Global investment in insurtech grew by more than three and a half times, from approximately $800 million in 2014 to $2.6 billion in 2015 – a 237% hike. The number of deals in the insurance sector has more than quadrupled since 2011.
In 2015, non-life insurance innovations received 80% of the funding. Insurance automation accounted for 67% of all fintech insurance deals and is now in the top 20 categories for the highest number of deals in financial services globally. Automation investments include front-office innovations like robo advice which insurers are taking a close looks at – for example the acquisition of Learnvest last March by U.S. insurer Northwestern Mutual, which also invested in Betterment. In addition, many insurers are looking into automation to add efficiency to the back-office function.
Collaborative start-ups are leading the field in insurtech, with 70% of global investment going into ventures that look to enhance the propositions of existing incumbents compared to 30% into disruptive start-ups (those that seek to directly compete with insurers). In comparison, 56% of investment into disruptive fintech ventures versus 44% collaborative last year, highlighting that insurers are operating more collaboratively with start-ups, because insurers don’t perceive them as true disruptors to their business models and therefore there is more openness to partner with them
Most insurers still base their underwriting and pricing on a limited view of customer variables, pooling risk and generating premiums.
But emerging technologies such as wearables and connected devices can help insurers create new models that help them determine the types of products and services their customers want and need based on their behaviour patterns and provide them in near real-time.
But the Internet of Things, big data and analytics, digital channels and artificial intelligence provide a broader range of data and a more holistic view of the customer, and can help insurers build tailored products and services priced for individual customers.
According to a recent survey 73% of insurers said providing a personalized customer experience is a top-three priority and 89% use sensor data to: monitor conditions, react to situations, anticipate issues, or interact with the world.
The survey research also showed that insurers will adopt wearable technologies into their businesses and expect wearable devices to have a significant impact on their organization. For example, a leading insurer John Hancock plans to provide new policy holders with a free fitness tracker band to track their health progress and rewards healthy living with a reduction in life insurance premiums and 31% of insurers are currently using wearables to engage customers, employees or partners.
This is a watershed moment for the industry, and in anticipation of this growth in insurtech investment Accenture has already started to incorporate insurance into our Fintech Innovation Lab and are likely to place a heavier focus on it as we move forward. For the first time next year, we will have insurers involved in the Fintech Innovation London Lab. This week, we also announced a joint venture with Apax Partners, designed to drive innovation in insurance software.
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