Barbarians at The Gate: The InsurTech PhenomenonValen Analytics Summit – March 9, 2017Martha Notaras, Partner
“Silicon Valley is coming. There are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking.”
Jamie Dimon, CEO
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“If the Insurance Industry does not innovate and become more relevant, we are in danger of being left behind. Soon.”
Michael McGavick, CEO
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Convergence of insurance and technology driven by entrepreneurs, investors, demographics and computational advances.
InsurTech:
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Explosion of Activity in Insurance InnovationFour of the Top Ten Global Insurers Have Innovation Centers*
Insurance Innovation
Growth of MGAs ILS (New Ocean, etc.)
Hedge Fund Re’s
Internal InsurTech Innovation
AIAAllianzAllstateAvivaAXA
Liberty Mutual
Innovation LabsGlobal Insurance Accelerator
InsurTech Innovation LabPlug and Play**
Startup Bootcamp NYCStartup Bootcamp London
Insurance Accelerators
Andreessen HorowitzAleph
CanaanDFJIVP
SequoiaNEARibbitRRE
Union Square
Traditional VCs
American Family
AIGAXA
AllianzChubb
Liberty MutualMarkelMarsh
MassMutual
Corporate VCs
*Ranked by Non-Banking Assets**28 Insurance Members
Manulife MetLife
MunichReSwiss Re
State Farm
MunichRe/HSBNorthwestern
MutualSwissRe
TransAmericaXL Innovate
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InsurTech Funding Hit $1.69B in 2016207 deals; 57% increase in number of deals from 2015
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Less than 25% of Dollars Invested is for P&CPlenty of Opportunity for Innovation
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0%
5%
10%
15%
20%
25%
30%
Market Opportunity Set is SubstantialInvestments are Diverse and Expanding
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“Tech startup dealmaking by insurance firms including AXA, XL Catlin, Mass Mutual, and others is on pace for a record high in 2016. Carriers no longer shying away from insurance tech.” -CB Insights
Increase in Carrier-Backed Insurance StartupsBroad Range of Carriers Investing
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Hedge Funds Insurance Veterans Entrepreneurs Venture Capitalists Technologists
The Barbarians are at the GateAnd their Numbers are Growing
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Entrepreneurs and Investors
Learning about Insurance
Early Focus on Obvious
Sectors (i.e., Personal
Lines & Distribution)
Incumbents Embracing
Startups
Regulatory Creep
Complex Insurance & Reinsurance
Require Incumbent
Support
Innovation and Digital Transformation StatusWe’re Early in the Process (“InsurTech 1.5”)
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Selection
Customer Satisfaction
Cost
Automation
Simplicity
Efficiency
AI / ML
Automation
Data
Analytics
Over Capitalization Efficiency
Velocity
Investment
Taxation
Sourcing
Acquisition & Distribution
Operational Costs
Business Intelligence Cost of Capital
Innovation & Digital Transformation OpportunitiesXL Innovate Focuses on These Four Pillars
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Greatest Opportunity for InsuranceEngage Customers Beyond Purchase, Claims and Renewal
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Source: Satisfaction Survey — BCG / Morgan Stanley“Insurance Technology Evolution and Revolution
Customer Service Rivals TelcosKey Vulnerability and Opportunity
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Startups are Already Raising the BarWorld Record Timing for Claims in Three Seconds Flat
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Digitally Transform Operations with Mobile Faster, Simpler and Transparent
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Text a photo of license plate for a quote
Get bid from local autobody shops
Uber-inspired app re towing, accident,
and insurance
Automotive Insurance DigitizedInnovative Startups and an Industry Stalwart “Uber-izes”
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SMB Distribution Reinvigorated Customer Focused with Greater Data and Risk Accuracy
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Value Add Broker Online Insurance Data Scoring
SMB Experience Reinvented and AcceleratedLeveraging Tech to Improve SMB Coverage
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New Products for Sharing & Connected EconomyReady to Ingest 26 Billion Devices?
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Insurance Partnering with IoT CompaniesPersonal Lines….Commercial and Industrial Bigger Markets
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Telematics for Usage-Based Insurance (UBI)Transparency for Value
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35% of Consumers Willing to Share Digital DataThe Trend is Well Underway
Percent of Customers Already Sharing Data
Source: Celent
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32%
35%
38%
41%
Social Location
Connected Home
Exercise
Telematics
IoT Reshaping the Insurance IndustryPotential Impact is Non-Trivial
Reduce risk, claim numbers
and volume
Decrease loss rates dramatically
Monetize risk and partner with OEMs
to reduce risk
Develop and price real-time micro
insurance
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Partnerships are Incredible CatalystsInsurers, Marketplace Platforms, Mobile Network Operators
On Demand Microinsurance Smart Home
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Water Leak is the 2nd Largest Cause of Claims$8 Billion in Losses Annually
Source: ISO®, a Verisk Analytics® business
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58%Kitchen
72%Storage
53%Basement
21%Bedroom
80%Laundry
Home Awareness Beyond ThermostatsSensing Water Presence Throughout the House
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Insurance + IoT Influences Customer BehaviorCustomers are Active Partners in Prevention
Burst Water Pipe Average Damages: $15,0005% of Sensors Detected a Leak
50% of these leaks were tests50% of these leaks were confirmed leaks
100% of Customers Took Action to Avoid Damage
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Massive Amounts of Data Captured EverywhereData Deluge Requiring Key Business Intelligence to Process
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Blockchain, Cyber and Fraud Detection“Fingerprinting” Diamonds, Buyers and Data Itself
Blockchain Fraud Detection Cyber Security
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Underwriting
Specialized Data Analytics for InsuranceComputer Vision, Machine Learning and AI
Claims Transportation
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Relationships & Distribution
Knowledge & Resources
Regulatory Interface
First Customer
Capital & Investment
Incumbents are Critical PartnersStartups Recognizing the Strategic Advantages
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Incumbents difficult to displace
Incumbents may absorb
startups
Regulatory barriers are
high
Incumbents can
innovate, too
Ultimately startups become
insurance companies
The Barbarians Don’t Have to WinParallel Strategies & Collaboration vs. Outright Disruption?
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Start Swimming with the Big GuysLots of Opportunity - InsurTech Hasn’t Hit Commercial Yet
Develop/offer new products leveraging data and analytics Identify risks from new tech (drone, autonomous vehicles, etc.) Drive IoT strategies for personalized pricing & risk management
incentives Pursue digital distribution to cut costs Deepen client engagement beyond renewals and claims Launch pilot projects with startups
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Questions?@MarthaNotaras
Hiked the 67 Mile Backbone Trail in the Santa Monica Mountains
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