The Real Value from Insurtech — A New Way to Develop Products

The Real Value from Insurtech — A New Way to Develop Products

The long-term sustainable value from insurtech lies in its ability to change how insurance products are created. The economic model behind how startups bring their products to market is bending — no, breaking — the traditional development cost curve. Insurers which recognize this dynamic and adjust their innovation activities accordingly will create more value form insurtech than their competitors.

Insurtech has already gone through at least two iterations in its short lifespan. A little more than a year ago, the market was abuzz about widespread disruption. Now that it is recognized that there is value in integrating insurtech, partnership is the rage. The next phase will see an increase in greenfield operations. Over the next 12 months, the economics of insurtech development will result in a significant increase in spin-offs and stand-alone propositions.

The reasoning is this – economics will motivate different behavior. Traditional insurance product development is typically characterized by these approaches/tools/techniques:

  • Product or process-centered design
  • Waterfall development (although agile techniques are catching on)
  • Centralized, on-premise infrastructure
  • Package or custom-built software
  • Periodic release and control procedures
  • Service-oriented architecture (SOA) integration

Contrast that with insurtech operations. They are typically characterized by these approaches/tools/techniques:

  • Customer-centered design focused on delivering a minimal viable product as quickly as possible to the market
  • Agile development using small teams
  • Cloud infrastructure
  • Microservices architecture
  • Use of DevOps to control updates
  • Use of open source software
  • API integration

Here is where the economics comes in. Without reading ahead, answer the following question:

If you spend $1 delivering a specific set of functionality in the traditional approach,
what amount would be needed to deliver exactly the same functionality using the new development approach?

I have been asking this question for the last two months. It is a tricky one, because the best input comes from the limited number of people who have delivered insurance products in both the traditional and the new development approach. These few professionals have “lived” both environments. My sample size is small so far, but I have polled about 30 people.

The answer ranges between 20 and 30 cents on the dollar. So, call it a quarter. That means that a $4 million dollar project delivered with the traditional approach is only $1 million using the new tools/techniques. Or, better yet, entire propositions, which include changes to both the insurance product and a new automation platform, can be delivered for under $4 million. (For more on this, see the @Celent_Research report Slice Labs: A Case Study of Insurance Disruption.)

With this cost profile, a greenfield startup approach becomes much more attractive. Investing in a new product/market approach is much less risky given the smaller level of investment. If we marry this with the innovation fatigue expected as incremental efforts fail to deliver sufficient value to the core business, the environment is ripe for spin-offs.

This is not to say that the current “partner with a promising insurtech firm” or the “we want to make innovation part of our culture” approaches will go away. However, expect to see significantly more stand-alone efforts than we have seen in the past.

Immediate adjustments to this opportunity include:

  • Insurers should include multiple start ups in their innovation portfolios
  • Insurance software/IT services providers and venture groups should help both insurers and insurtech firms to set up greenfield propositions
  • Insurtechs should look beyond incremental solutions and apply their talent and techniques to entire insurance propositions

As some of the spin-offs succeed (and most of them fail), insurers will learn how to develop in the new environment and will transfer these techniques to their core business. As a result, the true value of insurtech will not be an either/or choice, but change through absorption of new approaches and techniques.

Insurtech = new way to develop insurance products

Fintech is a Development Opportunity for High Potentials in Financial Services

Fintech is a Development Opportunity for High Potentials in Financial Services

What does the development of high-potential Financial Services employees have to do with Fintech? Possibly, quite a lot. 40-something executives climbing the corporate ladder, or anyone mentoring such a person, or anyone concerned with developing future leaders in financial services – this blog is for you. You have an opportunity to differentiate yourself if you act now.

