Insurtech is generally thought to be developing but some way behind other areas of fintech such as payments. Is there much insurtech business in your jurisdiction and if so what form does it generally take?
Fintech (2nd edition)
Some insurance regulations have slowed insurtech’s development compared to other forms of fintech. As more U.S. jurisdictions adopt and implement GDPR-style consumer protection regulation, it will also likely affect insurtech, particularly those capitalizing on data gathering technology. Much of the insurtech activity has involved collaboration with incumbents. Brand new start-ups are down, but insurtech financing is still robust, with investors focusing on more mature players. More product launches are coming out of incumbents than in prior years.
Insurtech is generally viewed to be entering a new phase of development, where companies are focusing on new forms of data (from mobile phones, social media, IoT sensors, wearables, big data, and satellite imagery). Data from artificial intelligence and machine-learning is also a centerpiece of new insurtech investment. Early phases focused on (1) market efficiencies and service improvements, and (2) marketing and selling by online brokers with 24/7 access and digital marketing. Customers want to research and purchase products online and expect communications largely through digital channels. This includes more frequent, meaningful, and personalized communications. Insurtech in personal lines is still way ahead of development in commercial lines.
Belgium is an attractive place for insurers. The Brexit has also shown that even large incumbents of the sector found Belgium to be an interesting alternative to the UK.
We have seen the development of several initiatives in the insurtech industry.
Generally, insurtechs choose to intervene at the distribution level where they compete with traditional intermediaries – many of which are brokers in Belgium. A licence as insurance intermediary is indeed much easier to obtain than a full-blown licence of insurance company.
By the same token, insurtechs tend to prefer the non-life sector (car insurance, rent insurance). Part of the reasons is due to the fact that life insurance products are subject to more stringent requirements, have a long contract duration, and are trickier to market in an online environment – people subscribing life insurance policy are often looking for face-to-face advice.
Given that Bermuda is a leading centre for insurance, it is apt that Bermuda be at the forefront of insurtech developments. Bermuda-based insurers have already made moves into this space, demonstrating the industry’s innovative nature. For example, Willis Towers Watson recently announced that the first blockchain transaction for marine insurance has been delivered.
The Bermuda Monetary Authority recognises the growing importance of disruptive innovation in the insurance and wider financial industry and the critical role that innovation plays in promoting efficiency and enhancing competitiveness in the market. In order to ensure the viability of the Bermuda market, the Bermuda Monetary Authority has launched both an Insurance Regulatory Sandbox (Sandbox) and an Innovation Hub (explained below).
The Sandbox is a mechanism by which licensed insurance companies under the Insurance Act 1978 would be able to apply for a license from the BMA to allow them to test new technologies and offer new products, services and other delivery methods to certain policy holders (for a set amount of time). The BMA would need to review the company’s proposal, and determine appropriate regulatory requirements and modifications to allow the Sandbox testing. Upon successful completion of the Sandbox testing, the company would be re-licensed under the relevant legal and regulatory requirements.
The Sandbox eligibility criteria includes:
- technology must be new or use existing technology in a different way;
- research and due diligence must be conducted in advance of the application;
- testing objectives must be clearly defined;
- the applicant must demonstrate its understanding and assessment of associated risks and their mitigation;
- the applicant must demonstrate its understanding that policyholders and counterparties are adequately protected against loss during the testing stage;
- the applicant will be required to have a well-defined exit or transition strategy in case the testing is unsuccessful or discontinued; and
- the applicant must demonstrate that is has the intention, ability, and resources to deploy the relevant product, service or distribution channel upon successful testing and exit from the sandbox.
The Bermuda Monetary Authority is keen to promote broader dialogue on innovative insurance solutions with all market participants, including those conducting activities that are not directly regulated by the regulatory. The Bermuda Monetary Authority has therefore created a working group (BMA insurance innovation working group or BMA IWG) that seeks to act as a platform for exchanging ideas and information (Innovation Hub). The Innovation Hub may also be used by companies that will eventually apply for entry into the Sandbox when the concept is sufficiently developed, e.g. cases where the company is still developing its thoughts and ideas and not yet prepared for proof of concept.
Insurance business is still a very concentrated market in Brazil due to rules and laws which prioritize large insurance companies over small innovative initiatives.
