With $2.32 billion in global investment in 2017, InsurTech has firmly established itself as the trend of the future for the insurance sector. From wearable tech that tracks users’ healthcare needs to automated compliance processing, technological advancement is already transforming the sector and will have significant benefits for both businesses and consumers.
For insurers, machine learning and big data analytics are incredibly powerful tools enabling businesses to refine and tailor their products to meet customer needs, optimise service and reprice risk in real time. Back-end digitisation can simplify processes, minimise fraud risk and deliver considerable cost savings – vital in an industry with an estimated 40-60 cents per dollar of excess cost in the value chain. And InsurTech helps insurers keep pace with other industries and find new ways to insure 21st-century business risks like cybersecurity.
InsurTech can also bring a new level of agility and direction to the reinsurance industry, effectively digitising the market, modernising offerings and deploying innovations across the value chain. In fact, a recent industry report has shown that 45% of reinsurers already work with InsurTech partners.
Data-analytics technology offers reinsurers an exceptionally granular understanding of risk, allowing them to price commercial sectors as niche as physiotherapy or flight interruption. Blockchain applications alone – which enhance risk understanding, speed up claims settlements and ensure compliance – could deliver industry-wide savings of $5 billion to $10 billion.
And reinsurers also have an opportunity to market their traditional offerings to the new breed of digital-first customer-facing InsurTech startups who need reinsurance of their own.
InsurTech offers vast improvement to the customer experience, and its full impact is yet to come. Forward-thinking companies are already offering customisable insurance products that can be tailored based on the coverage customers want and need – helping them to save money with relevant packages. In a digital world, customers have come to expect 24-hour customer service, such as AI chatbots, and smooth claims processes with minimal paperwork and rapid repayment; startup Lemonade claims to have approved and repaid one claim in a record three seconds.
InsurTech and digital advancements will be even more important for emerging markets than in established global centres.
Reaching emerging-market populations with suitably tailored and priced products, especially given the lack of customer information like credit histories, has been a significant challenge for the industry.
Now, InsurTech enables businesses to target customers through mobile phones or social media with new offerings such as ‘microinsurance’ for small-scale assets like livestock or land, or short-term policies valid for just a few days or weeks.
As the gateway to the rapidly-developing MEASA region, where the population of 3 billion potential customers is remarkably underpenetrated, Dubai has developed as a global centre for FinTech. MENA FinTech companies have raised over $100 million in the last decade – expected to double by 2020, as innovation tops government agendas across the region.
Now, we are making progress as an equally-significant hub for InsurTech, with the UAE being home to the third-largest number of InsurTech startups in the MEASA region and offering 40% of the funding.
DIFC, the region’s leading financial centre and one of the world’s top ten financial and FinTech hubs, already has a growing FinTech ecosystem in place and offers a platform for InsurTech innovation. Our $100 million fund is set to accelerate the FinTech industry’s development by investing in start-ups from incubation through to growth stage, and in 2017 we launched a FinTech accelerator – FinTech Hive at DIFC – providing a platform for cutting-edge technologies in the region.
For the 2018 cycle, over 20% of more than 300 applications created were for FinTech Hive’s new dedicated InsurTech stream – reflecting the sector’s significance, future growth potential and willingness to adopt innovative new technologies.
This article was first published in the September 2018 issue of Global Reinsurance.