There is significant energy and investment happening outside of the four walls of financial services companies. The question many incumbents are asking is, “How do we best engage with the new, external innovation ecosystem?” Catherine Stagg-Macey @Staggmacey and I just released a report that outlines a framework for leveraging this emerging business approach (Making the Most of the Innovation Ecosystem: Adapting to the New Insurtech World). The report includes insights from more than a dozen interviews with a range of players in the innovation system including internal company venture capital staff, independent venture capital employees, innovation service providers, system integrators, accelerator, and innovation lab leaders. A central conclusion is that the new innovation ecosystem will eventually mature into a form where financial services firms and startups coexist and regularly form partnerships to improve specific parts of the value chain. A few new entrants may find success as disruptors, but the predominant model will be a mix of joint ventures, partial ownership, and outright purchase of emerging technology firms by incumbents.   

This is very different from the traditional buyer-supplier relationship that financial services companies usually enter into with technology companies. The feedback we received from innovation participants is that differences in culture, process, the speed of decisions (or lack thereof), risk tolerance, and goals must be deliberately managed in order to get the most out of these partnerships.

Leadership experience on “both sides of the fence” – both in the startup and the financial services worlds – will be a differentiator. The candidate with a financial servcies background who can demonstrate an understanding of the challenges in bringing both of these very different worlds together will be very valuable. Those actively managing personal development plans in banks, insurance companies, and capital market firms are encouraged to:

  • Mentor startups though a technology accelerator that is focused on financial services; StartupBootcamp @Sbootcamp, Global Insurance Accelerator @InsuranceAccel, and Plug and Play @PlugandPlayTC are examples
  • Attend technology “meet ups” in your local area to learn about startups in your area and network your way into the community
  • Offer your services as a sounding board for new tech companies, either informally as subject matter expert or more formally as a board member
  • Communicate with your mentor and your H.R. career development resources about your goal to develop the necessary skills to effectively act as a “go-between”

The realization that such a role is valued is just beginning to emerge, so those acting now will be slightly ahead of the curve and well-positioned to step into critical leadership positions.

In Insurtech, Partnership Will Override Disruption

In Insurtech, Partnership Will Override Disruption

There is much discussion in the press and at conferences about insurance incumbents and the disruption that is coming their way. A close examination of what is actually going on reveals that what is being labelled disruption is actually partnership.

Complicating a meaningful discussion about what is happening is clarity around what is meant by the word “disruption”. The term is used so often that it now carries a range of meanings. On one hand, it refers to a specific market phenomenon defined by Clayton Christenson’s theory of Creative Disruption. On the other end of the scale it represents a recognition that technology is changing the industry.

In most articles and presentations the term is not explicitly defined. Many times disruption is used in the context that portends doom for insurers and that predicts that the revolutionary shifts will cause insurers to go the way of the photo film industry or pre-digital music firms. This is a compelling argument given the challenges incumbents face because of the burden of their legacy systems, their aversion to failure, and a habit of extended decision cycles.

However, there are several significant barriers for newcomers to address if they are to displace incumbents. Celent’s analysis of what has happened to date in Insurtech concludes that the need to overcome these challenges results in a model of cooperation rather than destruction.

First, capital considerations must be taken into account. This is not the capital required to build a technology solution. Agreed, it is no small feat to fund the activities required to build, test, pilot, launch, and sustain a technology solution. However, this pales in comparison to the amount of capital required to underwrite risk (pay claims and hold necessary reserves). To date, a few startups have overcome this challenge by securing relationships with primary insurers or reinsurers, but if this is the approach, it is cooperation, not disruption.

A second barrier is regulatory expertise. This is not only a knowledge of regulation, but the ability to account for regulatory requirements from the earliest stages of ideation, through design, to sustained maintenance.  For startups, detailed regulatory experience can be bought, but this is an additional capital expense. It also can be sourced from a partner, but obtaining this assistance is not likely if the startup is a “disruptor”.

Finally, there is the biggest barrier – customers. As examples of this challenge, startups in the P&C and Life space that have been around since 2010 to 2012 have failed to achieve significant scale. In insurance, attracting and retaining customers is much more expensive (there is that capital problem again) and more difficult than in consumer goods.

The inherent challenges faced by both “tribes” argue for a partnership, rather than a replacement, solution. Insurers can address their legacy technology, risk aversion, and decision challenges by working more closely with the new technology firms that actively seek risk and have a bias to action. Startups need risk and regulatory capital and expertise as well as a customer base to serve.

