inspiring threat (part 2) ~ Insurance Academy

Where is insurtech currently positioned?

Not unlike fintech, insurtech focuses on the retail segment. 75 percent of the insurtech business targets the retail segment while the rest is in the commercial segment. Insurtech targets millennials and young people. Millennials and young people tend to value the convenience of transacting and like to execute transactions remotely. If necessary, they want to transact without direct interaction with institutions. That’s why the process of submitting insurance and claims through digital channels that are not limited by space and time will be a priority.

Although insurtech focuses a lot on the retail segment, insurtech is starting to target the commercial segment. However, the commercial segment of insurtech focuses more on loss prevention and efficiency.

Based on research from McKinsey Panorama Insurtech, in the entire insurance value chain, insurtech actively innovates distribution channels (37 percent) and pricing (23 percent). In terms of distribution, 75 percent of insurtechs focus on distribution, by making products available to customers by facilitating product comparisons and simplifying the buying process. This activity builds on the success of aggregators such as comparethemarket.com or confused.com—e-commerce pioneers who moved into financial services in the 21st century and are now leaders in digital insurance.

The insurtech form strongly adopts and adapts new technologies. Several new technologies support specific product innovations including micro insurance, used-based insurance, and peer-to-peet insurance. Others have applications in a variety of industries including machine learning, robo-advisory, and the Internet of Things (Figure 2).

Insurtech is looking for a value pool

Insurtech clearly represents a market risk for incumbents. With their agile operating model and digital innovation, they will initially target the attractive profit pool that digital unlocks and capture share among specific customer segments. Start-up Insurtech is just getting started to tackle a potential set of values; insurtech is still in its infancy, but is already starting to have an impact on the industry. The global insurance industry represents a premium volume of $4 trillion according to the McKinsey Global Insurance Pool. At the same time the industry is currently achieving relatively low growth rates in the regions where insurtechs have the highest penetration, namely Western Europe and North America. In this region only 4 years of growth in health significantly outperformed GDP growth with 6.2 percent against GDP growth of only 2.7 percent while P&C and life insurance only achieved growth of 3.0 percent and 2.5, respectively. percent.

Figure 3 below shows the perinsurtech value proposition based on the McKinsey Panorama database which underscores how insurtech is invading the market. Forty percent of insurtechs have a key value proposition built on finding new ways to grow, namely by introducing new products or services or entering new segments; while another 22 percent focused on lowering acquisition costs by providing customers with digital interface services and using a direct model. The rest of the insurtech companies build their value proposition around reducing policy admin fees, claims management, etc. through digitization and process streamlining.

When it comes to finding ways to grow, one of the keys to insurtech’s success is that they tap into untapped markets and address unmet needs. BIMA, a mobile microinsurer based in Sweden, provides low premium insurance in emerging markets that have relatively high mobile penetration and very narrow insurance coverage. By providing mobile insurance in this target market, BIMA achieved high growth in 2011. Now BIMA has 20 million customers in 15 countries in Africa, Asia, and Latin America by providing pay-as-you go insurance and mobile health services for people. -people who live on less than $10 a day.

The presence of insurtech in making inroads into the insurance industry might increase the overall growth rate of the industry, and will surely gain market share with their digital model. Investors and industry talent are believers. Lemonade, the US-based peer-to-peer insurance company, has attracted significant funding from key investors, as well as talent from leading insurers, with a promise to “uberize” insurance. The start-up may or may not succeed, but the pre-launch reception and initial results are an indication of the level of disruption that can be expected.

Next: How insurtechs differ from incumbents