Aug 14, 2020

Insurance continues to hold its value through COVID-19

Roper Technologies
William Girling
2 min
Insurance/InsurTech continues to experience favourable market conditions despite the challenges of COVID-19
Roper Technologies’ announcement that it has reached an agreement to purchase Vertafore for USD$5.35bn gives a strong indication of insurance’s futu...

Roper Technologies’ announcement that it has reached an agreement to purchase Vertafore for USD$5.35bn gives a strong indication of insurance’s future.

Far from being mired in the economic disruption affecting the manufacturing, energy and hospitality sectors, insurance appears to be buoyed by activity, IPOs and acquisitions.

Roper, a diversified industrial company headquartered in Florida and currently serving over 100 countries, is hailing the upcoming purchase as an example of its strategy focused on durable, long-term investment.

With 50 years of experience in the industry, Vertafore has managed to establish a strong market presence of 1,000 carriers, 20,000 agencies and 500,000 insurance professionals. 

“Vertafore is a fantastic business characterised by clear leadership in its niche market, a strong management team, high customer retention, and a long track record of consistent revenue and cash flow growth,” said Neil Hunn, President and CEO of Roper.

This follows news of several InsurTech entities announcing IPOs; an apparent vote of confidence that investors will see the future of the industry as positive.

Lemonade’s stock value reportedly doubled following its IPO in July, one which was also the strongest showing for 2020 so far. Now with Duck Creek Technologies planning to go public today (14 August), the industry appears poised for growth.

COVID-19: a catalyst for change

In an article published at the height of the global lockdown, McKinsey spoke with Policygenius’ CEO Jennifer Fitzgerald to gain insight into how the insurance market was starting to change.

Unsurprisingly, given the unforeseen circumstances and perceived increase in risk, Fitzgerald relayed that search volumes had increased dramatically as consumers either sought to increase their coverage or gain a better understanding of their policies.

“While the biggest surge we’ve seen has been for term life insurance, this pattern has extended to other product lines. Demand for disability insurance has increased. On the P&C side, interest in homeowners insurance has surged more than we’ve seen in the past few years,” she said.

In a more recent insight article (which InsurTech Digital reviewed here), McKinsey opined that insurance’s value has not dropped in the intervening months, although charting a path for digital transformation by upgrading vital processes is now particularly essential:

“Many current efforts to modernise underwriting are only digitally enabling yesterday’s products. Today’s consumers have different preferences and needs than they did several decades ago.

“Streamlined underwriting is the first foundational step that will lead to the broader reinvention the industry needs.”

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Jun 19, 2021

Insurtechs are winning the race with legacy system companies

Tom Allen, Founder, The AI Jou...
3 min
Insurance has long been due an overhaul. The AI Journal’s founder Tom Allen explains how innovative insurtechs are changing the incumbent narative

Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.

That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.

The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector. 

What exactly is insurtech?

Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.

Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.

The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.

Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.

More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.

Insurtechs and risk

But there are some obstacles in the way of insurtech’s continued evolution.

Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.

Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?

There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.

While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.

Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal

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