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Digital Innovation in the Insurance Industry

It’s been an interesting year for Insurtech and so far the industry seems stuck awkwardly between two polar opposite points: pause and fast forward.

What makes Insurtech (and, indeed, its sister industry fintech) interesting is that while funding generally dropped off a cliff and fell more than 50% in Q1 2020, investors are doubling down on smaller startups and early stage funding rounds. Naturally, Covid-19 is, at least partly, the culprit for the drop in funding for it is also impacted by the lack of megadeals - the biggest one of note was PolicyGenuis and a $100 million series D funding round - which has driven down the overall funding percentage.

A Clearer Picture

It can be challenging to aggregate all of the industry’s information and pull together a clearer picture of the rates of change and the fundamental differences between Q1 and Q2 2020. While Insurtech had a rocky Q1, it is finding new opportunities as the pandemic and changes to working have shifted the needs of traditional insurance agencies to more cloud-based systems and solutions, which are needed to support quoting, policy binding and issuance claims. There has been a notable bounce back in Q2, which saw a more than 71% increase in quarter-on-quarter funding (a total of US$1.56 billion) but this is associated with a considerable fall in the number of deals, meaning that investors were putting few eggs in fewer baskets. The Q2 bounce back builds on historical data that shows the resilience and innovation of the industry. In the year between 2018 and 2019, insurtech almost doubled its market share in terms of the number of startups invested in by insurers. Historically, the focus has been on disruptive startups (for example health start ups and scale ups) and in earlier funding rounds, which shows that in some ways, the industry has come full circle in its bounce back from Covid-19, with investors returning to focus on early stage funding.

Greater Opportunities for Partnerships

There is an expected uptick in the number of opportunities and importance of collaboration with traditional insurers who are able to form strong partnerships with their insurtech counterparts. Some of these partnerships are already beginning and blurring business lines as insurers need to focus on customer retention, new revenue streams and efficiencies and are turning to more digitally savvy counterparts in hopes of a smart home style revolution. One example is Munichre, which is building strong partnerships with digitally focused insurtech companies across customer acquisition and retention. Munichre is partnering cross industry with insurtech and fintech start ups to innovate and digitise its whole value chain. Companies like Munichre are embracing and understanding the value of speed to get to the market and also enabling their customers to move at a speed that they’re comfortable with. For example, these partnerships allow Munichre to offer a bigger, more comprehensive, services suite. In this way, Munichre is able to navigate one of the bigger challenges that traditional insurers face (and where partnerships will be so valuable) which is how they can continually create value for customers and capture, manage and analyse information in order to produce that value. It’s almost impossible to overstate the value of data and integrations with technology to help create value for customers. Holding data securely and making it easily accessible helps insurers find valuable in-appetite opportunities and it makes it easy for them to make connections and have meaningful interactions.

Insurtech Trends for 2020 and Beyond

The insurance industry is facing large scale disruption but that’s also coming hand in hand with new trends that will create bigger opportunities. Insurtech is applying data analytics, AI, Machine Learning and a host of other new solutions to the insurance space. This has, in part, led to a huge diversification of services but it’s also helped usher in a streamlining of operations. In line with that, some of the biggest trends for the next 12 months are shaping up to be:


It’s been 53 years since the first chatbot, ELIZA, came online and now, chatbots are expected to help bring in more than USD$8 billion in worldwide savings by the end of 2022. Powered by AI, chatbots can now build personalised insurance policies and quotes for customers, all from within an app. The AI driven chatbots hold the title for the fastest insurance claim in history which saw one run 18 anti-fraud algorithms and then make the payment in only three seconds.

Drones and Video Inspections

Commercial use of drones has been championed by companies including Amazon and BrewDog but they could play an important role in the insurance industry as well. Drones offer a new world of data collection opportunities and can gain access to difficult areas that would usually require a surveyor in a helicopter. Live, on-demand, video inspections are already becoming part of the claims-handling process through an on-demand, YouTube-like video platform that creates more precise underwriting risk assessments, speeds up claim resolution and enhances damage estimate accuracy.

Information Gathering

Wearable tech and the expansion into 5G are making it easier and faster for our devices to send information. Insurtech companies will be able to tap into that information to help offer premium discounts (in exchange for data) and shape future, personalised, policies about the information they’re able to gather from clients. The information gathered by wearables is quickly becoming a valid new source for risk assessment and customer engagement.

Moving towards the end of 2020

As we head towards the closing months of 2020, it’s clear that the need for digitisation and innovative thinking is needed more than ever before in the insurance industry. Disruption and new technologies will help insurance companies better engage with their customers and provide more valuable services - whether that’s through widespread use of drones, wearables or chatbots remains to be seen but challenger brands are already leading the way in those trends. Through closer partnerships and more long term collaborations between traditional insurance providers and the challenger business counterparts, the technology gulf will start to close and a deeper sense of community could help push the industry into a more innovative 2021 as the world continues to grapple with the implications of Covid-19.