Insurtech 101

By Katie Langmore | Vol: 40 Issue: 4 | Nov 2017
Insurtech 101


 A spinoff of the word fintech, insurtech refers to the application of new innovations and technology that are dramatically disrupting the insurance industry, from apps to artificial intelligence (AI) and lots in between.

The aim is to provide new tech-driven products and services that deliver savings and efficiencies compared with the traditional insurance model. At the same time, new streams of data can inform consumer risk profiles and allow insurers to price premiums according to observed behaviour. For example, greater personalisation of insurance is occurring through usage- and behaviour-based models that capture driving data and offer insurance based on factors such as low mileage and sporadic driving.


Insurtech was born as part of the global startup revolution, through which innovators solve problems or pain points within an industry using technology.

These startups are agile in an industry where some traditional players have become too big, too slow and encumbered by legacy systems. Friendsurance was among the first startups in the insurance market, launching a peer-to-peer concept in 2010 whereby a small group of people supported each other in the event of a loss.


Insurtech is part of a larger interdependent ecosystem, incorporating insurtech startups, incubators, accelerators, investors, regulators, government and all incumbent players that sit within the insurance value chain. Increasingly, the startups are collaborating with the existing industry leaders.

It’s big business, too. American tech company CB Insights says total funding to insurance startups last year hit US$1.69 billion. More than 50 per cent of insurance tech deals in 2016 went to US-headquartered startups, with the United Kingdom, China, and Australia among a diverse spread of companies embracing the trend.


“One of the outcomes of insurtech is that insurance will be able to move into risk mitigation and prevention, rather than just risk profiling and payouts,” says Simon O’Dell, who is part of the leadership team at Insurtech Australia, a not-for-profit member organisation and ANZIIF partner that helps insurance companies work with insurtech start-ups.

Imagine, for instance, a device that sits in the old water pipes of a building and alerts an insurance company when a water leak is about to occur – just in time to manage the risk. Or consider a device a person wears that warns their doctor when a major health event – perhaps a heart attack or a stroke – is about to happen.


Apps, software, the Internet of Things (IoT), artificial intelligence, machine learning, robotics, blockchain – they are all technology factors that can lead to market efficiencies and better distribution of insurance products and services. As the connection of devices such as smartphones, wearables, tablets and household appliances becomes an increasingly common part of our lives, likewise IoT is having an impact on trends in insurance, such as distribution.

“It’s enabling a consumer to insure something the moment they purchase it or need it,” says Insurtech Australia founder Brenton Charnley, who has been working with Cover Genius, one of Australia’s fastest-growing insurtechs, on website plugins for this purpose.

AI is playing a big role in insurtech. “Some companies are using AI and machine learning to trawl large data sets and predict and identify when a false claim comes in,” Brenton says.

“We’re now also automating things that touch the consumer and that’s making people nervous, but it has applications that could be great for the industry and the consumer.”


The most exciting element of insurtech is the new product lines being created in response to the fast-evolving needs of the consumer, according to Brenton.

“New areas are coming up in response to share-economy needs. This category of insurance – for consumers who also derive income from their assets, coined ‘prosumers’ – supports people who need some commercial terms from their insurance without requiring a full commercial policy. ” This could be an Airbnb host, for example.

Single-asset insurance is also evolving, driven by changes in asset ownership, Brenton adds. “A millennial might not own a home or have home insurance, but they still have assets they want insured. So this insurance, through an app, gives them an easy way to set up insurance for single assets.”

Such an app, created by insurtech company Trōv, can then cross-sell insurance. It recognises it’s been downloaded from an iPhone, and will jump in and ask the customer if they would like insurance for their phone too.


Partnerships between fintechs, insurtechs, companies and insurers are in vogue. “Most companies now either have accelerators or incubators, where they invite insurtech companies to come in and work on their premises, or they have venture capital arms where they look to invest and take an equity stake in an insurtech business,” Simon says. “Companies now know that if they’re not an early adopter or a fast follower in tech innovation, they’ll get left behind.”


Professional services firm PwC’s strategy team, DeNovo, expects the rise of new ride and car-sharing business models, or similar sharing economies such as Airbnb, to create demand for new insurance solutions around liability and personal injury. Then there is robo-advice, whereby new models will emerge on insurance needs as automated advisors take advantage of advanced analytics and AI.

In such an environment, inaction is not an option for insurers. As Simon commented in a recent article for ANZIIF: “There exists not just an opportunity but a responsibility for the insurance industry to respond, and respond well.

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