Last year was my first time writing a “predictions” piece. While initially apprehensive, I did enjoy publishing one of the many predictions-focused articles. As it’s the New Year and insurtech has no signs of slowing down, I thought it would be fun to throw my hat in the ring once again.
Before I go into my thoughts for 2019, let’s see how I fared in 2018. Here is the full article if you’d like to take a look at the details.
Reflecting on 2018 Insurtech Predictions
#1: Consumer engagement – While this is still a focus for many carriers and startups out there and progress has been made by some companies, we (as an industry) haven’t completely cracked the nut on this yet (in my mind). Also, as insurtech is not fully mainstream, my prediction of policyholders telling us to ‘cool it’ with the engagement has not come to fruition as of yet. 0/1
#2: Insurtech buzzwords – Did you hear the terms ‘API’ and ‘ecosystem’ throughout your readings, listening to podcasts and going to conferences in 2018? 1/2
#3: Specific technology – AI and blockchain were two technologies talked about a lot in 2018. While AI is being experimented with and implemented across the value chain and within various solutions, blockchain has not gotten the steam that I had predicted. I’ll be generous and give myself a half point here. 1.5/3
#4: Lines of business/risk covers – We have seen more D2C insurtech entrants to the life space in 2018 and some are getting more substantial funding (Ethos, Fabric as examples). In addition, focus on the gig economy and cyber continues to increase. 2.5/4
#5: Areas of the value chain – Reading back on this prediction, I gave myself an easy one. Nonetheless, we are seeing more focus on claims for Life and Health (e.g. Benekiva). Cyber security and fraud initiatives are also on the rise. 3.5/5
#6: Geography – ZhongAn and Ping An have expanded outside of China (ZhongAn is bringing its tech to places like Japan, Ping An bought a stake in Finleap to name a few). We are also seeing more growth of insurtech in Africa, the Middle East and Latin America. I expect these areas to continue to grow as there is so much opportunity/need to protect the under/uninsured in these markets. 4.5/6
#7: Investments – I predicted more investments via ICO (Initial Coin Offering) as well as more insurer incumbent investments. The ICO train did not go into speed as much as I had thought it would. However, incumbent investments and the establishment of CVCs continue to roll on. Half point again. 5/7
#8: Regulation – Regulators continue to make a more concerted effort to understand and get involved in insurtech. After all, they are the ones that will need to regulate it. Being more personally involved in the US market this year, I must commend the NAIC and many state departments for being so proactive. Connecticut and Iowa are two of the leaders in this, and many other states are also doing a great job. 6/8
#9: Big Tech – Any question that Big Tech firms (i.e. GAFA) are looking at insurance? I think not. (see my prediction below for more on this). 7/9
#10: Macroeconomic – Bitcoin crashed in 2018. Brexit is still in flux. The US markets are having their worst year in 10 years. However, none of this has stopped the insurtech investment train from steaming along. I guess this a good thing? 7/10
Bonus prediction – I love to see the continued global and cross-border sharing of ideas. We are starting to observe more insurtechs expanding their operations globally (Lemonade and Denim recently announced expansion into Europe) and I expect this to continue. The beauty of our industry is that it’s a global one and the opportunity to continue to share ideas around the world is one of the things I love most about what I do.
7/10 isn’t bad for my first year. Let’s have a look at 2019, shall we?
2019 Insurtech Predictions
Prediction #1 – Late round funding
This year, we saw an abundance of later, larger round investments. As noted in PwC and CB Insights' Q3' 2018 MoneyTree report, Q3' 2018 funding for expansion and later round funding was 37% of the total amount invested. Aside from Q2’ 2018, this has been an increasing trend (as can be seen in the picture below from their report).
Further, the recently published Willis Towers Watson CB Insights Quarterly Insurtech Briefing stated that 'Q3 was completed in 57 reported transactions. This amount is more than double the funding volume over the prior quarter, despite a 20% decline in the number of transactions reported. The trend of growing round sizes continues. Q3' 2018 saw eight transactions over $40 million, compared with six in the first half of 2018.’
Lastly, here is a great list from Coverager of the top funding events by series and region in 2018 which gives more detail showing this...
Bottom line, I expect this to continue.
We are in a stage now where many startups have had the opportunity to prove their value to carriers and consumers. Some have, and some, have not. The ones that have proven value will need to scale. And to scale, takes money.
Now that the market understands what these solutions can do and which ones are being successful, more and larger bets are going to be made on the ones that are actually doing something of value, rather than the ones that are trying to do something of value (though some bets will still be made in these companies too).
Prediction #2 – Underwriting for Life & Health products
This one is a bit closer to home given my time on the Life & Health side of the industry and my recent joining at RGAX. Many life carriers out there are trying to achieve ‘fluidless underwriting’. The need to take blood/urine for underwriting (which has been the standard for years) can be invasive to consumers and timely/costly for carriers.
