Author’s note: This was originally published in Jan on LinkedIn before Coronavirus was classified a pandemic.
Making predictions is fraught with risks; however I am going to attempt it anyway! Here go my Insuretech predictions for 2020:
- The last few years were excellent for healthcare-focused digital companies like Oscar, Bright Health, Clover Health, and they managed to raise nearly $ 3 Billion at a valuation of multiple Trillions. Their focus is on superior engagement, empowering the user with information, and getting them in charge of their health. The upshot is that they attract customers with a better risk profile and hence lower claims outgo. That is the reverse of adverse selection and insurers love it! I predict this trend will continue with Apple, Google, Amazon, and countless small startups entering this space over the last few years focused on prevention and customer wellness.
2. Environmental issues matter: We can’t ignore the impact of climate change on the World. Insurance companies will also feel the heat. The last few years have seen upwards of USD250B of losses attributable to natural causes. Over half of these losses have come from “secondary perils” (floods, thunderstorms, rains, etc.) and events that occur as a follow up after a significant CAT event, (tsunami after an earthquake). Impact on insurance? Many vulnerable areas will be declared uninsurable, making cover unaffordable for ordinary people. Several large insurers have declared the coal industry, (massive contribution to climate change), as “uninsurable”. Very likely, new large coal projects will not be commissioned. Besides, on the investment side, you can expect pressure on insurers to continue to invest in non-polluting /green sectors, which may depress yields, going forward. The upshot of this is that over the next few years, we can expect to see new fintech/insuretech companies entering the green investing and insurance space offering better protection to businesses and consumers.
3. Auto+Tech rides into town: Insurers in the US and EU have experimented with telematics devices, and InsureTechs like Metromile and Root have started gaining traction. This trend will accelerate in this decade. Human errors cause 90% of accidents, and with autonomous cars, this will reduce dramatically. In time, insurance premiums will go down by 75% (Accenture).
The risk will transfer to the vehicle manufacturers who will need to tie up with reinsurers to manage liability for their entire fleet of cars. InsureTechs and aggregators themselves could get disrupted as the premiums shift from personal lines motor to commercial liability.
Transportation unicorns like Tesla, Didi, Grab, and Ola will continue to gather rich data on transportation and make it available through their APIs. Insuretechs will use this data to create new business models that add value to manufacturers, city planners, and provide new ways to improve productivity and spend time for drivers who now don’t need to drive!
Also, watch out for the rise of micromobility providers like Bird and Lime and the insurance needed to cover their riders
Inspired and perhaps terrified by Insuretechs, insurance companies will start to go digital fast(er)!
Increasingly, we will see adoption of hybrid #cloud architectures that enable quick product launches. We will see the rise of on-demand, short duration insurance products such as those sold by Trov and Slice.
Mobile apps will enable customers to record claims and with customer consent, location & timestamp (leading to reduced frauds). Check out Lemonade in the US that operates in the home insurance space.
Insurers will start to build on voice technologies like #Alexa & Google assistant to improve customer service and easy access to customers.They will start to use #MachineLearning to power their underwriting models.
Aggregators like Yallacompare (UAE), and Confused, (UK), will start to be disrupted by specialized players focusing on lines such as travel and pet insurance.
Insurers will start to trial out #blockchain with smart contracts especially in products like travel to bring down the cost of processing low premium products.
Finally, you will see more startups looking to cover small business risks (Coverwallet) and entering #microinsurance.
What do you think? Agree/Disagree
Originally posted on LinkedIn