It’s never too early to start doing end-of-the-year pieces. Tearsheet asked some of the top names in the insurance and insurtech business about their thoughts on top trends in the industry going into 2019. The following is a compilation of these ideas by dozens of insurance and insurtech executives, entrepreneuers, and investors.
2019 as the make-it-or-break-it year for insurtech startups
If 2018 was a breakout year for insurtech, 2019 bodes to be a year of reckoning. Money and interest has flowed into the sector and expectations are high.
Craig Schedler is a venture partner at Northwestern Mutual
“2019 will be a critical year for insurtech. Startups in all sectors of insurance have attracted a tremendous amount of interest and capital in recent years. It’s going to be time for insurtech companies to start demonstrating that they can deliver on the promise transforming insurance.”
Caribou Honig is cofounder of InsureTech Connect
“My number one trend for 2019 is the APIification of the insurance stack. I’m seeing not only insurtech companies but the incumbents as well building out their capabilities with an API architecture and building out business models that leverage it. I think that’s going to be impactful for 2019 and beyond.”
Sam Friedman is the insurance research leader at the Deloitte Center for Financial Services
“Insurtech has reached a major inflection point, as the Deloitte Center for Financial Services observes in a report coming out the first week in October. While the number of brand new startups have fallen dramatically over the past two years, insurtech financing remains as robust as ever, with insurers and outside investors focusing their attention on more mature players further along in developing solutions with demonstrable results and proven potential.
Meanwhile, rather than competing with insurers, the vast majority of insurtechs have settled in as collaborators with incumbents, looking to improve carrier capabilities across the organization, from distribution to underwriting to claims. Personal lines is way ahead of commercial lines, and both are much further along than life and annuities, but that will likely shift as insurtech innovations in personal lines are adapted for other industry sectors.”
Joe Beneducci is the founder and CEO of ProSight Specialty Insurance,
“While traditional insurers and insurtechs have their respective strengths, their respective inadequacies and deficiencies will become more visible in 2019 as customer demands increase. For example, 2019 will reveal insurance companies’ inability to provide efficient, simplified customer experiences as customers become less patient with the traditional insurance purchasing process.
And while insurtechs continue to gain momentum with their slick customer interfaces, a growing set lack substantive insurance experience and knowledge for how to make a profit with their early-stage ideas. In order to succeed moving forward, both traditional financial services companies and insurtechs need to gain better visibility and insight into customer needs in order to meet their changing expectations.”
Insurance moves to the cloud
Beyond testing new business models, the insurance industry has been slow to adopt cloud technologies. That’s changing as IT budgets allocate money towards digital initiatives. Moving data to the cloud is just an early step in digitization of the industry.
Tony Jacob is head of business development, insurance at Amazon Web Services:
“We’ve seen cloud adoption increasingly gain momentum across insurance. We’ll see that continue in 2019, although the areas of focus will expand into interesting areas involving channels and data. While early work focused on transforming the data center and moving workloads to the public cloud to retire technical debt and free IT budgets to better fund transformation and growth initiatives, insurance companies are broadening their use of cloud to digital interactions, digital signals, and the premium growth or loss control opportunities they can enable.
For example, insurance companies like Asurion and Liberty Mutual are using cloud-based data lakes and AI/ML services to gather and analyze larger sets of unstructured and structured data to improve customer views, identify new customer insights, deliver superior service experiences, and identify premium growth opportunities. At the same time, Liberty Mutual and others are introducing more conversational digital channels that, through more frequent policyholder interactions and by delivering value-added services, are creating more opportunities to generate and capture more signals that feed into the improved customer insight.
The use of data lakes, artificial intelligence, machine learning, serverless computing, and natural language skills and voice, enables the delivery of new digital channels, the capture and analysis of new digital signals, and even the event processing and triggers that turn those signals into automated processes and actions. The initial interest in the public cloud may have been driven by IT cost reduction, but the combination of digital channels, digital signals, and automated processes will drive the next period of dramatic innovation in the insurance industry, with a focus on business value.”
Insurtech attacks the back office
Innovation in insurance and insurtech not only targets the front office, but it’s beginning to take hold in the back office, too. Helping to streamline flows and offline processes, technology is now focusing on automation.