The National Council of Private Insurance (“CNSP”) and the Private Insurance Authority (“SUSEP”) are the authorities responsible for regulating the Brazilian National Private Insurance System (“SNSP”), which is composed by large insurance and reinsurance companies, entities operating open-ended private pension funds, capitalization companies and insurance and reinsurance brokers.
In this context, Decree-Law No. 73 of November 21, 1966 (“Decree-Law 73”) is the main law regulating the insurance industry and both CNSP and SUSEP are responsible for issuing consequential and more detailed regulations.
With due regard to the above, recently enacted Provisional Measure No. 881/2019 (“MP 881/19”), known as the “Economic Freedom Act”, provides that companies can test out inventive business models within a closed group without requesting any prior approval. The Brazilian government has been notably more pro-market and liberal since the last election and this has been reflected in SUSEP.
SUSEP has made several statement in favor of insurtechs and other innovative models and is looking to create a more competitive scenery over the next years within the insurance market.
Given the difficulties and complexity of managing an insurance business, most start-ups have decided to focus on some parts of the value chain and partner with insurers and reinsurers.
The most common way in which Insurtech startups operate is as advisors to quote and compare which insurance is more suitable for the needs of the client, and connecting the user with an insurance provider so that the acquisition of insurance begins with a request through the platform or website. This is what ComparaOnline.com does - recommends certain insurance based on the client’s profile and needs.
Another example of Insurtech in Chile is Jooycar, a fast- growing Chilean company disrupting the auto insurance market that provides a car connected platform and services, using telematics and machine learning to develop Usage-Based Insurance (UBI) products for commercial users and personal/individual users
The insurance industry has undergone tremendous changes as a result of the development of technological innovations in the industry. Beyond traditional insurance moving online from offline, insurtech has triggered innovations throughout the insurance industry and has forged a brand-new ecological model in the industry.
Take Ant Financial’s Mutual Aid (Mutual Aid) for example. Fundamentally, Mutual Aid is a health insurance product for lower-income families, similar to conventional health insurance. Members of Mutual Aid can receive health care coverage for free if they shared medical expenses when other members were ill. The Mutual Aid plan is cheaper and more affordable than traditional health insurance: the amount each member pays is determined based in part on the ratio of members to those that fall ill. This amount is regularly adjusted to match the realities of the membership: recently, for example, it was RMB 15.7 per member per month. However, Ant Financial does cover some of the excess of expenses resulting from more members falling ill than figured in the membership fee calculation. Mutual Aid can potentially benefit lower-income families and individuals who do not have full access to medical coverage from public programs or other traditional insurance programs.
However, such mutual aid business models have come under scrutiny from insurance authorities for promoting products as insurance when, according to the authorities, the products differ in significant respects, e.g., not affording the same degree of guarantee of coverage as (traditional) insurance.
As it has in other jurisdictions, insurtech has developed more slowly in the UK than other aspects of the fintech industry. A combination of complex products, relatively heavy regulation and legacy systems have made it difficult for insurtech solutions to make headway, as have barriers to start-ups resulting from prudential capital requirements. Having said that, investment and growth have surged in recent years, as the industry has responded to technological advancement, customer expectations and market conditions.
Insurtech is bringing changes to a number of areas, including disintermediation in insurance for SMEs and product development. To the extent that SMEs are increasingly moving toward cloud applications, opening up new avenues for direct connections to insurers, the demand for brokers may decrease.
Insurtech is also changing the nature of the product offering, with new products including:
- parametric insurance, which pays out a defined amount upon an agreed trigger being hit;
- automated underwriting for single invoice insurance (against bad debt);
- predict-and-pay services, which shifts the focus from making indemnity payments as claims arise to predicting and preventing claims from arising in the first place; and
- narrowly tailored products and pricing, which uses a combination of static data, contextual information and real-time data to develop products and pricing.
Insurance industry in Colombia represents 10-15% of innovation opportunities and sandbox applicators within the SFC in 2019. Insurtech startups are mostly focused on price comparison and microinsurance development. There are several early stage newcomers working on IoT based agricultural insurance and health insurance. No other relevant or clearly identified market champion or tendency is evident.
While insurtech business is present in the UAE, it is developing at a slower pace than other areas such as fintech. As there is nothing in current legislations specifically regulating insurtech companies, the latter must ensure they are providing their services in compliance with general regulations addressing the provision of insurance and reinsurance policies:
- On Onshore UAE, the IA regulates insurance and reinsurance services.
