For a lawyer “CPs” is a common acronym used in commercial contracts to identify the “Conditions Precedent” to be fulfilled to consider a contract totally executed. Comparing this legal jargon to the “Tech Era” for us CPs are the “must have” of every start-up to succeed in the Insurance industry nowadays.
Following the frameworks proposed by two InsurTech influencers, “C” (Communication, Customization, Connection, Cognition and Consensus) and “P” (Profitability, Proximity, Persistence and Productivity) represent the real innovation and the degree of relevance that the product or service of each InsurTech start-up represents for the insurance sector.
In my opinion “Shwetank Verma’s 5Cs” (@shwetankv) and “Matteo Carbone’s 4Ps” (@MCins_) jointly are an insightful and comprehensive way to deeply analyse the probability of success of every InsurTech start-up innovative proposition in the evolving insurance landscape.
“I have interacted with various start-ups – stated Verma (Singapore MetLife Innovation Center director) – it has become clear that the breadth and scale of the opportunity are not clear to many of them. The mental model of ‘InsurTech’ seems to be limited to the claims part of the value chain only. I outline a 5Cs framework to help start-ups navigate the insurance opportunity landscape. I hope to convince more start-ups to have a clear strategy for selling to insurance carriers.
Communication: At its core, insurance is a promise. Now, there isn’t much value in a promise if you can’t communicate it! […]
Customization: […] I see two distinct opportunities in this pool: 1) Start-ups building recommendation engines to customize risk coverage and 2) Start-ups generating data sets that can be used to change the basis of underwriting. […] Tomorrow’s leading carriers will embrace “real-time underwriting” as customers produce more capture-able data.
Connection: The key challenge for companies today lies in getting noticed. To get noticed, you have to be part of your customers’ conversation. You have to engage without interrupting. […] It is hardly surprising that most customers feel no sense of connection or loyalty to their insurer and that insurance ranks near the bottom for customer satisfaction scores. The opportunity here lies in ancillary services. Potentially, digital solutions that increase the number of connections we can have with a customer along the following aspects […]
Cognition: I use cognition as shorthand for the wider Artificial Intelligence and Machine Learning opportunity. Strictly speaking, cognition runs across the earlier Cs (communication, customization and connection), but due to its impact, I feel it deserves its own section. We are in the early stages of the artificial intelligence (AI) revolution. […] In insurance, I see AI/ML tools being used for: (i) Fraud detection and monitoring, (ii) Claims automation, (iii) Marketing with customization, (iv) Behavioural analysis for improved pricing, (v) Preventive insurance using Genomic data sets. Insurance is one of the largest industries that you can target with your AI tool.
Consensus: By consensus, I mean blockchain(s) (consensus refers to the underlying algorithm that underpins their structure). […] However, in the near term, blockchains can have a significant impact on administrative costs by making processes such as KYC (know your customer), fraud and other verification services (policy issue, claim filing, etc.) cheaper. Ideally, the entire industry would collaborate on a blockchain solution […]”
According to Italian thought leader Matteo Carbone (founder and director of the Connected Insurance Observatory) “after many discussions with venture capitalist and insurance thought leaders, I’ve come up with my own answer for the following question: What is the potential of each InsurTech initiative? My approach is based on four axes related to the fundamentals of the insurance business.
Profitability: Impact which an innovation may have on the level of profitability of the insurance portfolio, acting on the loss ratio level or on the cost level without an increase of volumes.
Proximity: Contribution for creating improved relationship that is based on numerous touch points during the customer journey […]
Persistence: The reach of the new initiative in terms of renewal rate increase, and thus of stabilization of the insurance portfolio.
Productivity: Evaluation of the contribution that a certain InsurTech approach can have at the top-line insurance level in terms of new client acquisition, cross-selling or additional fee collection for services”
We are living in an era where sectors traditionally considered resistant to change are currently overtaken by macro trend of deep digital transformation. The insurance sector is no doubt one of the most impressive examples to represent the above statement.
The growth rate of investment in InsurTech initiatives boomed in the last 24 months and according to the main worldwide influencers on this topic it will continue to grow in 2017. Interest in Insurance technology has increased significantly in 2016 and the common use of the word “InsurTech” – initially simply considered as a small niche of the evolving fintech space – grew exponentially in the second semester of 2016. Large part of the Insurance market incumbents started to seriously consider the InsurTech wave as a serious menace (or opportunity) for their core business and to actively invest in the sector (setting up an internal innovation team or investing in a start-up accelerator/incubator or even directly in start-ups)
“The number of innovative initiatives is growing exponentially – commented Carbone in a recent paper – raising interest for all phases of the customer journey and all steps in the insurance value chain. This reveals a very crowded map of innovations that were introduced by the incumbents of the insurance sector or by start-ups”.