“There is vast potential for innovation and digitalisation” – Tim Kunde, co-founder of Friendsurance
Since the conception of the first credit card in the 1950's, we have been driving towards a goal of making our spending and finances coherent and secure. One could say this was the birth of Fintech and it has become an integral part of business today. From a piece of plastic with a magnetic strip, to an incorruptible digital ledger of economic transactions like Blockchain technology.
Insurance is also an enduring business and comes hand in hand with financial services, so naturally Insurtech was destined to be born. However, the PwC Global Fintech report last year stated that very few insurance companies are embracing Insurtech in their strategies, with only 28% exploring partnerships.
It's safe to say this wave is yet to crash, but there are a select few startups and branches of traditional insurance companies that are willing to take the plunge.
The Price Comparison Shift
Since the noughties, consumers have been using online services such as uSwitch and Confused.com to search and compare insurance quotes – with car insurance often being a key point of focus for these websites. These companies helped lead the way in transforming how we explore and compare insurance providers – making the process instantaneous.
Our need for the best possible deals at our earliest convenience has led to companies appealing to us in the palm of our hands. With smartphone browsing overtaking desktop surfing for the first time this year for adults in the UK, the consumer journey for insurance buying is naturally becoming a mobile and app-based process. Smartphone apps allow insurers to cut their costs for call centres and offices whilst delivering a service that is tailored to customers' growing demand for a quick and effortless experience.
This is the basis of startup company Cuvva, which launched in late 2015 and allows users to insure themselves on any car for as little as one hour long. You need to know the registration number and approximate value of the car, take a few verification pictures and you will get an instant quote. At the heart of Cuvva is flexibility – a key attribute with the idea of ownership diminishing.
With smart-homes becoming all the rage with Alexa, Google Home, Hive and Apple's HomePod round the corner, it makes sense that there should be an app that controls and protects it all. Neos is an app that detects home disturbances with sensors and live camera to identify intruders, leaks and fires.
They are the UK's first connected home insurance specialist and have been described as “revolutionising insurance by providing preventative smart-home technology as part of your policy” by The Times. It would appear they have caught the attention of Aviva, Munich RE and Hiscox, who have helped the startup raise £1 million in investments.
Despite this, many major players are still being tentative in their approach to these startups, despite their potential and promising market appeal.
A survey conducted by Towers Watson in 2015 stated that 92% of Millennials are willing to participate in a usage-based insurance program by downloading a smartphone app.
Although older age demographics are heavily active online, Millennials and Generation Z will be the audience that is most in-tune with online and application-based services, with their touch screen devices essentially becoming an extension of their limbs.
Back Me Up is a project started by Ageas Insurance built for Millennial consumers. Through the type of low-cost cover they offer and the nature of their application, they are one of the few major traditional insurance companies making their own digital footprint in this market. The user can insure multiple valuables costing £7.99 - £16.99 for up to £1000 per item added. The app relies on taking pictures of precious valuables, a process this generation is not estranged to.
The service specifically targets young people, such as students, who often need to insure personal luxuries, like a laptop, phone or a bike. Because these generations are typically more digitally savvy and price conscious, they’re less brand loyal and more focused on accessibility or a convenient system that suits their needs.
So, with Insurtech establishing itself as a stand-alone investment sector – especially on mobile – can we expect this momentum to build?
We already know from a press conference held in May that Aviva explicitly stated they want to become a fintech company. Though they have made progress in the sector through their MyAviva and Aviva Drive applications, they still have a long way to go in their digital transformation.
It would seem like many other companies, they are slowly transforming their business model by upping internal digitisation projects to £100 million a year. As CEO Mark Wilson stated “I don't know how big a lot of this stuff can get, but we think it can get pretty big pretty quickly”. An appropriate ethos for an industry that deals in risk.