Research

Quarterly InsurTech Briefing Q2 2017

July 20, 2017
| United Kingdom, United States

Insurance in the modular economy

The roots of the InsurTech revolution can be traced to the internet boom of the 1990s and the simple notion of transitioning traditional commerce to the web. As this phenomenon gained traction in the following years, insurers’ websites increased in sophistication and aggregator engines emerged as the industry collectively sought to reduce distribution costs and improve customer experience. Some of them were successful: many more failed, and the industry reached a preliminary consensus that the fundamental value proposition for many insurance products is partially diminished by online distribution. It was hardly a disruptive change.

What has followed is more complex and profound. Technology and connectivity continue to serve as catalysts for the modular economy, where products and services in any value chain are repeatedly dissected into modules that interact with each other seamlessly for the benefit of the ultimate consumer. As consumer demand shapes the end product, some of the modules increase in relative value, while others become commoditized and lose value.

The second edition of the Quarterly InsurTech Briefing highlights the following topics:

Claims managers – insurers of the future?

This report focuses on one of the insurance industry value chain’s most underestimated modules – claims management. It’s a $170 billion global industry currently controlled approximately 90% by incumbents that’s booming with innovation.

Claims management can be the most powerful driver of customer satisfaction and retention. Executives estimate that a customer who experiences a personal auto claim could be up to 40% less likely to renew their policy, regardless of the outcome.

Where is the true value in the industry?

In the search for value, investors are first asking questions about where the revolution will truly begin. Is it the new approach to distribution that will make the industry unrecognizable in the future? Is it a different approach to underwriting? Or is it the ability to effectively securitize risk and find access to the cheapest possible capital? For investors that build their thesis around disruption driven by risk mitigation, claims managers are particularly attractive. In our industry theme feature, we interview executives at established claims management companies and review the universe of claims-focused start-ups to gain insight into how the claims management industry will evolve within the insurance value chain.

We provide a brief case study of a new initiative focused on automatic settlement of claims related to parcel delivery, illustrating how Willis Towers Watson is pioneering solutions to efficiently manage high volume low complexity claims. We also look at the deal activity in the claims space with particular focus on Crawford’s acquisition of WeGoLook. WeGoLook provides Crawford with a crowdsourcing network of 30,000+ “Lookers” that will go and collect required data/pictures of a loss within hours of notification.

Risk mitigation dilemma

One of the most disruptive scenarios that could result from the InsurTech revolution would be a change in underlying function of the insurance value chain, from volatility management (paying claims) to risk mitigation (making losses smaller). In our incumbent strategy feature, we look at Allstate’s progress to date on its strategic initiative to optimize its claims management processes.

Threat vs. opportunity

Our thought piece examines the pressure on the insurance value chain. Whether disruption beckons or opportunity unfolds is primarily a matter of perception relative to a company’s position in the value chain, amplified by how or the extent to which it chooses to embrace or reject innovative technology.

InsurTech investment reaches record levels

Finally, we review the record level of InsurTech deal activity experienced during the second quarter. Funding volume increased 248% to $985 million across a new high water mark of 64 transactions in Q2, while the $289 million of early stage funding volume and 27 technology investments by (re)insurers during the quarter each also represent record levels.

We strive to provide our clients with the most comprehensive and thought provoking analysis of the technological trends in the industry. We hope you will find this edition of the Quarterly InsurTech Briefing useful. We welcome your feedback and suggestions.

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