Ruth Foxe-Blader is a director at Anthemis
“Insurtech will be less and less about insurance: watch the mobility space, prop-tech and biotech. Don’t underestimate the boring, expensive parts of the business: claims handling, policy admin and…all that paper! Insurtech has been slowly moving toward the backend of the value chain, attacking data and analytics, underwriting and, fundamentally, risk engines from P&C to life and health.”
Julien Victor is managing director of Effisoft
“The insurance industry is undergoing a complete transformation because of constant innovation spurred by big data, artificial intelligence, blockchain, business intelligence and cloud. The big challenge in 2019 is automating processes while controlling costs and overcoming the technological constraints. The automation of reinsurance operations is a good example. Insurers are moving forward with contracts centralization, recoverables tracking, security improvement, and regulatory compliance simplification.”
Sally Prather is vp of insurance services at Paychex
“With the growing focus on technology, digitization, and data transparency, small commercial and mid-sized employers are looking for greater access, speed, and customization for their business and their employees. For example, new tools are available that allow employers to manage their workforce in the cloud, from recruiting to onboarding, all the way to benefit elections. These solutions reduce the administrative burden on employers while empowering employees to personally manage their information.
At the same time, data transparency positions insurers and brokers to customize programs that fit the risk profile of each business – eliminating much of the back and forth that comes with setting policy limits and completing manual forms. Employees are looking for this same customization from their employer when it comes to benefits. Some of the trends we see emerging are more flexible paid time off policies, personalized voluntary benefit offerings, and financial wellness benefits that help with things like school loan repayment.”
Matt Jones is a director at Anthemis
“Insurtech has been slowly moving toward the backend of the value chain, attacking data and analytics, underwriting and, fundamentally, risk engines from P&C to life and health. Insurtech will be less and less about insurance: watch the mobility space, prop-tech and biotech. Don’t underestimate the boring, expensive parts of the business: claims handling, policy admin and…all that paper!”
Insurance becomes more personalized and friendly
As a massive, regulated industry, insurance was one of the laggards to embrace new technologies. That’s changing and where it’s beginning to be felt is on the front-lines of the business. Personalization and customization technologies, drawing from big data and AI, are beginning to make the industry feel softer and friendlier.
Yaron Ben-Zvi is CEO of Haven Life
“Meaningful engagement: Historically, the insurance industry’s relationship with customers has been limited to a monthly bill or claim submissions. As a whole, the industry is beginning to recognize that there’s a need to create a more meaningful relationship with customers. I predict we’ll see this increasingly come to fruition in the coming year in the form of ancillary benefits that insurance companies and agencies know their policyholders are interested in.
Better pricing personalization: New entrants to the insurance industry are bringing cutting-edge technology that takes a data-driven, more personalized approach to pricing. The result is that insurers are becoming more sophisticated in their underwriting, which enables carriers to more accurately assess risk for individuals. The fewer assumptions an insurer is making about an applicant usually results in more affordable coverage.
Greater automation powered by AI: Greater automation will be seen across the entire customer experience and value chain. This will be seen in things like the adoption of chatbots for simple requests or quoting, to application taking and real-time underwriting, to the analysis of complex personal data points from third parties. Automation enables the industry to move faster, smarter while also helping to identify where real, human support is most needed.”
Alex Maffeo is the CEO of Boost Insurance
“There are three critical issues faced by entrepreneurs in the insurance industry:
- the glacial go-to-market pace for new products
- the integration and data flow issues experienced between high tech startups and low-tech insurance companies
- the cultural disconnect between incumbents and startups
One of the biggest trends in the industry has been steadily gathering steam and creating massive success for companies who play into it (Oscar, Hippo, Lemonade). Today’s customer wants to interact less with their insurance company and have a one-stop shop solution (think: renter’s coverage directly through Airbnb at the point of booking).”
