Not only portfolio investors but also insurance companies are interested in technological startups. Acquisitions and investments in InsurTech solutions are beneficial for both parties: some get the opportunity to develop their technologies, others - an advantage in the insurance market. However, competition among start-ups is also high. And one should choose the direction for development in narrow and promising market segments. If we take underwriting (the procedure for reducing insurance risks, determining adequate insurance conditions - "HiTek"), then it is a commercial trasnport insurance, and the most promising technology in automation is blockchain. And it also should be taken into account that the Russian experience differs from the world experience.
New approaches to underwriting
Underwriting has existed for several centuries. And if its basic principles remain unchanged, the process is evolving. In recent years, new analytical and automated tools for risk assessment have emerged. This involves a number of projects in the field of InsurTech. With the analysis of large data, artificial intelligence and new sources of information, they automate underwriting and make it more accurate.
For example, there are technological approaches to the underwriting procedure in health and life insurance. The American company Force Diagnostics offers insurers to have their tests in fast forward mode, in supermarkets and pharmacies near home. Tests also reveal the presence of chronic diseases. And the received information is transferred to insurance companies, with the client’s consent, of course. Data on health issues (or lack thereof) become an important factor in calculating the optimal cost of policies for clients and providing a "discount for a healthy lifestyle".
Insurance Automation and Chat-bots
Automation allows reducing the degree of human participation in the underwriting procedure: application submission and processing, and communication with clients. Previously insurance company employees used to perform a part of these tasks. Now IT solutions undertake the tasks, from relatively simple chat bots to artificial intelligence algorithms.
From the client's point of view, automation is interaction with the insurance company with no need to visit the office or ring the call center. Mobile applications have become a "window" of remote services for insurers a long ago. They provide them with remote services: ability to download photos from the accident scene, ask an agent a question in chat or place an order. In Russia, applications have not gained much popularity among users and are still not very common among insurers.
"InsurTech keeps being attractive for investors: the number of transactions is growing, venture funds are building their strategies on the insurance solution basis, and the big insurers and reinsurers are "the main fans" of technologization. That inspires confidence in the future of insurance startups and gives them the incentive to grow and develop".
Insurance companies are actively mastering social networks and messengers and developing chat bots for them. Chat-bots can accept payments, calculate rates and sell insurance policies directly in instant messengers. Template answers are available to them, but they can also use artificial intelligence technologies: in particular, to "understand" the questions and claims of the client formulated in free form.
The chat bot technology is promising and effective. 70% of policies of Next Insurance start-up were bought via mobile phones with the bot participation. Several InsurTech start-ups build their work completely around "smart" chat bots, for example, Lemonade, which attracted $120 million last year.
Blockchain technology creates a single register with data on policyholders. Insurers, reinsurers and underwriters get a simultaneous access to it. Thanks to unified access to information and its inamendability, companies spend less time and effort in processing and authenticating data.
IBM predicts that by 2020, 85% of all actions in the company-client chain will be automated including by means of chat bots. However, the competition in this niche is great.
Blockchain design for insurance procedure automation is a more promising direction. The multifunctional solutions allow automate both the interaction between the client and the insurance company, and internal insurance processes (for example, checking the data on a customer).
The insurance market so far is only getting acquainted with blockchain, therefore InsurTech start-ups with their flexibility and willingness to use advanced technologies will not be amiss.
"Smart" devices reduce the insurance cost
Recently, there several large deals with start-ups in the field of "smart home" have been made; Amazon bought a "smart ring" producer Ring for $1 billion, another large company bought a start-up August Home specializing in "smart locks." Both start-ups were previously invested in by insurers.
High risks and great prospects
Marketplaces: aggregator services for searching the most attractive offers in the insurance market are popular with customers. There are also successful rounds of funding in this area; last year the Indian financial market attracted $30 million. The niche is promising, but in Russia there is a risk of serious competition with large portals. This June the Bank of Russia and the Moscow Stock Exchange have announced a prototype of the Russian marketplace for financial products, including insurance offers. Marketplace will provide customers with a set of popular services: remote account opening, policy purchase and price comparison.
Automotive insurance technologization is a big niche with successful examples. But experience shows that not all investments in it bring the expected result. Telematic equipment is still not in demand in Russia (except for regular systems). And the growth of online sales of policies is mainly observed in third party liability insurance. Investments in the digitalization of these segments are the long-run investments, which may not be able to pay back due to low demand.