In this chapter of our Annual Insurance Review 2018, we look at the main developments in 2017 and expected issues in 2018 relating to Insurtech.
Key developments in 2017
2017 saw a major shift in the insurance industry’s attitude towards insurtech. It saw: UK investment in insurtech jump by 2,500% in the first half of the year; the first insurtech IPO, raising $1.5bn; and a range of insurance companies testing and implementing insurtech solutions.
Insurtech now offers a wealth of possibility and improvements for every corner of the insurance industry. Insurtech companies offer products or solutions to improve every part of the insurance cycle, from advertising and distribution to underwriting, claims, loss adjusting, payments – and even audit and Solvency II calculations.
(Re)insurance companies now place a greater focus on insurtech and understand its impact on the future of the industry. While insurtech is still in its infancy, with new start-ups and products created on a daily basis,2017 saw large (re)insurance companies working in closer collaboration with the insurtech industry, and helping to develop and fund start-ups.
However, the theme of 2017 is still evolution. Insurtech is slowly improving current processes in existing insurance structures, rather than creating new processes outright. Whether it is using analytics to evaluate large catastrophe losses post-Harvey/Irma/Maria, analysing claims data to spot signs of fraud, or using artificial intelligence to analyse and automate part of the wordings and endorsements process for new insurers, insurtech solutions or products are working alongside existing underwriters, claims handlers,and other industry personnel. They are intended to speed up their processes, make them more effective,reduce repetition and give them more time to work on the novel and more challenging areas of their work.
What to look out for in 2018
Data will come to the fore in 2018.
As a society, we now create an immense amount of data. According to IBM, 90% of the world’s total information was created in the last two years, and the growth of data creation is still accelerating at an exponential pace.
But the challenge is to use increasing levels of data more effectively. We will see a growth in “service before claims” insurance, which uses sensors or other publicly available information to warn insureds and provide a solution before the insured even realises there is a problem – for example, detecting industrial leaks by changes in sensor conditions or offering to re-book flights as soon as delays become likely.
In addition, we will see greater collaboration between companies. Insurtech companies with particularly strong analytics will begin working more closely with existing insurers and other new sources of data to find new and better quality insights. As this occurs, insurers will find new opportunities to improve current underwriting analyses, price more effectively, and create new products.
However, those who control and process data will also need to contend with the implementation of the General Data Protection Regulations (GDPR) on 25 May 2018. The GDPR will restrict the processing of personal data and, perhaps more importantly, restrict some forms of automatic processing of data.Breaching the GDPR carries a penalty of up to the higher of 4% of global turnover or €20m.
Nonetheless, new regulation also carries new opportunities. Undoubtedly, new forms of GDPR-compliant data-gathering will emerge. Similarly, other new regulation, such as the requirement for insurance product information documents under the Insurance Distribution Directive, provides new opportunities for automation and the collection of good-quality data.
Download our full Annual Insurance Review 2018 for more insights.