Steven Burton is vp of digital strategy at Legal & General America
John Bodrozic is co-founder of HomeZada
“Most consumers view home insurance as a commodity and don’t really engage with their home insurance company unless they have a claim. As a result, insurance companies are looking to deploy customer loyalty and customer engagement platforms that provide value to the homeowner beyond the policy. After all, a home is most people’s largest financial asset and biggest expense, yet insurance companies today only care about the policy. There is an opportunity to help consumers manage their home through the entire journey of homeownership that includes managing, maintaining, improving, protecting and ultimately selling their home.”
Joe Ben-Zvi is the Chief Operating Officer, TheGuarantors
“Asset owners, not just their property managers are evolving faster than ever before. In an industry yearning for innovation, change is being embraced because it has a real implication on the bottom line. Now, landlords see technology not only as a driver for efficiency but as a tenant amenity. We see landlords embracing insurtech because it signals to their tenants that they care about making their interaction with the landlord easy, better and positive. This, in turn, results in better tenant-landlord relationships which drive the bottom line.”
Mads Hennelund is a consultant at the Danish consultancy Nextwork A/S
“Perhaps the most important trend for insurance is personalization in terms of determining risk and price. We will se much more data being used for more precise risk estimations, which actually has a lot of benefits for the individual and society.
With more data utilization, more people will pay less and some will have to pay more. But some of the latter people are able to change their risk profiles – by for instance driving better or changing their lifestyle – and the insurance companies will have a commercial incentive to try and change the behavior of those people. This benefits themselves and society. The bad risk people who are not able to change will need other solutions, that society in some way must take care of.
We are beginning to see more and more insurers that say ‘you can purchase our product the traditional way with limits and deductibles and it will probably be more expensive or you can share your information with us and we can tailor the price to you’. The risk free people will probably share more data than the high risk groups, and, consequently, we will see the same market as today but with a greater number of tiers, i.e. more precise tiers among those willing to share data and then some larger pools among the higher risk groups. The problem here is, that regulators alway think of ‘individualization’ when you mention more ‘personalization’. Insurance should not and will probably never go down to the complete individualized state because the principle of insurance then disappears. But going further down the personalization track can be very reasonable.”
Steven Mendel is the CEO and cofounder of Bought by Many
I think the power of the consumer is our number 1 trend.
Insurtech, Big Data and AI solve big problems
If you look at other industries disrupted by technologies, early startups focused more on taking advantage of inefficiencies, rather than attempt more audacious transformation. Insurtech is working on solutions to big problems — sure, getting better at servicing customers is important but now we’re seeing companies working to prevent bad things from happening in the first place.
Phil Edmundson is founder and CEO of Corvus Insurance
“Three years ago, in its infancy, commercial insurtech was focused on bringing to market efficiencies and service improvements, like using mobile phone picture technology to speed up the handling of auto or property insurance claims.
In phase two, a series of insurtech companies have been launched that focus on marketing and selling commercial insurance by online brokers, with 24/7 access and digital marketing.
In the third wave of commercial insurtech, companies are using new forms of data (from mobile phones, social media, Internet of Things sensors, Big Data and satellite imagery) to not only better predict claims but also to help organizations prevent bad things from happening. These transformations of insurance will come to dominate commercial insurance as data and its adaptability expand in the next three years.”
Peter Colis is CEO and co-Founder of Ethos
“Consumer awareness for life insurance will grow thanks to insurtech players: People often avoid buying life insurance altogether because the process is burdensome, outdated and confusing, which unfortunately gambles their family’s future. In fact, the share of Americans with life insurance has fallen to less than 60 percent, from 77 percent in 1989. The rise in insurtech players like Ethos, Lemonade and Stride Health have helped spread awareness for the industry and this trend will continue to grow as we enter into 2019.
Automation will continue to be king: The traditional experience is 10 weeks long. That’s 10 weeks of being upsold murky products, filling out paperwork, getting medical exams and blood tests. Thanks to cutting edge technology and AI, automation has vastly improved the application experience. For example, an application through Ethos takes ten minutes and approvals happen instantly or within a few days.
Policies will become hyper-personalized: Right now, agents are financially incentivized to sell the largest, most expensive policy. That’s because it takes the same time for an agent to sell a $10,000 commission policy to a 55-year-old versus a $200 commission policy to a younger family (who has the least savings and often most needs the coverage). Using software and predictive analytics to make the process more efficient and cost-effective for both parties, insurtech players can help everyone, regardless of their policy size, to ensure they get exactly what they need.”
