Insurtech: The Modern Age of Insurance

The global insurance industry is worth nearly $5 trillion and technology wants a piece of the pie.
Insurance is one of the oldest businesses and is traditionally offline — think of the forms you need to sign, the policies you need to review, and all the paperwork you need to go through when making a claim. Insurance Business begs the question, “If all of your other important transactions are online, why wouldn’t you do the same with your insurance?”
As fintech continues to shape and transform banking, insurtech is starting to do the same in today’s data-driven world. Forbes wrote, “Everything from environmental sensors to connected devices and wearables — will allow insurers to better manage risk, improve subscriber loyalty and optimize sales opportunities.”

What is insurtech?

Insurtech is fintech’s insurance-specific branch, and is a, “gamechanging opportunity for insurers to innovate, improve the relevance of their offerings, and grow,” according to PWC. It covers every facet of the insurance industry, and references the use of technology innovations intended to eke out savings and efficiency from accepted models of any kind.
Insurtech gives insurance firms the ability to offer ultra-customized policies and use data streams from internet-enabled devices to price premiums dynamically, tailored to observed behaviour.

Why is it important?

According to CB Insights, insurance tech startups raised $1.7 billion in 2016, its highest ever deal activity annual total. While 2016 was a meaningful year for insurtech, 2017 builds on this notion. As Sam Evans, founder of Eos Venture Partners, says, “Insurtech established itself as a stand alone investment sector last year and we expect the momentum to continue to build. There is a lot of hype but underneath the noise there are some excellent businesses looking to drive significant improvements in the way insurance is managed, designed, distributed, sold, perceived and bought by the customer.”
Millennials are the key new market for insurance. Many people expect to be able to apply for and process their insurance instantly, at the last minute. Technology needs to supply efficient processes for insurance companies trying to meet these demands.

What are some of the insurance fields affected by the insurtech trend?

Car insurance
Progressive (NYSE:PGR) are a US-based insurer who have adopted TrueMotion’s software that automatically links driver data to their car insurance. This means that rather than calculating average price, connected cars can provide accurate information. In the case of an accident, the TrueMotion Impact app can call emergency services and start insurance claims on the spot.
Disability insurance
Venture capital-backed, independent broker PolicyGenius offers long-term disability coverage online. Their 5-minute Insurance Checkup tool is their customer service interface and the replacement for bureaucratic paper-pushing. They are part of a communication and language overhaul, using plain english for the everyday consumer, aiming squarely at Gen Y consumers. Their unique online forum and quoting engines allow site visitors to browse pet and renters insurance too.
Health insurance
“It is very difficult to see a border between insurtech and healthtech today; lines are blurred”, according to Forbes. Health insurance giant Aetna (NYSE:AET) are one such company blurring the boundaries between the sectors. They have partnered with tech powerhouse Apple (NASDAQ:AAPL) to make the Apple Watch available to customers, rewarding fit individuals by linking their biometric information to their insurance policy. Other healthcare providers are following suit.
Life insurance
Smart contracts can automate claims management and underwriting, as well as verifying life insurance claims. Global Arena Holding (OTC:GAHC) acquires companies and patents that use blockchain. They invested in Blockchain Technologies Corporation (BTC), a startup accelerator who have developed a patent for self-executing wills. These smart contracts eliminate the need for estate executors, triggering a chain of events from verifying the death to asset distribution.

How can I invest?

As a growing industry, many of the main players are still at the startup stage. In order to support these, investors can turn to Eos’ Insurtech Fund, a portfolio of six companies. This gives investors exposure to startup companies like RightIndem, a digital claims business focused on the customer. 
Insurtech may be in its early stages, but at its current rate of disruption in the insurance sector, as well as growth evident in startup funding, there is huge potential for it to become the best fintech sub-group to invest in.
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Securities Disclosure: I, Emma Harwood, hold no direct investment interest in any company mentioned in this article.