Partnerships between insurers and startups are a new business model. Unlike supplier-buyer relationships of the past, where a contract is negotiated through an extended procurement process, these partnerships must be governed by a common vision and controlled through active communication from both sides. Celent’s research into the best practice in these partnerships emphasizes the importance of adjustments on both “sides” of such relationships. (see report Accelerating Insurance Transformation: The Good, the Bad, and the Ugly of Innovation Relationships).

It will take time to work out the best ways to accomplish this new model, but the barriers faced by both sides will force each to adjust. Economics will drive transformation to occur in a collaborative manner. Success will come to those insurers and startups which are able to make the necessary adjustments to their own preferences, cultures, and working models to create meaningful partnerships.

The predominant Insurtech approach will be one in which startups coexist with, not replace, insurers.

The UK’s First Personal Insurance Policy for ‘driverless cars’: Too early or just in time?

The UK’s First Personal Insurance Policy for ‘driverless cars’:  Too early or just in time?

Yesterday, we received a press release announcing the launch of a new insurance proposition targeted at personal use for ‘driverless cars’ from Adrian Flux in the UK. This news arrives hot-on-the-heels of the Queen’s Speech last month that announced the UK Government’s intention to go beyond its current ‘driverless’ trials in selected cities and legislate for compulsory inclusion of liability coverage for cars operating in either fully or semi-autonomous mode.

As the press release suggests, this may be the world’s first policy making personal use of driverless cars explicit in its coverage (we haven’t been able to validate this yet). Certainly, up until now, I suspect that most trials have been insured either as part of a commercial scheme or, as Volvo indicated last year, by the auto manufacturer itself or trial owner. 

What I find particularly interesting about this announcement is that they have laid the foundation for coverage in their policy wording and, in doing so, been the first to set expectations paving the way for competition.

Key aspects of the coverage (straight from their site) include:

  • Loss or damage to your car caused by hacking or attempted hacking of its operating system or other software
  • Updates and patches to your car’s operating system, firewall, and mapping and navigation systems that have not been successfully installed within 24 hours of you being notified by the manufacturer
  • Satellite failure or outages that affect your car’s navigation systems
  • Failure of the manufacturer’s software or failure of any other authorised in-car software
  • Loss or damage caused by failing when able to use manual override to avoid an accident in the event of a software or mechanical failure

Reflecting on this list, it would appear that coverage is geared more towards the coming of the connected car rather than purely being a product for autonomous driving. Given recent breaches in security of connected car features (the most recent being the Mitsubishi Outlander where the vehicle alarm could be turned off remotely), loss or damage resulting from cyber-crime is increasingly of concern to the public and the industry at large – clearly an important area of coverage.

Given the time taken to legislate, uncertainty over exactly what the new legislation will demand, and then for the general public to become comfortable with autonomous vehicles, I suspect that it may be quite a few years before a sizeable book of business grows.  Often, the insurance product innovation is the easy part – driving adoption up to a position where it becomes interesting and the economics work is much harder.

Maybe this launch is a little too early?  Or maybe it's just-in-time?  Regardless of which one it is, in my opinion, this is still a  significant step forward towards acceptance. I also suspect that some of these features will start to creep their way into our regular personal auto policies in the very near future. I wonder who will be next to move?

If you’re interested in learning more about the potential impact of autonomous vehicles on the insurance industry, why not register here for Donald Light’s webinar on the topic tomorrow.

 

Slice: Insurance disruption in action

Slice: Insurance disruption in action

Most “disruptive” Fintech propositions are actually incremental; Slice.is promises to be an exception.

Celent’s Banking and Capital Markets analysts have tracked Fintech since 2013 and continue to track movements in areas such as payments, digital banking, and blockchain. More recently, our insurance team has begun looking at Insurtech, especially the initiatives coming out of the Global Insurance Accelerator (@InsuranceAccel) and Startup Bootcamp.