Dele Oladapo is chief technology architect and innovation officer at Prudential Financial
“As it relates to life insurance, the use of data is having a significant impact on the value chain of our business – including product development, operational efficiency, underwriting, and sales & distribution. For example, fintech companies and incumbents have developed underwriting processes that leverage the use of disparate data to more accurately predict risk and issue quick term policies.
Another major trend that we are seeing is the empowerment of the consumer. Consumers expect transparency, simplicity, personalization, and autonomy. These expectations are driving profound changes in the life insurance product itself and how life insurance is distributed and consumed. For example, wellness encouraged through wearables and the expansion of IoT particularly in the P&C space with sensors playing a role in lower claims by “seeing” or predicting things before they happen and reducing the amount of damage.”
Craig Simms is svp at Vantis Life Insurance Company.
“The most significant trend within the life insurance industry, specifically, is accelerated underwriting. On the cusp of going mainstream, this expedited underwriting process harnesses readily available applicant data from places like LexisNexis and the Medical Information Bureau to deliver a policy decision in as little as a few minutes to a few days. Traditional, and even some current, life insurance underwriting processes can take four to six weeks before a policy decision is made. This process is painful for the customer and turns many people away from pursuing this product in the first place.
However, I’m confident the development of accelerated underwriting will transform the life insurance purchase experience and will even pique the interest of millennials, an age group the insurance industry has been targeting for years.”
Michael de Waal is founder and president of Global IQX:
“Artificial intelligence will be the number-one insurance business trend in 2019 and for years to come. It is being applied to all facets across the value chain, from customer service to individual and group enrollment, fraud detection, policy administration and more. AI is already making the move to edge computing where data is processed more quickly and intelligently onsite without communicating with outside servers. As use of AI moves into the mainstream, it’s imperative for it to be used with integrity and transparency to ensure the public continues to trust the industry.”
No more monoline: Carriers and insurtechs expand their offerings
Like other fintech verticals, early stage insurtech startups focused on monoline offerings, choosing one business line to get really good at. As these companies lured growth capital, growth expectations expand over time and they’re looking to add new products and services.
Matt Miller is founder and CEO of Embroker
“The biggest insurtech trend of 2019 will be insurtechs moving up the value chain and into more complex lines of insurance. In 2018, we saw several examples of this including Next Insurance transition to be a fully licensed carrier, Lemonade expanding further into homeowners insurance, and Embroker launching the first digital D&O policy, the most complex line of commercial insurance yet to be offered digitally. This trend will accelerate next year with insurtechs continuing to move from distribution to improving underwriting models and owning new product development, as well as further pushing the limits of what can be digitized, expanding into the more complex, expensive, and profitable lines of specialty insurance.”
Alex Meisner is director of innovation at Snapsheet
“In 2019 you will see insurance carriers focusing on engaging policyholders and adding value outside of the claims experience, which is going to require carriers to embrace the cloud and accelerate the modernization of their entire tech stack. Little things like implementing preventative claim measures such as, proactively alerting policyholders via an SMS or push notification of an approaching hail storm, can go along way in terms of making policyholders feel like they are getting what they pay for.”
Mitchell Doust is executive vice president, head of the Americas for Cover Genius
Chad Nitschke is CEO of Bunker
“The most prominent insurtech trend of 2019 will be the industry taking steps to catch up to the burgeoning gig economy. Existing insurance models don’t work well for independent contractors, which are projected to make up over half of the workforce within the coming decade. Insurtech platforms like Bunker, which seamlessly embeds business insurance directly into the contracting process, offering flexible policies rather than rigid year-long contracts, will become the new normal. In industries from banking to retail, there’s a clear generational preference for seamless, automated processing. The future of insurtech will combine this with the logistic needs of independent contractors, creating platforms which are flexible, automated and, above all, easy.”
