InsurTech – Growth Opportunity for Re/Insurance? Dr. Andreas Schertzinger IVW St. Gallen, Future.Talk 1 / 2017, May 3 rd
The buzz continues Continued growth in number and volume of deals Early-stage start-up investments 40 180 Number of deals and total deal volume by quarter 160 35 140 30 Deal volume in USDm 120 25 # of deals 100 20 80 15 60 10 40 5 20 0 0 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Deal Volume 6 15 2 2 26 12 11 14 33 9 58 26 103 98 56 41 87 73 100 65 84 152 156 117 Deals 3 7 4 1 10 4 10 10 12 5 11 8 11 11 21 14 15 16 18 29 39 18 28 30 Sources: CBInsights 2
There is a real opportunity New risks, unmet consumer demands, and the ability to serve consumers better Risks change Consumers expect exerience “Digital value chain” possible • More extreme risks • Digital (with human option) • Vast amount of data • More insurable risks • Other industries more advanced • Secure sharing of data • New risks • Analytics as commodity • Risk mitigation • Digital consumer interaction Catalysts / Inhibitors (technological diffusion / consumer adoption and technology convergion) 3
Moving towards the “digital value chain” Capturing more of the insurance premium with technology Solutions & Pricing & Distribution Claims & Inforce Operations Services Underwriting Digital advisors buy insurance Smart analytics and cognitive Policy administration costs for the consumer computing help: reduced by [50%] Alternative distribution channels Simplify/speed up underwriting Retention management (Google, Facebook etc.) Select and price risks more Financial partnerships appropriately and dynamically Improved awareness and engagement, much lower cost Seemless solution partnerships Digital claims automatically file to compose consumer solutions and process claims Customer expectations shift from Fraud detection financial compensation to services and prevention 4
The larger opportunity: Closing the protection gap Growing the insurance premium with technology Example: Natural catastrophe protection gap • Consumers – Losses, USD trillion Increasing risk awareness (pension, catastrophe), and potentially value added by insurer • Microinsurance – Insured Providing access and affordability to the underinsured 0.5 (30%) • New middle class in high growth markets – Fast growing demand for services and protection • Small & Medium enterprises – Traditional distribution (and claims) too expensive 1.3 • Increased risks – (70%) Pricing cyber, supply chain, and other new risks Uninsured 5
Challenges to capture the opportunities Costs and major uncertainties in times of soft markets “InsurTech regulation” Digital advise Uncertainty around data usage and potential new Training the advisory algorithms and documenting the requirements rationale is harder than for online shopping Consumer ownership Data usage Loss of relationship to digital native brokers, Limits to risk selection and pricing to enforce pooling platforms or OEMs & ubiquitious advisors (“SiRi”) & affordability Business case Digital claims High immediate costs (IOT devices, analytics, Automated event identification and loss amount premium discount), underestimated future costs, estimation from available data non-trivial uncertain value (customer growth, loss ratio) 6
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