Module 4: Insurtech
Dr. Ari Achiaz
Dr. Erez Levy
Introduction to Fintech
Outline
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Outline
• What is Insurance?
• The history of Insurance
• The main fields in insurance
• Challenges in the old insurance industry
• Insurtech
− The main Disruptions in the Insurance Industry
Introduction to Fintech - Ari Achiaz & Erez Levy
Introduction
What Is Insurance?
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What Is Insurance?
• Insurance is a contract, in which an individual or entity receives financial protection or reimbursement
against losses from an insurance company
• Main Terminology:
− The provider of the insurance - known as an insurer, insurance company, insurance carrier or
underwriter
− The purchaser of the insurance - known as an insured or a policyholder
− The insurance contract - known as Insurance Policy
This contract contains the details, the conditions and circumstances under which the insurer will
compensate the insured
− Premium - the payment of the policyholder to the insurer for her protection
Introduction to Fintech - Ari Achiaz & Erez Levy
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How Does Insurance work?
• The policyholder makes a relatively small payment in exchange for the insurer's promise to compensate
the insured in the event of a covered loss
− Note: The loss may be non-financial, however, it must be reducible to financial terms
• In case of an insurance event, usually, the insured submits a claim to the insurer for the incurred losses
Introduction to Fintech - Ari Achiaz & Erez Levy
The History of Insurance and
Types of Insurances
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The History of Insurance
• Insurance agreements are found as early as 3000 BC, when Chinese made a pooled insurance on
transfer of cargo in the Chinese rivers
• In the following paragraphs, I will present the main fields of insurance and their history:
− Marine insurance
Started in Italy during the 13th century
Became more popular in Britain
The common practice was that the people who accepted the risk, wrote their name under the
description of the risk and the terms => Underwriters
Introduction to Fintech - Ari Achiaz & Erez Levy
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The History of Insurance
− Life Insurance
First evidence of a life insurance is from Egypt during
2500 BC
Insurance was intended to cover burial funds
First life insurance policy is documented in England
during the 16th century
At first, everybody paid the same premium
=> many insurance companies could not pay the
claims
Only during the 18th century, insurance premiums
became differential
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The History of Insurance
− Fire Insurance
Started in London after 1666 (the 5 days fire in London
which destroyed 85% of the city)
− Traveler Insurance – the first Traveler insurance policy was
issued at 1864
− Automobile Insurance – the first automobile insurance
policy was issued by Travelers Insurance Company at
1898
− Health and accident insurance – the first insurance was
issued at 1850 in Massachusetts
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Main Types of Insurances
Insurance
General
Life Insurance
Insurance
Whole Life Term Marine
Annuity Miscellaneous Fire Insurance
Assurance Assurance Insurance
Loss & Workmen’s Professional
Vehicle Fidelity Credit Burglary
Profit Compensation Liability
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Types of Insurance
• Today, there are more tailor-made insurances for specific groups like women or professional insurance
In addition, in the last few years, there is also an increase demand of tailor made insurances.
For Example:
− Hole-in-One Prize Insurance
− Athlete "Loss of Value Insurance"
− Body Part Insurance
− "Change of Heart“ Insurance
− Multiple Birth Insurance
− Death by Laughter Insurance
− Lottery Insurance — For Companies
− Alien abduction insurance
− Chicken insurance
Introduction to Fintech - Ari Achiaz & Erez Levy
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Digitalization of the Insurance Industry Before Insurtech
• Similar to the banking industry, computers changed the
insurance industry
• Data could be stored and found, and with it the ability to:
− Allow better insurance policy (tailored to the customer)
− Avoid frauds
− Speed up the issuance of insurance and claim processes
• Although, in time, more and more parts became digital, the
underlying insurance product remained the same
Introduction to Fintech - Ari Achiaz & Erez Levy
Challenges in the Old Insurance
Industry
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Challenges in the Old Insurance Industry
• There are two main parts in which the costumer meets the insurance company:
− Issuance of the policy – the purchasing process of a new insurance
− Making an insurance claim - when insurance event occur and the costumer claims her lost
• In both parts, the insurance industry has significant challenges, in particular when dealing with
costumer’s experience
− Customer’s deterrence from dealing with the insurance companies came in different forms:
Avoid claiming if it is not crucial
Customers did not try to understand the fine print of the insurance
Deterrence from switching insurance company, since this move included dealing with the insurance
companies
Introduction to Fintech - Ari Achiaz & Erez Levy
Insurance Policy Issuance
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Challenges in the Old Insurance Industry
• Insurance Policy Issuance
− It is a long process which involve a lot of documents
− The process is unfriendly and complicated
− In the old insurance industry, there was less availability for tailor-made insurance policies
− Due to lack of information, pricing is not accurate
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The Policy Issuance Process
Introduction to Fintech - Ari Achiaz & Erez Levy
Making an Insurance Claim
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Challenges in the Old Insurance Industry
• There are a few major difficulties in the completion of an insurance claim process
− It is a tedious process
− There is minor (if any) cooperation by the insurer
− The filing process is a very long process
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The Process of an Insurance Claim