Peter Taylor is CEO at PAI Health
“Digital Health sensors and algorithms will broker a new paradigm of user value: Healthcare providers will be able to prescribe preventative measures as a result of innovative insurance products. This new wave of innovation in insurance will transform the wearable technology industry, in the same way the security industry did. As insurers build sensors and algorithms into their services, it provides a frictionless way for people to combine the power of devices and software to deliver improved health.
Catering to millennials and how they want to be served: Insurers need to reinvent their processes to cater for the digital native millennials who make up the majority of new customers. Digital assessment tools can streamline application processes and engage these customers in an experience that speaks to their lifestyle and communication preferences.
Making sense of all the data: Innovations in sensors, analytics and algorithms provide insurers access to meaningful insights. This allows them to segment, profile, and understand their customers and in turn build more sustainable, relevant and better-quality relationships.”
Blurring the lines between insurance brokers and insurance agents
Scott W Johnson is the owner of WholeVsTermLifeInsurance.com:
“Drones, crytocurrencies, blockchain — all of these future and current technologies sound awesome and they are, but they are masking a much larger change that is taking place, albeit a less sexy change, that is revolutionizing insurance.
Let me ask you one simple question – Can you define the difference between an Insurance Broker and an Insurance Agent? I used to easily be able to define it, but most definitions now fail to make sense of the current slender distinction.
Have you heard or Aggregators, MGAs, Clusters? These partnership agreements, like Oli or Digital BGA, allow easy appointments for life insurers or appointments or sub agency appointments in property and causality, and are upending our past understanding of who is an Insurance Agent and who is a Broker. Although not recognized, the entire personal world of insurance is changing for the better.”
Lack of enough knowledge workers will haunt the insurance industry
Mike Mann is the executive vice president, risk practice at the Plexus Groupe
“Data management, big or small, is of paramount importance to operating a successful business. If an organization doesn’t understand what their own data is telling them, it is not possible for them to make strategic decisions to improve the business, much less grow the business. Management thinker Peter Drucker stated that “you can’t manage what you can’t measure”, a lasting truth which becomes even more pertinent as time passes and all information becomes digitized. With the focus on “big data”, SMEs are often overlooked in this context. Given the proliferation of systems that can track, manipulate, and access third party data, as well as compute and model business outcomes, it is critical for SMEs to incorporate extensive data management objectives into their business models.
The single greatest challenge that will continue to haunt businesses for at least the next 10 years is the void of knowledgeable employees who understand how to provide appropriate cyber security fundamentals to protect the organization’s digital assets from cyber criminals. Some estimates predict there will be nearly 4 million unfilled cyber security jobs by 2021, leaving many organizations prone to cybercriminal risk. Academic institutions have only recently begun to recognize the developing gap and are adjusting their curriculums with a more focused approach towards cyber security and large organizations are making available additional training for IT personnel to hone their skills. The cyber security industry can’t move fast enough to meet needs that continue to evolve at a breath-taking pace.”
Autonomous cars will change pricing and claims volumes
Joel Ohman is a Certified Financial Planner™ and the founder of CarInsuranceComparison.com
“One of the single biggest ways that insurtech like AI will affect the insurance industry will be in the major role it plays in autonomous/self-driving vehicles. In the near term, auto insurance rates will likely increase, since insurers will be uncertain how to price the uncharted territory of self-driving vehicles. However, in the long term, rates will likely decrease significantly because of the likely increase in safe driving habits that self-driving cars will exhibit as compared to their fallible human counterparts.
It is highly likely that with the introduction of self-driving cars, the number of auto insurance claims will plummet. This is fantastic for the average motorist, but potentially a big negative for car insurance companies since they could long-term see premiums decrease substantially.
The nightmare driving robot scenario that haunts every car insurance company CEO’s dreams goes like this: perfect robotic drivers = drastically reduced likelihood of a car crash = car insurance companies forced to in turn drastically reduce their premiums = drastically reduced revenues = tanking stock prices = well, you don’t need to be a Wall Street financial analyst (or a science fiction writer) to see why robotic driverless cars should be causing car insurance company CEO’s to break out in a cold sweat at the mere thought of trying to sell insurance on cars that never get into accidents.”
New security challenges haunt new account openings
Eddie Glenn, product marketing manager at iovation