The insurance sector has transformed in recent years from dipping its toes in the water when it comes to digitalisation, trialling products that weren’t too expensive or obtrusive, to a clear recognition that new business models and ways of engaging with customers are crucial. While insurtech startups have been central to driving this realisation through the traction they’ve gained, recently their influence has been re-evaluated.
Two to three years ago, startups such as Trov and Lemonade were being heralded as representing the emergence of new business models and the definition of how insurance should now be thought about. Since then, however, Trov has pivoted and is providing a service in collaboration with the large organisations in the industry. Lemonade, meanwhile, a firm with a huge valuation and significant hype behind it, still has to prove it will be able to make a significant difference to the market at scale.
“Our hypothesis is there will definitely be more insurtech upstarts, but in terms of new entrants making a significant difference to the insurance market at scale, the jury’s still out,” says Tim Hardcastle, founder and chief executive of INSTANDA, whose cloud software enables insurance firms to easily create, manage and distribute their products.
“Particularly at the consumer end, there is a level of brand impact, loyalty and psychological alignment that means it’s hard for any new arrival to invest the billions of dollars required to scale in a meaningful way. Meanwhile, incumbents are doing a good job of flexing their models and becoming more tuned into their marketplaces, which is where we can help.”
INSTANDA’s no-code product design platform is built on a powerful set of insurance-speciﬁc calculations, processing and workﬂow capabilities that free companies from high-cost legacy systems. Using its software, organisations can amend rates, questions, documents and customer journeys in minutes, and new products can be launched in days. Return on investment is delivered in weeks via dramatically reduced product manufacturing, underwriting and distribution costs, and improved customer experience.
“When we were considering the technology needed to address some of the pain points in the industry, we abstracted ourselves from the variety of insurance products in different geographies and with different distribution models, and thought what is insurance actually about?” says Hardcastle. “Simplistically, it’s about data and ingestion, some rules and then issuing a contract. It’s quite simple in that respect.
“So when we were doing the design-thinking around INSTANDA, we wanted to ensure we could enable any kind of insurance to be distributed in any channel. That design-thinking has led us to a position where we’re working with some quite amazing companies in different geographies across multiple different insurance types.”
One of those companies is Canopy, a startup insurance firm addressing issues in the house rental market. Rather than having to put six or eight weeks of rent down upfront as a deposit, which is often difficult for people to fund, Canopy provides a unique insurance proposition that acts in lieu of the deposit. House renters can pay for an insurance product that avoids them having to pay for an upfront deposit at all.
The winners will be those that adapt their models and become much more digital and flexible in their ways of doing business
To meet the needs of millennials, which make up a large proportion of house renters, Canopy has built an app which provides additional services and enhances the richness of its relationship with that target market. The insurance is seamlessly integrated into the app, as well as open banking APIs (application programming interfaces) that make it easy for the rental deposit process to be replaced by a different financial product. Canopy is illustrative of a growing trend in insurance where interactions with consumers are enabled in different ways and the insurance product is intertwined to make it easier for people to live their lives.
Another startup that, via a pilot, is leveraging INSTANDA’s technology to be able to approach the market in the most agile and innovative way is Pikl, a specialist insurance broker which launched in 2018 with some big-name backers. Pikl focuses entirely on the sharing economy, whose participants have different characteristics in terms of insurance products.
For short-term rentals, such as those booked through Airbnb and HomeAway, homeowners may find that their standard home insurance policy is invalidated and any claims rejected, even if they only let a room or the whole property for a couple of nights. Pikl has developed a suite of products that will fill this ‘insurance gap’ and run alongside homeowners’ standard policies.
On the other end of the scale, insurance giant Aviva has been working with INSTANDA to introduce innovative new products in life and health cover. The company carried out significant research1 which revealed three in ten small and medium-sized enterprises (SMEs) struggle to offer competitive benefits for their employees. With SMEs citing product cost and lack of staff and resources to manage benefits as the two biggest barriers, Aviva has seen a gap to offer a flexible, highly tailored, yet simplified, protection insurance for small businesses.
“It’s fascinating for us to have a technology platform that can accommodate very different business models and ways of the insurance being distributed and engineered,” says Hardcastle. “It goes back to something we identified several years ago called ‘mass customisation’, which involves providers customising their offers, but doing it at scale in a way that is efficient financially. Now we’re starting to see companies delivering this.
“Like any industry that goes through periods of change, there are organisations which are really embracing the change and starting to change their ways of working. Blockbuster should have come up with a subscription model solution when they saw Netflix coming. The big car manufacturers should have been more proactive about electric vehicles before Tesla came along.
“While we don’t necessarily think an upstart is going to disrupt insurance incumbents in a similar vein, we do think the winners will be those that adapt their models and become much more digital and flexible in their ways of doing business.
“We’re fortunate because we get to work with companies that are doing this and it’s why they choose INSTANDA. The losers will be the ones that haven’t moved fast enough. Companies that haven’t moved quickly are still giving decent returns to shareholders and perhaps it’s going to take 10 to 15 years before you start to see those organisations suffering. However, the companies that we work with truly believe, unless they do something now, they will lose out in the next three to five years.
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