently partnered with InsurTech startup Flock to develop pay-per-flight drone insurance; and U.K. insurer Aviva is partnering with Digital Risks, to develop a brokerage dedicated to supply startups and SMEs with case-specific, monthly insurance subscriptions. The incumbent insurers are reacting to digital disruption as rising competition presses them to transform services and even business model. 

What do you think is future of commercial insurance industry? Is there an Amazon or Tesla or the next insurtech unicorn who will change the face of Insurance industry?

References: Aon Inpoint, Bain Research, McKinsey, Verisk, Apiumhub, Forbes.

Tags: #Insurtech #Insurance #Startups #Commercial

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