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Insurtech and disruption bring change to Canadian insurance

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Chris Gory
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Canadian insurance companies have yet to fully embrace the potential of blockchain and digital authentication. Meanwhile, other industries are pushing ahead with innovative, enterprise-scale services related to these technologies.

Chris Gory has seen big changes in the insurance industry over the course of his 23-year career. But the founder of Insurance Portfolio Financial Services (IFPS) thinks Canadian insurance companies need to do more to embrace the digital capabilities that are changing businesses across multiple industries.

“As an industry, especially on the benefits side, we really need to embrace change more. When you look at other industries, there’s change going on, and things are changing pretty quick. And we really need to keep up,” he says.

The beginnings of enterprise-scale transformation

What sort of changes are the larger insurance providers undertaking? It’s about more than just putting a shiny new face on the same services. To make real headway, companies need to adopt what EY calls ‘enterprise-scale digital services’.

According to Gory, big providers are already taking steps in the right direction, but the best is yet to come.

The transformation taking place in Canadian insurance is clear when looking at new technologies targeted to improve the customer experience.

  • Manulife has developed Alexa integration, allowing customers to access account information via voice recognition.
  • Sun Life’s new digital coach Ella works with Google Assistant to provide customer support in a similar fashion.
  • Sun Life has also opened up the playing field for blockchain and benefits providers with the recent announcement that the the company is teaming up with SecureKey to help customers verify their credentials.

Gory notes that blockchain innovation has big potential for the insurance industry, especially for benefits — reining in the debilitating paper trail of claims.

Startups and legacy companies push ahead together

The presence of startups within the insurance market has become too large to ignore.

According to the 2017 World Insurance Report, 31.4% of customers rely on insurtech options — either on their own or paired with more established insurance provider offerings.

At IPFS, a company that specializes in providing employee benefits to startups around the world, Gory does business with a lot of the exciting, young companies that are reshaping Canada’s business landscape.

Gory says he has never seen the scale of change currently moving through the insurance space.

“This is something awesome. Before, you wouldn’t see such engagement, such traction with the tech startups, with the insurtechs. You saw some before, but definitely not on the same scale. They’re being more widely accepted than they were say in the Dot Com era. The Dot Com era was pretty limited as to what you could do. There was a certain number of vendors, but you didn’t have the number of insurtechs out there.”

Insurtechs pointing a way forward

“In the benefits space, you’re seeing a lot of companies that are trying to really gain traction in Canada,” says Gory. “They’re competitive, but they’re also pushing the insurance companies to make changes.”

Gory points to a couple of Canadian insurtechs as sources of inspiration and collaboration for larger providers.

  • Insurtech platform League has partnered with business leaders like RBCI, AETNA and Humana to broaden its reach and improve its ability to offer customer solutions.
  • Newcomer Honeybee — a group working under the umbrella of insurance provider Benecaid — has also garnered buzz recently for its non-traditional benefits platform. The online app allows employers to allocate benefits to employee healthcare spending accounts, allowing the employees to choose what they spend their benefits on.

These developments are helping to transform the insurance industry, adapting the wealth of technology that can upgrade outdated systems of file keeping and customer onboarding. And according to Gory, it’s this collaboration and ability to engage with enterprise-scale solutions that is beginning to transform the insurance industry in Canada.

“I think we’re starting to see that they’re realizing, they’ve got to do big picture,” says Gory. “It’s not just small-scale innovation that’s going to set them apart.”

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Lloyd’s of London set for digital transformation after securing £300m

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It’s never too late to start the digital transformation process — even if you are 330 years old.

Noted insurance market Lloyd’s of London has secured £300m and established a technology and transformation committee, with the goal of cutting costs and better streamlining services. It’s all a part of The Future of Lloyd’s programme, the company’s plan — named ‘Blueprint One’ — to build the most advanced insurance marketplace in the world. 

When the company’s initial digital ambitions were released in May, CEO John Neal explained that traditional business models were being disrupted by technology and data analytics.

“Customers are facing new risks as their asset mix shifts from tangible to intangible and, consequently, are seeking new insurance products and services to protect their businesses,” Neal said.

On the docket for this digital transformation — set to begin next year — is a focus on accelerating product and service development to meet customer demand, namely simpler access to services and lower costs. A significant focus will be on the need to improve real-time data quality and capture.

Blueprint 1a is expected to arrive in February, detailing plans and key delivery points for phase one of the project. 

“Since the launch of Blueprint One, we have focused on designing a carefully structured and managed approach to planning and execution to allow regular delivery of value to the market,” said Neal. “With robust governance and oversight now in place, and the funds for delivery secured, we have every confidence in the successful delivery of the Future at Lloyd’s.” 