One observation emerging from this experience across the three verticals is that most startup propositions are actually incremental innovations. Despite numerous broad claims of disruption, most of the solutions alter part of the traditional value chain. In insurance, for example, start ups target narrow activities such as claims settlement or customer engagement with advanced algorithms, direct distribution schemes, and/or new data sources. Undoubtedly, some will deliver value, but to label them as disruptive is a reach and strikes me as sensationalist.

An exception to such incrementalism surfaced today in the launch of Slice. Its press release today announces $3.9million in funding and describes their approach as one addressing a new market – the on-demand economy – with a new product – one that combines both personal and commercial coverages into a single contract. The stated goal is to not only change the way we work with insurance products, but to change the way the insurance product works. This is why I consider this as one of the very few examples of disruption – delivering a new proposition to a new market.

Slice has worked with primary insurers and reinsurers to develop policies which provide insurance coverage on a per event, time period-specific basis. Their forms combine what is traditionally both personal and commercial coverages in order to address ridesharing, homesharing, and (eventually even delivery) services. It acts as an MGA, sourcing business both directly and also through on-demand apps such as Uber and Lyft driver platforms. Their goal is to close the current gaps that are not addressed by traditional products and cover the exposures which are often unintentionally retained by operators.

It is exciting to see a new market / new product proposition in the mix. Examples such as Slice reframe the discussion around what true disruption looks like in insurance.

Rethinking the role of the intercap

Rethinking  the role of the intercap
The trend-naming fashion of capital letters in the middle of words continues. I believe those “InterCaps”—also known as “BumpyCaps” and “CamelCaps”—are mostly a marketing trick intended to make terms sound important. I find them annoying. The hot example of late is FinTech. Plus its close cousins, BankTech, InsurTech, and RegTech. They’re popping up everywhere, including within the hallowed halls of Celent. We are all guilty of putting a new veneer on something that has been around for ages. What does that capital T in Tech imply, and why do the terms get such rapt attention? Is applying technology to the business of financial services new, and more worthy of our attention today than it was years ago? Is how we manage new technology fundamentally changed? I don’t think so. Maybe the point is to let us collectively off the hook for pursuing technology change so casually (was that it?) for the last 50 years. I can imagine the bank or insurance CIO, late in his/her career, saying, “Hey, if we had FinTech 30 years ago, this place might look a damn sight different by now!” Right, that’s what we were missing: Technology startups! Youngsters in hoodies! The truth behind technology and the financial services industry requires no such defense. Changing the world through application of technology didn’t depend on the arrival of startling new tools, or dorm room genius, as helpful as those might be in today’s world. It required a risk/reward shift. As an industry, we didn’t change because we didn’t have to. Our existence was not threatened by new consumer behaviors. Our livelihoods were not at risk from upstart competitors. We took a hard look at the costs and benefits of new technology, and behaved accordingly. Which meant…changing…slowly. But something is certainly different today. I believe that existential threats are emerging for our industry. We are now at risk. I’m firmly convinced that relationships between consumers and their financial providers are changing, with the industry’s participation or without it. There is a new dynamism, and it is clear that the entire ecosystem is feeling the impact. Instead of looking at FinTech and all the other Techs with an annoyed editor’s eye, maybe I should embrace the way intercaps communicate something important. They’re a stylistic irritation. But they’re also a visual cue that helps us rethink technology. And that is sorely needed in these times of powerful disruption.

