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?
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.
We are not aware of any insurtech business in the Cayman Islands.
We are unaware of much insurtech business being conducted in Cyprus. Our experience indicates that insurers in Cyprus have found it difficult to keep up with fintech developments owing to the size of the market and lack of contrations from overseas.
That said, the industry is generally becoming more aware of the possibilities in this area. This can be demonstrated through various events and seminars which are insrutech-oriented such as the Hackathon cy #insurtech. Hackathon cy #insurtech focused on the development of applications (Minimum Viable Products — MVP) and operational innovation in the field of insurance and it was held in Cyprus for the first time in January 2018.
Generally, the insurtech business is still at a low in Denmark and way behind fintech and especially areas such as payments. However, notably Tryg, the largest insurance company in Denmark, has launched their own incubator co-working space called the Camp with room for up to 300 entrepreneurs.
Current Danish insurtech businesses are primarily working within intelligent insurance software, insurance technology, reduction of insurance fraud, in-surance and price comparison services and blockchain.
Also in Finland, insurtech is currently lagging behind other areas of fintech. However, the field of insurtech is expected to grow rapidly already within the next few years. Most of the insurtech business models at the moment are related to smart insurances. Some Finnish insurance companies have developed, piloted and issued smart life insurance and smart home insurance products.
As mentioned hereof, Insurtech are not inefficiently represented in the French Fintech landscape:
Insurtech in France are divided into four categories of services:
- 40% belong to the services to insurers and brokers: they are technology providers for insurers. For instance, Shift Technology offers a platform that allows insurers to detect fraudulent returns;
- 38% belong to the insurance broker: they offer digital insurance solutions for individuals or professionals (often more flexible and less expensive) but do not cover the risk;
- 12% offer services to individuals and businesses: these are solutions inventories of goods to better make his statements to his insurance, or application for making state of affairs;
- 10% offer collective insurance services: this makes it possible to cover a community of insureds who have similar needs.
InsurTechs are getting more and more popular in Germany. The political and so-cial climate is positive as customers are getting more and more familiar with technology based offerings and the convenience of it. A famous InsurTech is clark: https://www.clark.de/de/start4
Traditional insurance firms in Gibraltar are becoming increasingly receptive to the idea of insuring fintech businesses, particularly in respect of those business seeking authorisation from the GFSC. However, currently, insurers are not ‘jumping aboard the fintech bandwagon’ in regards the adoption and integration of fintech into their businesses. Therefore, we expect a slow adoption of financial technology for this particular sector of the industry.
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 of the most suitable insurance product for them.
There are over 100 insurtech start-ups currently operating in Israel (which is more than double the number of insurtech companies since 2015) and the technology of a growing number of other Israeli start-ups can also be used in the insurance sector. Lemonade and Next Insurance are two leading Israeli companies in this field. In addition, two insurance companies that allow customers to receive all services digitally, recently received licenses from the local regulator. Finally, a US-UK US$100 million venture fund recently announced that it intends to invest in the Israeli insurtech sector and is expected to invest tens of millions in Israeli insurtech companies.The insurtech companies are focusing on technologies that assist insurance companies in providing more efficient, accessible and personalized services to customers as well as in their risk assessments when issuing insurance policies.
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.
Celent Fintech Survey states that as of July 2017 (SALDÍVAR, Belén, El Economista, Las insurtech tomaran fuerza en seguros, 2018) only 15 of the 238 fintech start-ups in Mexico, are part of the insurance sector; that is, 6% of the total. Nevertheless, experts state technological innovation and the Insurtech will mature before 2020.
Insurtech companies are to be regulated by the National Insurance and Bonding Commission, however, to date there are no specific provisions in this regard.
British Virgin Islands
Insurtech has not yet penetrated the BVI domestic insurance market. This partially reflects the compact size of the marketplace which inhibits investment in technological innovations that may require mass to be effective. Also traditional insurers have to underwrite and manage catastrophic risks which dominate premium pricing and insurers will therefore be less inclined to buy into all the innovations available.
SSEK: Insurtech in Indonesia is at the moment an emerging market, but compared to, for example, payment systems, insurtech takes a back seat. The few insurtech businesses that have appeared take the form of microinsurance.
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.
US investments in new insurtech companies peaked in mid 2017, and has been steadily declining, while investment in established insurtechs has increased during that period. Accenture reports that the most popular insurance segment for investment is in property & casualty, or general insurance, which accounts for about 42% of insurtech investment. The majority of insurtech investment continues to come from private equity and venture capital funds.
Insurtech business is present in the UAE, however it is developing in the UAE at a slower pace than other areas of fintech such as payment services.
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.
Insurtech in Ukraine is presented by the number of companies that generally offer platforms that join insurance agents and their clients with the purpose of selling ordinary certificates of insurance (for instance, automobile liability insurance certificates).
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.
Insurtech is at a nascent stage in India however given the scope of new business models, applications, processes and products the Insurance Regulatory and Development Authority (IRDAI) set up a Working Group to examine innovations in insurance involving wearable/portable devices. It is advocating the integration of technology in the process of underwriting risks, processing claims, and the conduct of insurance business itself. While insurance companies have been quick to adopt outreach initiatives, such as, the use of e-forms, remote underwriting calls, etc., considerable effort is required to be made to integrate technological innovations in product design by insurance companies. Although, the IRDAI has de-regulated the tariff-fixing for insurance products, product design continues to be strictly regulated.
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;
- 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.
Although insurtech is on the agenda of many Dutch insurance companies, insurtech is known to be running behind other areas of fintech. Within the Netherlands, in general there is a current development of existing insurance companies to introduce new IT-solutions to change and improve their service to their customers and to exchange data with the customer. An example is providing customers with the opportunity to make claims under their insurance directly through an app, instead of through a written claim form. In addition, some insurance companies provide discounts on insurance premiums for car insurances if a customers shows safe behavior in traffic. In such case, travelling data is exchanged between the insurance company and the customer. On a more experimental basis, some existing insurers introduce for example peer-to-peer insurance, but so far these initiatives do not represent a substantial portion of the Dutch insurance market.
Some experts in the Dutch insurance market estimate that fintech solutions will evolve towards a situation in which insurers “plug” their insurance services into an existing economic “ecosystem”, for example regarding all services that relate to a household’s home.
The insurance industry in China is highly regulated by the China Banking and Insurance Regulatory Commission. The obtaining of an insurance permit in China is an especially challenging and time-consuming process.
Compared to all other fintech areas, insurtech is lagging behind, however, many of the insurance companies are scaling up their own digital expertise to different extents. Traditional players are the insurance companies such as PICC (中国人民保险) and Ping An(中国平安保险). The new players are companies such as Zhong An Insurance(众安保险) andTaikang.cn(泰康在线), and challengers are companies such as Baidu, Alibaba and Tencent, who have all entered into the field of digital insurance.
There has been competition and cooperation among all the players at the same time, which allows the players to learn from one another and facilitate the dealing progress. On the other hand, some of the traditional players have set up network platforms for the distribution of insurance products, and they also collaborate with the fintech companies to different extents, the latter can provide the incumbents technologies including network technology supporting and auxiliary services.
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.
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.