FinTech has been one of the buzzwords of the financial sector over the past decade. These days, virtually every financial product and service is now available online or through an app.
Wherever we look in the financial news, there are stories of online startups - young and agile businesses taking on the established incumbents. Whether it’s in payments, lending, banking, investing or crowdfunding, every part of the financial system is being disrupted by new entrants keen to take market share and shake up their industry.
The insurance sector is no exception, though it may have taken a little longer to see its own tech revolution. Since the financial crisis of a decade ago, the industry has finally woken up and has recently seen a wave of innovation from new entrants to the market, looking to drag the traditionally slow-moving insurance industry well and truly into the digital age.
What’s driving the InsurTech revolution?
Another current buzzword we see a lot is “instant economy” (okay, two words…).
What does it mean? It means instant fulfilment: I want my loan now; I want my payment to arrive in two minutes, not two days. Everything is now about choice, speed, convenience and security. Just as with all the other apps we use these days to run our lives (financially or otherwise), it’s all about giving the best possible experience to users.
Smart phones in particular have created a new medium for distributing insurance products, interacting with customers and handling claims. Vast amounts of data are generated and collected every day.
For those companies best able to collect and analyse it, this creates tremendous opportunities for new products, better underwriting and first class customer service.
For millennials and other customers who are now getting comfortable running their entire financial lives from their mobile devices, insurance represents just another component of their financial lives that can be handled on a phone, via an app.
Today’s consumers now demand real-time engagement and online access to services managed across their mobile and personal devices. Insurers therefore need to embrace the transition from the traditional and rather dusty world of insurance to a new, comprehensive, fully integrated, digital ecosystem.
To provide just a flavour of some of the startups that are hoping to changing the face of insurance in the UK, here are a few:
Anorak is building an automated life insurance advice platform which will be integrated by distribution partners. The solutions are powered by data science and machine learning to give people access to tailored advice based on their unique needs.
By Miles provides a pay-per-mile car insurance product. The company offers a monthly subscription model which charges customers for the exact number of miles they drive.
FloodFlash offers customers a new way to insure flood risk. The company has developed a tech-led approach that makes flood insurance available to everyone, even those with the highest flood risk.
Homelyfe provides a property insurance product for people to cover themselves against losses in the case of a house sale or purchase falling through. Expenses up to £2,250 can be reimbursed. The company is also developing home and travel insurance products.
Insurami is an insurance platform offering protection to landlords. The company provides protection as a traditional deposit but without holding tenant funds, which can help landlords attract a wider client base.
Wrisk offers insurance connected to our personal lives and devices, aiming to making it as simple as possible, for as many people as possible, all within single app. The company recently signed a partnership with BMW to become the sole supplier of BMW and MINI car Insurance in the UK.
Cuvva offers short-term car insurance through an app that apparently take only 30 seconds to be insured once set up.
This is a just a selection, but it gives a good idea of the breadth of insurance products and services that are now being offered and developed with the help of technology.
What challenges face new startups in the UK insurance sector?
It’s not enough, of course, for an InsurTech startup to develop an app, stick it in the Apple Store or Google Play, and expect it to gain immediate market dominance. Insurance is a highly regulated industry (just as banking is), even more so since the financial crisis.
Regulation in the insurance industry shows little sign of slowing down, and within the past few years we’ve seen the introduction of data protection laws in the form of the GDRP, not to mention tax hikes on insurance premiums.
With the added complexity of Brexit, to many insiders it has felt like the industry has almost been treading water while they deal with all the regulatory changes. Try telling that to the InsurTech disruptors, though.
The final word
The InsurTech industry looks to be here to stay. Young and agile startups will continue to make inroads into the mature UK insurance industry.
Perhaps the biggest challenge to new entrants in the insurance sector, will be ensuring collaboration and partnerships with the traditional incumbents, who have often been slow to adapt to the digital revolution.
These larger players face more pressure than ever to evolve and reinvent themselves before disruption hits their bottom line. Importantly, there is a growing recognition that InsurTech represents more of an opportunity for them, than it does a threat.
This should be good news for the new entrants, since it means that the traditional incumbents will need to seek partnerships and collaborations with the new breed of tech-fuelled insurance startups.