Silicon Valley? No, Chilecon Valley

Silicon Valley? No, Chilecon Valley
In previous blog posts regarding fintech in Latin America my position was, and remains, that one of the reasons for being behind is that it lacks of a “Silicon Valley” equivalent. Efforts to create a fintech ecosystem, as Finnovista is doing, become a good alternative to overcome the absence of a geographical pocket of innovation. Particularly consider the market fragmentation of Latin America comprised by 19 countries, some of which have 3M inhabitants to Brazil having +200M. People in most countries may speak the same language but markets are far from being similar just for that. Under (or against?) these circumstances, Chile is working to become Latin America’s Silicon Valley. One of its most attractive initiatives is “Start-Up Chile”, created four years ago to transform the Chilean entrepreneurial ecosystem. It began with a question: “What would happen if we could bring the best and brightest entrepreneurs from all around the globe and insert them into the local ecosystem?” The initiative offers work visas, financial support, and an extensive network of global contacts to help build and accelerate growth of customer-validated and scalable companies that will leave a lasting impact on the Latin American ecosystem. The idea is to make the country a focal point for innovation and entrepreneurship within the region. Start-up Chile, with only four years, is a start-up itself but it has a good starting point and great potential:
  • Chile has demonstrated for years its entrepreneurial spirit, with Chilean companies competing successfully in various industries (air transportation, financial services, and retail, just to mention a few) and a stable economy.
  • This year two Chilean start-ups were the winners of the BBVA Open Talent in Latin America: Destacame.cl, aiming to financial inclusion by creating a credit scoring based on utility payments; and Bitnexo which enables fast, easy and low cost transfers between Asia and Latin America, using Bitcoin.
While other countries and cities in the region are working in offering support to start-ups, it seems Chile is leading the way. Hopefully this triggers some healthy competition in the region, which in the end will benefit all. In the meantime, let’s meet at Finnosummit in Bogota – Colombia next February 16th. Join financial institutions, consultants, tech vendors, startups and other digital ecosystem innovators, to learn how startup driven disruption and new technologies are reshaping the future of financial services in the region. Remember to use Celent’s discount code C3L3NT20% for a 20% discount on your conference ticket.  

Personal musings from one of the world’s first InsurTech incubators

Personal musings from one of the world’s first InsurTech incubators
Last Friday (and flowing into the weekend), I was privileged to take part as a mentor in the final selection process for the first “InsurTech” cohort of the StartupBootcamp’s accelerator programme targeted at the insurance industry. This programme claims to be one of the first specialist “InsurTech” accelerators to be run globally by an independent firm. The programme has attracted pretty impressive backing from the industry with firms like Admiral, Allianz, Ergo, Intesa SanPaulo, LV=, Momentum, LBG/Scottish Widows, Tryg and UnipolSai taking partnership roles. To give you an idea around the scale of achievement of those who got through, the process started with circa 1.3k interviews, 250+ applications, 42 short-listed ideas and then whittled down to just 18 finalists…from which just 10 could be accepted onto the program. These ten firms will now go on to be mentored during their start-up phase, have their ideas challenged and further developed from people within the industry and independent entrepreneurs and, in doing so, build the network they will need to both attract funding and find new clients. Over the two days that I spent with the finalists, there were a number of themes that came through the submissions. Here are my personal musings: Data featured strongly across nearly all of the initiatives. Having access to either unique sources of data (whether from a home move, from a travel plan or from connected world) and a model for assessing underwriting risk appeared to be a winning combination. Digital engagement, aggregation and ‘robo-advice’ are hot topics. What I found most interesting was the focus on underserved markets, whether targeting prospects with poor health records, in difficult to reach populations around the world, or educating Gen-Y/Z of the value of insurance. Addressing underserved markets profitably is a big issue that the industry often struggles with. A fertile area if tackled well. What impressed me the most, however, was the passion and sense of purpose displayed by the teams in fixing something that just feels ‘plain wrong’ to them. The Internet of Things (IoT) is going to change the industry’s client engagement experience and liability profile. Five initiatives related to the IoT were submitted. Three were focused on wellbeing, one on the connected home and one on drones. Although it didn’t quite make it into the final ten, I found the drone initiative fascinating. With Amazon and others itching to launch commercial drone services at scale, this is a market that is set to grow. Drone insurance could be the next ‘fleet’ or ‘auto insurance’ (as was pointed out by my fellow mentor Charles Radclyffe). Certainly, the current risk models in use today are immature and unlikely to be adequate for a world where autonomous vehicles are delivering packages across our heads 24×7 (assuming the regulator allows it). Sadly, the drone initiative didn’t quite make it into the final ten. Personally, I wonder if it’s just maybe a little too early, but perhaps still one to watch for the future? As with anything IoT related in insurance currently, each initiative will face a shared challenge. Although the proposition concepts may be compelling, the instrumentation rate of adoption will ultimately set the pace for growth. The IoT is still in its infancy across the industry and convincing prospective clients to share their instrumented personal data is no small undertaking. Data permissions are a growing concern for both individuals and regulators. It was refreshing to see some of the propositions pitch personal digital vaults as part of their propositions, whether for managing data from connected devices, personal wellbeing or personal belongings. Although it’s not yet clear how the market will develop for these services or how they will be monetised beyond a simple subscription model, services like these may suddenly find themselves in the limelight once regulators step in to protect personal privacy. Regulatory compliance. It wouldn’t be the insurance industry unless there was at least one idea focused on regulatory compliance. What if you took all of your regulatory compliance reports produced, aggregated them, and then analysed them? A really simple idea without a huge amount of cost involved. It was a refreshing couple of days. I look forward to seeing how their ideas and propositions develop over the next year. If you’d like to know more about each of the final ten, details can be found here.