Some of the things I am seeing and working on at RGAX (in addition to our parent company RGA) are really phenomenal and are going to - and already are - transforming the industry.
Here is a great piece from RGA that shares the impact these new underwriting programs will have on the industry.
I expect to see some real strides in this space next year.
Prediction #3 – Insurance literacy
Today, many individuals don’t understand how to calculate their insurance needs nor how to determine what they are specifically buying when they get a policy (both in terms of coverage and exclusions).
As purchasing insurance becomes a faster process -- new tools are used to provide insurance to consumers and it is ‘packaged’ with other products individuals buy -- the likelihood that needs and coverage are not explained/understood increases.
As such, there needs to be more focus on insurance literacy for consumers. I expect this to be a focal point of regulators. However, as an industry, we have a responsibility to build our new solutions with this in mind.
Transparency is key in any business and is one of the things that individuals don’t like about our industry (i.e. we are not as transparent as we could be).
Prediction #4 – Big Tech
This is a continued prediction from 2018 as I feel Big Tech will continue to make strides in insurance.
Apple and Google have been doing a number of things in healthcare. Amazon is working on its healthcare initiative in the US with JP Morgan and Berkshire Hathaway. They have invested in India’s Acko. There are rumblings of some work in the UK.
The dark horse Big Tech firm (even though they are not labeled as Big Tech), is Softbank. I wrote a detailed article on why you should be paying attention to the big moves Softbank will make in insurance earlier this year. While the Swiss Re deal seems to have simmered, they have still made other moves (investment in ZhongAn for example) and I expect them to continue to do so. I am about as bullish on Softbank in insurance as I am on Amazon.
Maybe even more so.
Prediction #5 – Partnerships
We are seeing more and more companies join forces and collaborate to offer additionally powerful, holistic offerings to the industry.
Take a look at Ping An and Finleap (mentioned above). Sureify has been doing this for the life space for the past couple of years and I think their recent partnership with Atidot is great. Bold Penguin partnered with TechCanary this year (and is already a partner with AskKodiak). These are just a few examples.
These partnerships are important because they allow companies to offer either packaged or bespoke offerings to carriers. Some carriers only need certain services and some need soup to nuts.
I expect to see more of this in 2019.
Prediction #6 – Data privacy and security
In 2018, we saw some of the largest cyber breaches on record. I don’t expect this trend to go away (unfortunately).
As such, there will be two areas of focus: 1) on cyber insurance and 2) on data privacy and security. As we use more data for underwriting and to embed insurance products in digital ecosystems, there are more opportunities for individual’s data to be shared. There will be more scrutiny from a regulatory standpoint as well as higher expectations from individuals on this.
Prediction #7 – Enable > Disrupt
The topic of disrupting vs. enabling the industry has been a hot topic over the last couple of years.
There are some full-stack and MGA (Managing General Agent) start-ups out there that are really making strides in the market and in many ways, are the catalyst of change that has brought insurtech to where it is today. However, going this route has a lot of financial and regulatory hurdles.
Many of the big incumbents can be slow to move/change, yes. However, they have the market share, marketing dollars and financial capital to be around for a long, long while. Their need to partner with third parties to help accelerate and drive the pace of change, is ever more important.
The companies that can prove to the incumbents that they 1) understand their business, 2) can drive value for both them and their policyholders and 3) can enable them to do better, in an easy fashion, will win. (See #1 and 5 above)
Prediction #8 – Insurtech conferences and events
I went to 10 conferences this year. As compared to the ones I went to in 2017, I definitely saw more ‘suits’ than startups. As incumbents continue to understand and get more involved in meaningful insurtech initiatives, they will be more interested in - and driving the agenda of - the topics at industry conferences. This is a good and a not-so-good thing. It’s good because it shows a willingness for the industry to change.
It’s not so good, because as more suits come into the foray, they tend to drown out some of the innovators that are actually helping to drive that change. This fact (more incumbents at events than startups), combined with the sheer abundance of conferences that are popping up, is going to start leading to insurtech burnout in 2019 (there were already signs of it).
This is not to say that individuals will not still be implementing meaningful initiatives. As noted above, I am very bullish about this. I just feel as if the amount of conferences and events are becoming a bit too much for the industry to handle.
Have you missed the other predictions out there this year? Check out some good ones I have found:
- 10 insurtech predictions for 2019: XL Innovate by Martha Notaras
- 2019 and the year ahead! By Nigel Walsh
- Six insurtech Trends to Kiss Goodbye in 2019…Or Not? by Adrian Jones, Gopi Rangan and Marie-Christine Razaire
- Guidewire predicts what will happen to insurance and insurtech in 2019
- 3 insurTech trends expected to accelerate in 2019 by Sally Poblete
Here’s hoping your holiday season was enjoyable and relaxing. I have enjoyed interacting with many of you over the past year and look forward to continuing these conversations throughout 2019 and beyond.
*These predictions are based on Stephen Goldstein's personal experience and observations.
