These are testing times for both insurtechs and traditional insurers as they struggle to adjust
to the impact of the pandemic on investor confidence and customer trust and behaviour
VIEWPOINT
www.insuranceday.co 6 m | Wednesday 7 October 2020
‘Insurtech collaboration crucial
to overcome Covid-19 challenge’
These are testing times for both insurtechs and traditional insurers as they struggle to adjust
to the impact of the pandemic on investor confidence and customer trust and behaviour
Bundeep Singh
Rangar
PremFina
The insurance industry is
searching for its own insurance
against Covid-19.
Claims related to the
pandemic pandemic could reach
£110bn in 2020, ($140.35bn), according
to Lloyd’s. The industry’s
reputation has been damaged by
coverage involving contentious
business interruption insurance.
Not surprisingly, the industry is
looking to insurtech in its search
for turnaround solutions. That is
contrasted by reports that some
insurtechs have raised nearly
2bn in the first half of 2020 despite
the pandemic, according
to Willis Towers Watson. These
include two insurtechs that have
achieved unicorn status (that is,
company valuations above $1bn).
Lemonade raised £245m in July
as it listed shares on Nasdaq,
while Hippo Enterprises received
115m in a private financing.
But Willis Towers Watson
also points out Covid-19 is by no
means a heaven-sent opportunity
for the insurtech sector; it also
comes with significant challenges
for a sector as capital-intensive
as insurtech, where many companies
are now more dependent
than ever on the financial and
other support, including underwriting,
from the major insurance
and reinsurance groups.
These are testing times, especially
for those insurtechs that are
highly leveraged, according to
Willis Towers Watson.
The pandemic has made insurers,
brokers and managing
general agents (MGAs) focus
more on how they deliver their
services and the role technology
can play. The pressure it has
placed on them means they have
to find ways to improve efficiency
and reduce costs and meet the
growing digital demands of customers,
which the crisis has fastforwarded
by several years.
They also need to capitalise
on new opportunities presented
in terms of the growing positive
focus on certain insurance products
as a result of the crisis and
new opportunities to sell products
and services to customers, some
of whom have not bought these
types of cover before.
Many insurance firms do not
have the resources or skills inhouse
to deliver on their plans
and are looking to partners to
help. With more than 1,500 insurtechs
around the world, they
have many to consider.
Digital savvy
The Covid-19 crisis has resulted
in a surge in people using digital
platforms and services to manage
their money and financial products
many for the first time.
Offering exibility is important
at a time when many have lost
their jobs, are unable to use public
transport or are now working
remotely and need to insure their
home as a temporary office space.
Demand for this new, mobilefriendly
market was evident before
the global pandemic, with a
slew of new insurtech start-ups
seeking to provide insurance on
demand for traditional products
such as life, house and motor
insurance, as well as new and
emerging products for the sharing
economy. Customers only pay for
insurance when the asset is in use,
just as with gas or electricity.
The introduction of financingas-
a-service (iFaaS) via mobile
phone apps that enable customers
to buy and finance insurance
premiums “on demand” on a
daily, weekly or monthly basis
as opposed to annually has created
a significant amount of interest,
especially in light of the
pandemic, among insurers, brokers
and MGAs interested in using
it, thanks to its exibility and accessibility
– features the crisis has
made even more important.
Such insurance apps tap into
a market segment of mobilefriendly
customers who wish to
buy insurance as if buying a Net-
ix subscription. iFaaS bridges
the gap between growing interest
in on-demand insurance and established
insurance industry incumbents
unable to offer this.
For those brokers and insurers
selling insurance policies requiring
annual payments, apps like
iFaaS is an out-of-the-box solution
that allows them to rapidly
offer an on-demand product, with
built-in financing. Not only does it
all allow them to cater to millennial
app-friendly customers who
feel empowered via on-demand
services, but it also offers them
exibility in managing their finances
in such uncertain times.
Millennials now comprise
about 30% of the Western population
and are quickly becoming the
most valuable customer segment
for insurers. They have a purchasing
power of £1.1trn – surpassing
that of baby boomers this year –
and set to double in six years.
Product delivery is rapidly
changing for the “click generation”
– 92% of millennials own
smartphones and make up 58%
of mobile shoppers. They are 2.5
times more likely than the average
shopper to be inuenced by a
mobile app.
New focus
The pandemic has raised the
profile of insurance and the importance
of certain policies such
as life and health cover, in many
cases to people who do not have
it. The real opportunity is in the
short term, so insurers need to be
able to launch new products or
market existing ones quickly and
ensure the purchasing experience
is a good one. Many of these potential
new customers are millennials
or younger, so a strong
digital experience is key.
Insurers and brokers are looking
to lower costs by shrinking
sales teams and call centres. Innovative
digital solutions can deliver
higher levels of customer service
and meet growing demand from
younger, more tech-savvy customers.
Artificial intelligence-based
chatbots to provide a personalised
experience and a smooth customer
interface are a case in point.
Claims handling will also be
an area insurers will be looking
to improve through technology.
With a rise in claims during the
pandemic and many call centres
having a reduced number of staff,
any tech solutions that enhance
the claims process by delivering
faster resolutions and more positive
interaction with customers
will be more welcome than ever.
These challenging times for the
insurance industry have focused
its attention on how it can use
technology to improve levels of
efficiency and the customer experience
at the same time.
The expertise and ready-made
solutions many insurtech companies
have will mean insurers and
brokers will be looking to work
with them more closely than ever
before to fight a common enemy
in the form of a virus. n
Bundeep Singh Rangar is chief
executive of PremFina
Millennials who want ondemand
insurance via apps
are becoming the most
valuable customer segment
Song_about_summer/
Shutterstock.com