In the quest of making fintech a reality in Latin America

In the quest of making fintech a reality in Latin America
The fintech ecosystem has been evolving and maturing in Latin America for the last three years mainly due to the effort of some participants, including Celent, to connect all key players of the fintech ecosystem. Unlike the USA where there are geographical pockets of Innovation, as Silicon Valley, that brings the actors together based on proximity, nothing like this exists in Latin America Furthermore, the individual (country) market size is significantly smaller when compared to the USA. Fortunately technology allows business to be conceived global or at least regional and therefor provide the scale needed for a fintech start-up to be viable. For these reasons, it is essential to work an ecosystem, a network of participants, regardless of their geographic location in Latin America. I do not foresee a sustained and increasing development of fintech start-ups and initiatives in the region without the existence of this ecosystem. In this last three years we have seen many cases of “me too” fintech start-ups. While this is not bad, it doesn’t show creativity either. Happily we have also seen completely innovative ventures, especially around blockchain, but without this being the sole focus. There are all kinds of fintech start-ups; in payments, leveraging the use of data and focusing on customer experience; in loans, traditional and new models such as crowdfunding and Peer-to-Peer (P2P); in insurance distribution and risk management leveraging the Internet of Things (IoT) just to mention a few. How is this playing for the insurance industry? I believe that the insurance industry is at a tipping point in fintech although I see it more developed out of Latin America. I believe there is a great opportunity gathering and using data for underwriting, claims, and fraud detection; taking advantage of the IoT to develop new personalized products and working on claims prevention; in distribution enabling new channels and becoming more digital and technology reliant, and even using P2P models; engaging with customers in new and improved ways; and discovering how disruption in payments can be leveraged in insurance. In insurance (P&C, life and health) we are seeing that traditional players start moving towards digital environments and interactions, experimenting with technologies such as telematics and with the opportunities arising of the IoT. In Latin America this is incipient, but we see that it improves every year. According to our most recent research 41% of insurers in the region have a formal innovation program which has been running, as minimum, for 2 years and 35% indicated that it doesn’t have a formal program yet. The fact that only 8% of them are focusing on disruptive innovation allows us to think that change will be slow, mostly based on incremental innovation, unless some external factor can accelerate change. The main insurance companies globally are either funding accelerators, have created their Innovation labs, or have established funds to invest in fintechs. However, innovation is often difficult for established players and initiatives of new players appear seeking mainly to innovate in product, distribution, customer experience and looking to benefit from the IoT for both underwriting and claims. Ingenie, one of the pioneers in offering a pay-per-use model based on telematics alongside its strategy of risk prevention, is not really an insurer but a technology company that was forced to go direct as a consequence of the lack of interest from established insurers in adopting a pricing and underwriting model based on the use and individual behavior of the insured. This model is no longer a novelty and has been adopted by many insurers around the world; it is even being replicated in property, life and health insurance. Recently John Hancock announced the launch of an incentive program based on the insured to share data related to its health, but it is not the only one; Discovery was one of the pioneers to launch it many years ago in South Africa. Oscar offers it for health, along with a digital-only user experience. Friendsurance, in Germany, has adopted a model based on social networks and P2P insurance that although it is oriented to auto, it could be applied to other risks (including microinsurance). In parametric insurance (aka index based insurance) using sensors and data, we have seen initiatives as Kilimo Salama aiming to market agriculture insurance massively, in segments that otherwise was not viable to serve. This is indeed an interesting case of extreme digital, with innovation applied in all the insurance life cycle. An area that we still see relegated in Latin America is the widespread use of data, a historic deficit that in many cases can be represented by the difficulty of something as simple as not having a claims database at industry level. Blockhain, for its novelty, is another area where insurers haven’t yet stepped in. Distribution, in the region, is mostly not under the control of the insurer; the direct channel is insignificant in volume when compared to the intermediated business, therefore innovation depends to a large extent of the capabilities of the distribution channels to adopt new technologies and rethink their own models. In this sense banks distributing insurance, where bancassurance is permitted, as well as the largest brokers seem to be in a privileged position to capitalize this opportunity, but suffer the same challenges that other large established players and the final word has not been said yet. Could an external player, someone that understands digital, data and customer experience, change the market dynamics? They are certainly doing so in banking, especially around payments. Google has already entered the insurance industry, on the distribution side, in United Kingdom and the USA. The founders of Alibaba and Tencent Holdings Ltd acquired shares of Ping An Insurance Group Co of China Ltd in a deal valued at $4.7 billion of dollars in December 2014, in what I see as another major threat to the industry from the outside, but taking positions to be able to integrate the business, from distribution to assuming and managing risks.
Three Giants in Internet Finance