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Five insurtech startups to watch out for in 2019

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The insurtech sector has grown rapidly in recent years, with a number of startups launching new products and making it easier for consumers to buy insurance. Many of these are products of startup accelerators. The most successful insurtech players, according to TechWorld, appear to be those who focus on building new products to address the changing needs of the customer.

Insurance-as-a-service

The traditional model of an insurance company offering a standardized product to the customer is on its way out. Many customers, especially millennials, want more choice and a flexible approach to insurance products.

This flexibility to decide what to insure (“insurance as a service”) is being met by several insurtechs, who are offering insurance products tailored to the customer. An example is the company Valoo, which offers a straightforward way for customers to make an inventory of possessions. This can be via video or photographs. These items can then be valued by artificial intelligence scanning the items, and then short-term insurance being offered.

Blockchain

InsurTech startups are deploying blockchain technology to disrupt the insurance industry. One important application is using the technology to allow insurers and customers to verify the location of goods around the world in real-terms. This has helped to facilitate peer-to-peer operations in financial services.

An example of this service comes from Dynamis, which uses Ethereum, to offer peer-to-peer unemployment insurance, in the form of supplemental unemployment insurance.

According to Foresight Factory, Dynamis pays premiums into a de-centralised contract, setting up individual accounts for all its employees. If there are no claims, the premiums gradually go down. For employees, the account allows them to use the money while seeking employment and to transfer the details to their new workplace.

Big data analytics

Big data encompasses the massive amount of stored information on anybody who has ever had a digital connection and this data is of value to insurance companies. The startup Cystellar operates a cloud-based big data analytics platform. The aim is to offer insurance firms data-driven decision making.

Cystellar’s platform uses predictive analytics for insurtech firms. The main focus of the platform is on trying to predict and thereby avoid damaging events, such as natural disasters that might affect agtech and foodtech companies.

Claims reduction

With traditional insurance, people pay in the same money (which often goes up) whether a claim is made or not. This model is challenged by the startup Laka. The company operates a community-based model for bicycle insurance. The monthly maximum is fixed at around £18. However, this amount can be reduced, depending on how many claims are filed by the wider community.

Security-as-a-service

Cyberattacks are a feature of modern life. To help drive down insurance costs, many companies are keen to know how they can improve their systems and services.

An example of a startup in this space is ThreatInformer. The company provides cyber risk intelligence to the insurance industry. The firm creates tools for users to transform the way risks are written, using a security-as-a-service platform. The aim is to use analysis of security assessments and environmental factors to enable business users see the full risk picture.

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Five emerging Insurtechs to take notice of

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Insurance companies have been slow to embrace digital technology; however, signs are emerging that the industry is gradually opening up to the idea of alternative ways of providing insurance services.

The conservative nature of the insurance sector was summed up last year by Andrew Brem, chief digital officer at insurance group Aviva, who said, as quoted by TechWorld, that the sector is “not known for its incredible radicalism”.

Whether it is due to threats from startups or realization that startups can provide competitive advantages for big insurance companies, the major players are starting to engage with startups. The types of new technologies disrupting the insurance sector include mobile apps, investment in digital channels, process to hire technology talent and platforms for analyzing customer data.

Moreover, research from London accelerator Startupbootcamp and PwC indicates that 75 percent of incumbent insurers “believe the biggest impact to the industry will come from building new products in order to address the changing needs of the customer”.

Five Insurtech startups of interest

A number of Insurtech startups are causing interest in the industry, and helping to introduce innovative new technology into the business of insurance:

  • The startup Cytora has produced technology termed Risk Engine. This software can be used by commercial insurers to target and price risk using artificial intelligence algorithms. The star-up was supported by the University of Cambridge’s Judge Business School Accelerate Programme.
  • The company InMyBag came about as an answer to the gap in the insurance market for mobile workers who are reliant on portable technology. InMyBag insures mobile devices such as laptops, phones and cameras. InMyBag works with Amazon Prime and Apple to guarantee same day replacement of the devices.
  • Brolly is a London-based startup that is deploys artificial intelligence to provide customers with a mobile insurance locker. The locker stores existing and expired policy documents. Also offered is an advisor, to suggest insurance coverage and an online shop.
  • Digital Fineprint uses machine learning technology to provide smart insurance policy recommendations. This is based on the social media profile of the user data. As an example, LinkedIn data might be used to assess a person’s income and Facebook data provides an assessment of an individual’s appetite for risk.
  • Digital Risks targets technology companies and provides a flexible, pay monthly Insurance-as-a-Service model. The scheme enables companies using the services to start off with insuring small items, like a laptop, and then gravitating to something like employer liability insurance or insurance against data breaches.

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