- In the DIFC and ADGM, the DFSA and FSRA respectfully regulate insurance and reinsurance services (only wholesale services with respect to insurance are permitted in the Financial Free Zones).
Successful insurtech business include (1) Aqeed, which developed an insurance wallet where customers can store and recall all their policy documents, it also sends reminders to customers with respect to renewal dates, compares different policies and informs customers where there is a duplication of coverage; and (2) Souqalmal.com, an insurance, personal loan and credit card comparison website, which underwent a Series B funding in 2017.
More recently, the Insurance Authority issued Board of Directors’ Resolution No. 41 of 2019 which provides supervisory rules for the experimental environment of financial technology in the insurance industry.
The development of insurtech in Taiwan generally started from the issuance of electronic insurance policy, of which the relevant processes shall meet the requirements and technology standards prescribed under the regulations. It has been further developed to utilize artificial intelligence technologies to facilitate underwriting process (including detecting fraud cases) and to simplify the claim approval process for certain types of simple claims, by designing different models based on historical data. Some insurers also engage financial robot services to assist in telephone customer services. Starting from 2014, the Financial Supervisory Commission started relaxing the restrictions applicable for on-line application of insurance policies by policyholders. For example, the access to on-line application no longer restricts to existing customers if other identification verification mechanism is in place; the restriction that the policyholder and the insured must be the same person has been lifted; the types of product that can be available for on-line purchase have been gradually relaxed through several phases of amendment to the applicable regulations.
There are several start-ups dedicated to insurtech projects; furthermore, a number of insurance companies have embraced insurtech. B3i, an international insurance company consortium which aims to explore the potential of using distributed ledger technology in the insurance industry, is based in Zurich, Switzerland. The focus of many projects is on digital insurance management solutions for customers, on digital on-boarding and on consolidation of various polices on one app.
Insuretech businesses have in general received less focus than fintech providers related to payment services and other services related to the banking sector. Insurtech has therefore in general been included in the general reference to fintech in Denmark. It is therefore difficult to single out what form it generally takes in Denmark.
Spain hosted in June 2019 the 4th edition of the Global Summit for Insurance Innovation dedicated to the innovation in the Insurtech market.
As of September 2019, at least 193 startups dedicated to Insurtech were recorded in the Spanish market.
Back in 2018 the Spanish Association of Fintech and Insurtech (AEFI) stated that 2018 had been the year in which Insurtech start-ups and pre-established insurance big players had begun to discuss agreements and collaborations.
The existing Insurtech ecosystem works in different areas in Spain, from medical care to using artificial intelligence to manage car and home accidents.
Especially with regard to insurance brokerage, insurtech-based online platforms are already very popular and widely used. Beside this, recently tech-based tools to analyse potential risks and to avoid damages as well as to advise on helpful or necessary insurances or to analyse any gaps in the personal insurance situation or existing double insurances are entering the market and becoming more and more popular.
In Korea, various forms of insurtech are being tested and utilized. In the case of Internet of Things, various telematics and wearable devices with collect and transmit data from sensors attached to things are being used for various purposes such as calculate savings of insurance premiums; in the area of big data, a variety of large volume of data such as customer consultation data, online activity data, medical and credit level are collected, analysed with velocity to estimate the risk of accident, contract retaining rate and possibility of insurance fraud which are then utilized with regard to development of insurance products, marketing and risk management. With regard to AI, chat-bots are used for customer consulting and blockchain technology is being tested for application for identification and detection of insurance policy upon insurance payment request. As shown above, while insuretech is beginning to be used in various ways, full scale commercialization will take some more time.
Insurtech is not as widespread as fintech innovations in Iceland. However, there have been efforts made by local insurance companies toward far greater automation and self-service through either online portals or mobile apps in which certain insurance policies can be acquired and certain insurance claim process in relation to can be fully completed, i.e. from making the claim to pay-out to the insured party. This trend is likely to continue as the insurance companies are under certain pressure to reduce operating costs.
We are not aware of any current projects in the insurtech area in the Portuguese market. However, we note that recently the insurance market has been subject to some instability, with a series of M&A transactions involving the biggest Portuguese insurers, and so it may be expected that once such companies are running smoothly after the recent market turmoil, new solutions arise eyeing the insurtech segment.
