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 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



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 in􀈵uenced 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


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