What are the main trends impacting the industry in 2017

The insurance industry in 2017 is all about the customer. Better engagement, better service, better coverage, better pricing - leading to improved relevance and trust. For insurtech it is all about a maturing sector where the new entrants will have a greater understanding of insurance and will bring actionable solutions as opposed to just exciting ideas. I think the emergence of AI will be the big transformational ingredient in new insurance models.

For incumbents one main trend will be looking outwards to solve problems and take advantage of opportunities; partnering with startups and new entrants from other sectors rather than trying to build in house. Much of the focus will be on ways to improve efficiency and reduce fraud.

About connected insurance, what are the opportunities for startups? Do they need a proprietary underwriting algorithm?

You only need a proprietary underwriting algorithm if you are underwriting. By far the majority of startups that we see in this space are focused on providing services to existing insurers, either by gathering new data, aggregating data or providing technology that reduces the likelihood of claims (such as sensors). In many cases the opportunities will not be with startups but from other industries that already gather this data (such as utility companies). And we are also seeing startups bypassing incumbents altogether and working directly with the reinsurers - looking forward it may be the reinsurers that really disrupt the incumbents.

What are the advantages that InsurTech startups have over incumbents?

They bring new thinking. And the lack of legacy technology allows startups to build to fit the customer problem rather than compromise to fit with an existing infrastructure and cost base. They can also have a laser like focus on addressing a particular issue without the problems associated with cannibalising existing businesses. Of course they also bring something around a fun and exciting new brand and concept - “I bought home insurance today via an app where I just videoed my belongings”.

What are the main challenges for InsurTech startups in order to gain traction in the market?

Generally insurtechs lack a number of fundamentals that incumbents already have. Most importantly:

• Customers - proof of concept is easy compared to scaling from 100 customers to 10,000. It requires vast amounts of marketing budget and lots of blood, sweat and tears.

• Capital - insurance is capital intensive and often needs significant startup capital even when there are few customers.

• Other challenges will be around cash, deep insurance knowledge/relationships and risk and regulatory expertise.

These barriers to entry mean that partnering with incumbents is often a smart move.

How do you evaluate an InsurTech initiative?

• How important is the problem the insurtech is trying to resolve?
• How well could it resolve that problem?
• Is there a USP that can be protected - or is it just a good idea that can be easily copied?
• Is it scalable?
• Who are the people - do I trust them and can I work with them?