InsurTech in India is currently in its nascent stages of growth, but, it has to a large extent disrupted the traditional supply chain of insurance products in the country. Several insurance providers have partnered with technology partners and other FinTech players to offer a range of digital insurance products to their customers. For example, several PPI wallets operating in the country have entered into collaboration arrangements with insurance companies to offer insurance products to their customers through their digital platforms. In addition to partnering with FinTech players like PPI wallets, insurance providers have also set up independent digital platforms for offering insurance products to existing and new customers.
The key regulations governing InsurTech in India include the Guidelines on Insurance e-commerce dated March 9, 2017, the Guidelines on Insurance Repositories and Electronic Issuance of Insurance Policies dated May 29, 2015, the Issuance of e-insurance Policies Regulations, 2016, each issued by the Insurance Regulatory and Development Authority of India (IRDAI) to regulate and govern the provision of digital insurance products by eligible insurance providers to new and existing customers.
A key area of discussion pertaining to offering of insurance products in India is bundling of insurance products with other goods and services (including financial products). The concerns around packaging of insurance products with other products primarily include inadequate disclosure to the customer of the characteristics of the bundled insurance products, restrictions on consumer choice or the freedom to make informed choices or comparisons with other products available in the market and undue influence over the customers by the provider of the packaged bundled products. With advances in technology and fast paced developments in the FinTech market, opportunities to bundle insurance products with other financial products have become easier and convenient. In 2012, with a view to regulate bundling of insurance products with other goods and services, the IRDAI had released a discussion paper on “tying and bundling insurance policies with other services and goods” and had invited comments from the public. However, the discussion paper could not culminate into codified guidelines or regulations to regulate bundling of insurance products.
The insurance commercialization, including the onboarding phase, using technology (defined as “Insurtech”) is still in an embryonic phase in Peru. In the case of B to C services, this activity is mainly concentrated in traditional insurance companies that have the authorization of the supervisor (SBS) to sell insurance. Due to the progress of regulation, it is possible to sell and contract insurance policies (directly or through authorized third parties) by remote marketing systems, including various electronic contracting channels (mobile applications, web site, etc).
In this context, an interesting opportunity for FinTech is to make alliances with insurance companies through collaboration schemes that allow insurance companies to offer their different products in a more efficient and friendly way. In this regard, some interesting experiences in Peru are, for example, the case of Seguro Simple.com, which operates as a vehicle insurance comparator, through a technological platform, allowing consumers to quote their insurance with different companies with total transparency and agility. Another interesting example is the case of Hello Zum, which provides management services for sales and after-sales processes to various insurance companies, saving them money and time in processing information.
There are several ventures we know of. For example pension counselling and pension marketing procedures carried out by systems that support counselling.
As a general rule, only licensed insurance companies and insurance agents are allowed to sell insurance policies or give brokerage insurance consulting. However, the Capital Markets Authority had issue a circular which permits the involvement of other entities in the insurance process. This allows some insurtech services that are very limited because they must be informational services free of charge or performed by someone who is licensed.
The most known insurtech project in Israel is an insurance comparison and selection website operated by “Wobi”. Please note that Wobi elected to register as an insurance agent in order to comply with the regulations applicable to insurance brokerage.
The most known insuretech company which originated in Israel is Lemonade, which was initiated and incorporated by Israelis but does not operate in Israel.
As insurance is a financial product, both offering insurance products and services and advising or intermediating in respect thereof are subject to financial regulatory laws. The point of departure is technological neutrality. As a consequence, insurtech players are currently subject to the same regulatory framework applicable to their incumbent competitors. This results in fintech companies involved in the insurtech business in the Netherlands still being relatively limited.
The AFM and DNB recently published a report describing the 10 key focus areas when using artificial intelligence (AI) in the insurance sector, in which the technical aspects of the use of AI are considered (www.afm.nl/nl-nl/nieuws/2019/jul/verkenning-ai-verzekeringssector). In line with the European Insurance and Occupational Pensions Authority’s recent report, the Dutch regulators emphasise the fact that the fast-evolving insurtech market should be monitored closely (https://eiopa.europa.eu/Publications/EIOPA%20Best%20practices%20on%20licencing%20March%202019.pdf). The regulators will pay special attention to the ethical aspects involved in insurtech solutions. The effects of AI (and other types of technology) on solidarity and insurability are important areas of focus.