• Below are the main process steps of an insurance claim in the old insurance industry:
1) Prevention - except from forcing activities (like installing window grates), did not get a lot of focus
2) Information - the customer informs and provides information regarding the insurance case (usually
via phone)
3) Initial examination - examination of the claim against fraud and assessment of the degree of the
insurance case ⇒ This process took a lot of time
4) Assessment of the damage
Appraiser is needed for every insurance case ⇒ takes a lot of time. The costumer have to wait long time
for the compensation
5) Settlement
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The Process of an Insurance Claim
• Outcome:
Introduction to Fintech - Ari Achiaz & Erez Levy
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Insurtech Number One Trend
− Insurtech 10: trends for 2019 by KPMG
Introduction to Fintech - Ari Achiaz & Erez Levy
Main Disruptions of Insurtech in the
Insurance Industry
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Main Disruptions in the Insurance Industry
• Customer’s experiences
− Smartphones changed the game
− Value-added services
− Continuous improvement from customers’ feedback
• Data collection and usage
− New Products (tailor-made products)
− Prevention of frauds
− Better underwriting
• New insurance field
− Digital data by itself creates opportunities for new insurance products, such as cyber-insurance
Introduction to Fintech - Ari Achiaz & Erez Levy
Customer’s Experiences
Customer’s Experiences in General
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Customer’s Experiences
• Dealing with insurance companies was the most problematic issue for the customers, in two main
occasions:
− When buying an insurance policy
− When filing insurance claims
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Customer’s Experiences
• In the Insurtech world, almost everything is around the costumer’s experience
• The customer’s experience is in the heart of the new insurance companies
• The goal of the insurer in the Insurtech world is to turn the process of buying a policy or filing out a
claim into a fast, simple, and satisfying process
This takes form in many ways, among them are:
− The filling process of the necessary documentation is now online and more friendly
− The payment process is simpler
− The ability to have the insurance policy online makes the costumer feel safer and in control, although
most of the costumers will not even look at it
− The claim process is quicker and more friendly
− Settlement process is quicker
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Customer’s Experiences - Smartphones
• The smartphones changed the insurance industry in several ways. The main ones are:
− Innovative distribution channel of insurance products
− Innovative process of insurance claims
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Insurance Claim Process in the Digital Era
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Insurance Claim Process in the Digital Era – Example 1
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Insurance Claim Process in the Digital Era – Example 2
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Insurance Claim Process in the Digital Era – Example 3
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Customer's Experience – Example 1
• Lemonade in numbers:
− Customers – 1 million
− Sales in 2020 were approx. $94 million
− Net income before tax in 2020 – ($122.3 million)
− Charity giving in 2020 - $1.1 million
Founded 2015
Raised ~$1.1B
Valuation (estimated) ~$2.6B
Employees ~990
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Customer's Experience – Example 2
Founded 2011
Employees ~584
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Customer's Experience – Example 3
• Adeslas is another company that offers
an end-to-end digitization of claims, with
features such as multichannel FNOL,
automated claims segmentation, and
digital claims status tracking
Founded 1990
Raised N/A
Valuation (estimated) ~€1.2B
Employees ~337
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Customer's Experience – Example 4
• Additional examples for entirely digital insurance with focus on costumer’s experience are:
− Youse from Brazil − Nexible from Germany
Introduction to Fintech - Ari Achiaz & Erez Levy
Value-Added Services
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Value-Added Services
• Value-added services can include a variety of services both linked or not linked to the insurance
coverage such as:
Support in filling out insurance claims Education on preventative Tele-medicine - remote
requirements and obtaining necessary health, safety or other topics diagnosis and treatment of
documentation linked to health outcomes patients
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Value-Added Services
• Value-added services can include a variety of services both linked or not linked to the insurance
coverage such as:
Discounts in pharmacies, suppliers of Health screenings and Various types of assistance: legal
agricultural inputs or other businesses preventative consultations assistance, homework assistance or
assistance with employment issues
Financial education
Introduction to Fintech - Ari Achiaz & Erez Levy
Ecosystem
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Ecosystem
• An ecosystem is an interconnected set of services that allows users to fulfill a variety of needs in one
integrated experience
• Customers wake up to a world in which their every need can be addressed through their smartphones
• Putting customers at center of every digital activity has not only scaled adoption but also allowed
companies to capture previously unimagined value
− For example:
Apple is now much more than a technology manufacturer, and Facebook is a way of life
Seven of the ten largest companies by market capitalization are ecosystem players—Alibaba,
Alphabet, Amazon, Apple, Facebook, Microsoft, and Tencent
Digital McKinsey
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Ecosystem- Example 1
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Ecosystem- Example 1
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Ecosystem
• By 2025 McKinsey expects 12 distinctive and massive ecosystems to emerge around fundamental
human and organizational needs.