Three Giants in Internet Finance

I foresee that in personal lines insurance we will get used to buy from companies that offer the best digital shopping experience, being these insurers and intermediaries that were able to adapt by learning how to compete in a digital world, or new players coming from the digital retail sector. In commercial lines I don’t foresee a threat from the outside in the short or medium term regarding distribution, but a deeper use of technology by insurance companies to become more efficient in the marketing of insurance. The level of advisory and specialization required makes it difficult to envision it can be transformed into a digital experience of purchase and servicing in a short-medium time frame. Nevertheless, in both cases, insurers will continue to be the one assuming risks, just as how banks fund and service credit lines. In this sense insurers must offer flexibility and agility in creating new products, but mainly with the ability to do it based on the use of data, the IoT, and easily integrating with its ecosystem. We will be meeting on February 16th 2016 in Bogotá – Colombia at Finnosummit to discuss the opportunities and challenges for the fintech ecosystem in Latin America. Fintech start-ups can participate of the Finnosummit Challenge, a great opportunity and very interesting prizes for winners. If you want to attend Finnosummit be sure to use Celent discount code: C3L3NT20%. See you there!  

Why private equity investment in insurance makes sense

Why private equity investment in insurance makes sense
As many of you know, the latest buzzword is FinTech. Considerable money is coming to vendors that are attempting to define the next major technological leap in financial services. This chart, from CB Insights, shows the explosive growth in FinTech investments. It is an exciting time. CB chart What I find interesting is that Private Equity firms are also finding the more traditional insurance market interesting. For example, Moelis Capital made an investment in Insurance Technologies last fall. Insurance Technologies focuses on the front-end of Life insurance, including illustrations and electronic applications. More recently, Moelis Capital announced an investment in FAST Technologies, which focuses on the Life Policy Administration System (PAS) space. Another example is Thoma Bravo, which announced in August that they had purchased iPipeline, another competitor in the front-end space. To me, these investments make sense. They may not be as technologically sexy as something like roboadvisors, but the market is ripe for improvement. The age of the policy administration systems in use is somewhat staggering, with systems that have been in production for decades. On the front-end, the Life insurance market is still surprisingly dependent on a paper application. As someone who has been a part of this space for many years (measurable in decades), it is nice to see that the market finds room to improve.