Insurtech appears to be still behind other areas of fintech, such as payment and cryptocurrency businesses in Japan. While quite a few Japanese insurance companies appear to be interested in insurtech and, therefore, either attempt to develop their own insurtech tools or invest in overseas insutech enterprises, we have not seen many insurtech startups in Japan so far.
We are not aware of any insurtech initiatives specific to Jersey.
InsurTechs ONE, which sells liability and household insurance via online technology, and the prosperity company, which sells retirement and risk insurance, are located in Liechtenstein and are very successful. Due to the high insurance density in Liechtenstein, further projects are expected.
Technology improvement has moved high in the agenda of insurance companies, particularly as regards digital sales. Nonetheless, the proportion of Insurtech FTIs seems yet to be rather low with respect to other sectors; in 2017, AIG Mexico launched, by way of example, ‘Seguro X Kilómetro’, a pay-as-you-drive insurance based 100% on telematics. Experts say however Insurtech will mature early in 2020.
Recently, a number of initiatives have emerged in Luxembourg in this area. Since 2018, a yearly Insurtech summit, for example, is being organized in Luxembourg that aims to gather professionals from the insurance sector to foster discussions regarding the latest developments in the Insurtech domain and build up a network. Furthermore, digitization, currently, fosters insurance transformation at a rapid pace in Luxembourg. In particular, FinTechs, such as Earthlab developing insurtech solutions based upon AI, have recently found their way to Luxembourg.
Insurtech in Malta has recently experienced a healthy level of growth which is expected to continue with most products mainly focused on automated online sales. One of Malta's larger insurance companies launched a highly innovative digital saving product, where mobile technology is used to give clients a fully digital saving experience. Through this product, clients are able to reach their savings goals through an entirely paperless, cash-less and presence-less product, which is deemed to be a breakthrough in the savings market and a major insurtech development at European level. Another insurance company raised $2.3 million in funding from angel investors in a bid to change the way personal insurance is delivered. Through the use of an AI platform which automatically evaluates clients' risks, lifestyles and requirements, customers are given an unbiased view on the most suitable insurance product for them.
Insurtech in Malaysia has long been considered something underdog with most attention going to the banking sector. Formerly, insurers appeared to be unconvinced and uncertain about insurtech. They are in doubt on the customer readiness to accept fintech specifically insurtech. Insurtech in Malaysia is still nascent, there is much value it can add to the Malaysian society. The insurers begin to realise that somehow insurtech matters for Malaysians. The regulations aimed to cutting down on agency use, insurance companies have over past couple of years branched out into online platforms and mobile applications, making insurtech more accessible to the customers.
RHB Insurance Berhad (“RHB Insurance”) launches ‘RHB Insurance Mobile App’, which enables its customers to purchase motor insurance policy and road tax with just a single end-to-end mobile enabled application. This would allow users to complete the purchase of their motor insurance policy in three minutes, among the fastest in the financial industry. The customers are able to obtain a quotation for their motor insurance policy, opt to renew road tax, comprehensive insurance coverage for their vehicles and as well as access round-the-clock auto assistance and support at the touch of their smartphone screens.
Besides that, Allianz Malaysia Berhad (“Allianz”) is partnering with PolicyStreet to provide Malaysians with better online access to insurance products. PolicyStreet is an insurance technology company which offers an online curated platform with an aim to provide simple and affordable insurance solutions that cater for all customer needs. Through the new partnership, PolicyStreet is offering four of Allianz digital products.
Apart from the above, AXA Affin announced their insurtech play AXA eMedic, which focuses on offering low barrier to entry e-medical cards targeted at young professionals and families. AXA Affin has partnered with various companies ranging from insurtech start-ups, telecommunication companies and digital health companies. AXA Affin claims that the entire process of signing up for the product takes less than five minutes and requires no medical check-up.
It has been reported that Singapore is one of the largest InsurTech hubs in the Asia region. Singapore InsurTech companies include GoBear, an insurance plans and financial products comparison platform and Bandboo, a peer-to-peer online platform for people to co-insure one another.
Further, PolicyPal Network, a Singapore InsurTech start-up, is a direct insurance broker that employs machine learning and artificial intelligence to offer digital insurance policies and allow users to select and manage existing policies.
Beside InsurTech companies, there are also notable InsurTech innovation labs in Singapore. For one, Metlife Lumenlab focuses on building new products and services grounded in technology and data to help people achieve richer and more fulfilling lives.