NTT Data Report: InsurTech Global Outlook for 2024

According to the report, the InsurTech sector can be characterised by three simultaneous waves, each defined by the key technologies of their time. This progression illustrates the integration of innovation within the insurance industry, beginning with the rise of digital platforms and advancing to the advent of AI. The report highlights the industry's evolution and suggests that relying solely on funding raised as a metric for InsurTech success may not be the best approach.

Wave 1.0: Making Insurance Attractive

The initial wave of insurtech focused on making insurance more appealing and accessible to customers. This phase was marked by the digitalisation of traditional insurance processes, transitioning from paper-based systems to online services. The widespread adoption of smartphones played a crucial role in accelerating this shift towards digital platforms. Despite facing challenges such as overcoming legacy systems and ensuring data security, the results were significant. 

Wave 2.0: Beyond Connected Insurance and Fast Learners

Wave 2.0 brought about a more connected and responsive insurance ecosystem. This phase emphasised the integration of IoT and AI for real-time data connectivity, enabling personalised policies and dynamic pricing based on actual behaviour. The focus shifted towards proactive risk prevention rather than mere protection. Key technologies such as telematics and embedded insurance gained traction, with telematics being incorporated into 30% of new auto policies in the US. Companies like Cambridge Mobile Telematics and Bolttech led these innovations by using mobile technology to capture driving data and integrating insurance offerings seamlessly into other purchasing processes .

A notable example from this wave is the insurtech company Lemonade. Leveraging AI and machine learning, Lemonade revolutionised the insurance landscape by offering a digital-first approach, enhancing customer satisfaction through quick claims processing and transparent communication. The company demonstrated significant growth, with a 55% year-over-year revenue increase and a reduction in the loss ratio from 94% to 83% in Q3 2023 .

Wave 3.0: The Next Big in the AI Era

The third wave, driven by the rise of Generative AI (GenAI), marks a significant transformation in the insurance industry. GenAI is poised to handle mundane tasks, thereby reducing overstaffing and enhancing operational efficiency. This wave is characterised by the ethical implementation of AI, customer acceptance, and transparency​. Companies like Mind Foundry and At-Bay are at the forefront of deploying AI in high-stakes insurance solutions, focusing on transparent and collaborative applications that enhance human work and trust in the sector​ .

Wave 1.0: Making Insurance Attractive

The initial wave of insurtech focused on making insurance more appealing and accessible to customers. This phase was marked by the digitalisation of traditional insurance processes, transitioning from paper-based systems to online services. The widespread adoption of smartphones played a crucial role in accelerating this shift towards digital platforms. Despite facing challenges such as overcoming legacy systems and ensuring data security, the results were significant. 

Wave 2.0: Beyond Connected Insurance and Fast Learners

Wave 2.0 brought about a more connected and responsive insurance ecosystem. This phase emphasised the integration of IoT and AI for real-time data connectivity, enabling personalised policies and dynamic pricing based on actual behaviour. The focus shifted towards proactive risk prevention rather than mere protection. Key technologies such as telematics and embedded insurance gained traction, with telematics being incorporated into 30% of new auto policies in the US. Companies like Cambridge Mobile Telematics and Bolttech led these innovations by using mobile technology to capture driving data and integrating insurance offerings seamlessly into other purchasing processes .

A notable example from this wave is the insurtech company Lemonade. Leveraging AI and machine learning, Lemonade revolutionised the insurance landscape by offering a digital-first approach, enhancing customer satisfaction through quick claims processing and transparent communication. The company demonstrated significant growth, with a 55% year-over-year revenue increase and a reduction in the loss ratio from 94% to 83% in Q3 2023 .

Wave 3.0: The Next Big in the AI Era

The third wave, driven by the rise of Generative AI (GenAI), marks a significant transformation in the insurance industry. GenAI is poised to handle mundane tasks, thereby reducing overstaffing and enhancing operational efficiency. This wave is characterised by the ethical implementation of AI, customer acceptance, and transparency​. Companies like Mind Foundry and At-Bay are at the forefront of deploying AI in high-stakes insurance solutions, focusing on transparent and collaborative applications that enhance human work and trust in the sector​ .

AI's impact extends to fraud detection and underwriting efficiency. In the UK, AI systems increased the detection of fraudulent claims by 120% and reduced indemnity spend by 4%. 

Key Statistics:

• Evolution of Insurtech Funding: Funding raised over the years showed a significant drop from approximately $6 billion in 2021 to lower levels in subsequent years. The number of deals and money raised in 2023 shows diversification of investments in the sector.
• Investment Shifts: Insurer's investments focus on Series A and B funding rounds, with strategic emphasis on embedded insurance, employee benefits, and cyber risks.
• In the US, 30% of new auto policies sold incorporate telematics capabilities.
• Embedded Insurance is expected to be worth US$700bn in Gross Written Premiums by 2030.
• Generative AI (GenAI): IT giants’ investment portfolios show a sharp rise in GenAI investing trends in 2023, with 40% of all GenAI acquisitions made by tech giants like Google, Microsoft, and Amazon.
• Lemonade Inc. Case: Steady revenue growth with an increase of 2 million customers (21% from the previous year). Revenue growth of 55% year-over-year. Loss ratio reduced from 94% in Q3 2022 to 83% in Q3 2023.
• Public Insurtech companies showed a struggle in financial performance but are working towards more sustainable business models, while asset turnover rates improved significantly from 0.24 in 2020 to 1.28 in 2023.
• Cyber Insurance: At-Bay’s use of AI technology reduced ransomware attacks for its 30,000 policyholders by 80%, achieving 800% year-over-year premium growth.
• Fraud Detection: In the UK, insurers detected 89,000 dishonest insurance claims in 2021, increasing detection of fraudulent claims by 120% and reducing indemnity spend by 4%.

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