Forget Uber, InsurTech is the Tesla Moment for Insurance
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Forget Uber, InsurTech is the Tesla Moment for Insurance

For this month's InsurTech Insights from The Digital Insurer, Rick Huckstep talks with the founders of Sherpa and Getsafe. Both start-ups have redesigned the traditional insurance product, how they engage with the insurance supply-chain and the way they interact with customers.

Insurance is going through a period a rapid evolution

The word 'Uber' has become synonymous with the notion of industry disruption. The old guard completely replaced by a digitally fuelled customer centric new way of working. I see people talking about industry disruption and reinventing insurance all the time. The vast majority of this is simply exaggeration to gain a smidgen of attention.

In the world of insurance, there isn't going to be any wholesale disruption (IMHO). The industry is too large, too complex, and too embedded in the social and economic fabric of the world.

That doesn't mean that insurance isn't ripe for change or a significant overhaul. Because it is. A massive one. And it's happening. Thanks to InsurTech.

But this change isn't going to come in some form of Uberesque disruptive moment. Instead, it's going to be a rapid evolution. This is what I call "The Tesla Moment". Where someone comes along and makes such significant improvements that they change the way the market works.

What Tesla have done is change the way the motor industry thinks and approaches the way cars are designed and built. They haven't replaced the traditional car manufactures in the way that Uber have replaced black cabs in London. Tesla haven't created a devisive 'for or against' mentally in their industry either. In London, you are either for Uber or against them. I'll never get in a black cab or I'll never call up an Uber. That's disruptive.

For insurance, this rapid evolution means a massive technology catch-up is long overdue. It also means that the massive inefficiency and friction across the supply chain is in play. And it means a massive realignment to the customer is taking place. That's rapid evolution and what I mean by a Tesla moment.

Digital Lipstick on an Analogue Pig

During the first wave of InsurTech, there were essentially two categories of start-up. One category focused on Data, ie., technology and tools to help insurers do more than they could do before.

The other on Distribution, ie., new forms of digital and mobile distribution to make it easier to buy insurance. The problem with this first wave of digital distribution is that the underlying insurance product is the same. Some might call this digital lipstick on an analogue pig, I couldn't possibly comment!

However, in the second wave of Insurtech, new business models and new ways to create insurance products are starting to come forward. InsurTech has become much broader than simply software firms that create enabling tech. The diehards who continually say otherwise have missed the point.

Lets start with the pioneers; Lemonade and Zhong An

Over the past year, I've covered Lemonade's progress and my chats with CEO Daniel Schreiber in regular articles. The latest one is here on The Digital Insurer.

Lemonade's platform approach limits the total cost of operations to 20%. In itself, a massive challenge for the incumbents who are going to have to halve their current cost base to compete. And that's before the incumbents try and match Lemonade on their entirely digital, automated, self service, customer centric, instant everything delivery of an "insurance product".

Let's leave their value-led principles, kind heart, and ethical stance for another day.

Next step for Lemonade is to redefine the core insurance product. They've already started with deductibles and their Zero Everything product. More to follow, I'm sure.

Zhong An are the world's largest InsurTech by far. Their stats are simply outstanding.

Over 7bn policies sold, nearly half a billion customers and over $500m GWP in 2016.

The key take-away is that this multi-line insurance carrier is 99% automated, have less than 2,000 employees (over half are developers) and pricing is dynamic and personalised.

Zhong An's rapid success is in large part due to it's distribution through partners that has seen it tightly integrated across China's internet economy. Zhong An use the term "scenario based settings" to define how they enable customers to buy insurance for their specific risks at the point of consumption.

In other words, they make it an instant and easy no-brainer.

Sherpa and Getsafe; two of the new boys on the block

For this month's #InsurTech Insights, the theme is The Digital Advisor. To be more precise, it is The Digital Advisor in a digital-to-human engagement model.

To find out more for the article, I spoke at length with the co-founders of both of these start-ups. Partly because they genuinely are digital advisors with a digital-to-human engagement model, but also because they so much more than (simply) digital lipstick.

To be clear, both Sherpa and Getsafe have redesigned the underlying insurance product. They both treat their customers as a single entity and not as a collection of multiple products 

The Sherpa approach is fundamentally different to how the traditional insurance industry works and is organised. Sherpa package up multiple customers' insurance needs and buy cover wholesale from GenRe. For regulatory purposes they need a primary carrier, but to all intents and purposes, the carrier is superfluous in the Sherpa model. 

Getsafe build, underwrite and manage their own products across all three lines of business (health, life, non-life), then package it up in one single, flexible master-policy for the customer. In their case, they buy wholesale cover from Munich Re.

Between them, Getsafe and Sherpa have achieve one significant and fundamental step. They have eliminated the generic product. 

To find out more, go here for the full article and discussion with Chris Kaye from Sherpa and Christian Weins from Getsafe.

Rick Huckstep is a Keynote Speaker, Investor and InsurTech thought leader and one of the #InsurTech9. Rick is Chairman of The Digital Insurer.

Interesting read, although they are customizing the product it's still basically the same product, just delivery systems make it appear different. All insurance products are customized via coverage/amounts and deductibles. Does not seem revolutionary. The carrier that is 99% automated, is interesting. A little discerning for all of us insurance folks that keep that big wheel rolling. Interesting use of the "Tesla moment". Tesla not only redesigned the automobile, they now offer their own insurance product for their cars. The insurance industry obviously has to change to keep up with this ever changing world that is so digital these days.

Rosaria Truppo

Marketing, Communications and Business Development Professional

7y

Interesting read! I totally agree with your definition of rapid evolution rather than disruption in such a complex industry - what matters the most is to reshape insurance with modern customers' expectations in mind.

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Jeroen Bartelse

Seeks answers for the questions of tomorrow. Works on Strategy & Business Innovation @ Achmea | Scouts for Achmea Innovation Fund | PAVE Europe board | interested in Urban Air Mobility, digital assets and insurtech

7y

Interesting to read this progress being made

Michael Muzio

Founder and Leader Frontier Insurance Solutions Ltd

7y

So has now4cover and we launched that two years ago. Lots of learning under our belt and pushing on now with more covers in our own digital style.

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