• These 12 ecosystems will account for $60 trillion in revenues or roughly 30 percent of all global
revenues
Digital McKinsey
• So, what does this have to do with insurance?
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New Competition
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Example of an Ecosystem in the Insurance Industry
• Ping An, a giant Chinese insurer with more than one million employees and agents, on top of the
insurance services, offers also:
− Healthcare consultations
− Auto sales
− Real estate listings
− Banking services
• Ping An has more than 350 million online customers through a single customer portal called the One
Account
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Example of an Ecosystem in the Insurance Industry
Introduction to Fintech - Ari Achiaz & Erez Levy
Continuous Improvement from
Customer Feedback
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Continuous Improvement from Customer Feedback
• The companies send online surveys to the customers, in which they rank many variables:
− Representative
− Treatment
− Quickness
− Etc.
• In comparison to the past, the evolution of the insurance industry in
terms of costumer experience reflects the attention that these
firms pay to the customer feedback => motivate the feedback
Introduction to Fintech - Ari Achiaz & Erez Levy
Data Collection and Usage
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The Role of Data
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The Role of Data
• The data obtained by insurance companies today is quite different from the data which was obtained in
the past
− In the past the collection of data was focused on the costumers details the ‘who, what and where’.
The most important role of the data was: Customer relations
− In the Insurtech era, the data is more comprehensive – the most important roles of the data are:
Power connectivity with customers – for example, facilitate robotic process automation (RPA) and
artificial intelligence (AI)
Generate insights into customer behavior
o Driving risk pricing
o Generating the ability to sale new products (tailor made products)
o Prevent frauds
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Example 1 - Data Driven Insurance - Driving Risk Pricing
• Beauty
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Example 2 - Data Driven Insurance – New Products
• Next Insurance
• Israeli company that offers
tailored Insurance
Founded 2015
Raised $881m
Valuation (estimated) ~$4B
Employees ~681
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Example 2 - Data Driven Insurance – New Products
• Contractors
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Example 2 - Data Driven Insurance – New Products
• Beauty
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Example 3 - Data Driven Insurance – New Products
• Insurance company
designated only for
women
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Challenges in Obtaining Data
• Although customers are sharing a lot of data freely on their social media platforms, they are reticent to
disclose data to an insurer
• Accordingly, insurance companies need to give them incentives like: reduction of premium, gift
vouchers etc.
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Example 4 - Incentives to Provide Data
Introduction to Fintech - Ari Achiaz & Erez Levy
New Insurance Field - Digital Data
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Digital Data
• Digital data by itself creates demand for new insurance products, such as digital assets insurance
• Today, companies rely on data that they collect, this process can lead to several damages:
− Lost of required data
− Data theft
− Data leak – exposing customers for example
• Due to the significant exposure, companies need to insure themselves from these damages
• There are specific insurance companies that specialize in these kind of insurances
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Digital Data – Example 1
Introduction to Fintech - Ari Achiaz & Erez Levy
Wrap Up
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Wrap Up
• In the last few years the Insurance industry has changed dramatically
• Technological inventions changed the way companies sell insurance and customers buy and use
insurance
• This revolution led to the following disruptions:
− Customer’s experiences
− Data collection and usage
− New Insurance field
Introduction to Fintech - Ari Achiaz & Erez Levy