Startups Improving the Customer Experience

Insurance customers have come to expect the same level of convenience from their insurance providers that they get from digital service providers such as Netflix, Amazon, and Facebook. Traditional insurance offers are not able to meet these changed requirements, as incumbents are still limited by their outdated administration systems.¹

This creates opportunities for InsurTech startups acting as intermediaries on their own account to provide their policy-holders convenient services. Here are some examples: Check24 and CoverHound offer price comparisons for finding the lowest premiums; Bought by Many provides demand aggregation for obtaining special policies; PolicyGenius, Knip, and Clark provide digital brokerage to keep covers up to date. These startups give policy-holders an excellent customer experience tailored to their needs for convenience and low prices.

Startups Enabling Incumbent Providers

Most insurance providers underestimated the speed of technological progress and are now hindered from progressing fast enough by their legacy systems and their corresponding processes. This creates opportunities for InsurTech startups to enable incumbent insurance providers. This “self-help” can be found along the entire value chain:

• Simplesurance and KASKO provide online insurance self-service platforms that enable the delivery of cross-selling solutions for e-commerce stores and the delivery of new on-demand insurance products;
• Bold Penguin, Virado, and massup support the online sale of white-label, low margin, niche financial products direct to customers or via brokers improving the quoting, binding, and servicing elements of new and existing policies;
• SPIXII and Insurista provide, respectively, automated insurance agent and messaging leveraging chatbots;
• Rightindem and Snapsheet provide friendly digital claims management platforms leveraging enhanced customer experiences;
• DreamQuark and others provide big data analytics and machine intelligence solutions that take advantage of stored data;
• DataRobot and Neosurance offer automated processing using artificial intelligence that identifies the best timely products.

These technology-based services enable incumbent risk carriers and intermediaries to better serve their partners and customers, reduce costs, and speed up and automate processes.

Startups Starting as Risk Carriers

With the arrival of the mobile Internet (strongly driven by the iPhone in 2007) insurance customers and sales partners developed solutions based on requirements that are difficult to embed within insurers’ legacy systems and locked operations.² New full-stack InsurTech startups, powered with state-of-the-art technology, compete with incumbent companies in providing better products and streamlined and frictionless services. An acclaimed and respected example is Lemonade. Customers’ distrust of risk carriers and their associated high premiums (due to fraud) is reduced by the application of behavioural science. In the case of Lemonade this includes the use of video interview-led claims, a flat-rate cost model, the use of artificial intelligence to automate and accelerate claim payouts, and donating left premiums post claims settlement to charitable organizations. Another case is Element (in founding as of the time of writing). The demand for simple and transparent products and services by intermediaries and policy-holders prompted Element to equip the traditional business model of insurance with a more flexible product engine, letting distribution partners sell exactly the products they want.

Startups Offering Superior Products

Farmers can control many factors of their operations, but they have no control over the weather. Unexpected weather and climate change are the cause of more than 90% of crop losses. The Climate Corporation (formerly known as WeatherBill)³ applies the latest technology solutions to remove weather-related risk in the agricultural sector. The unique technology platform continuously aggregates large amounts of weather data (big data) from multiple real-time and historic sources, combines sophisticated statistical analyses (artificial intelligence), and performs simulations in a cloud-based computing environment. The results are personalized (field-accurate) weather insurance covers, with automatically generated payments to farmers (without the need for field inspections) when unusual amounts of rain or snow happen, or a long drought occurs. Rather than providing region-based protection on historic data and approving claims manually, the field-accurate coverage and unique service of The Climate Corporation helps farmers protect their livelihoods. New startups are emerging with solutions able to deliver more precise assessments, like The Climate Corporation. One of these startups is Aerobotics, which utilizes advance technology to determine the health of farm land and therefore provide more accurate underwriting.

Startups Tapping into New Markets

The sharing economy (which enables prominent platforms such as Uber, Lyft, and Airbnb) leads to new customer requirements and services. Owners, renters, and lenders that use the services of the new economy look to be protected by timely available insurance for the things they want to see covered and the length of time needed for it. InsurTech startups offer innovative alternatives for commercial and private users: Slice offers pay-per-use insurance for on-demand workers (such as Uber drivers) and home-share insurance for hosts lending out their home (on Airbnb, HomeAway, and FlipKey). Cuvva enables users to purchase as little as an hour of insurance for those times you need to borrow a friend’s car. The insurance is activated through a simple snapshot of the vehicle with their smartphone. Metromile partners with Uber to provide pay-per-mile coverage for personal rides with a seamless switch to a commercial per-mile car insurance plan for business rides. Trov is another solution that lets users (borrowers) buy insurance for specific products (such as a laptop, camera, or bicycle) for a desired period of time. Trov users can turn protection on and off for various items through the simple swipe of the mobile app.

While the business of sharing is key to these business models, these companies offer new forms of insurance products that change individuals’ appreciation for insurance. This allows customers to fill their protection gap and get insurance whenever needed, without committing to a long contract or interacting with traditional agents or brokers.

Startups Running a New Business Model

Customers are used to paying their premiums based on actuarial models estimating future losses, plus expenses and profit margins for the insurance provider. This traditional business model creates conflicts of interest between consumers and insurers, as fewer claims settled result in higher underwriting profits. LAKA created an innovative business model that aligns business and policy-holder interests. Customers only pay premiums based on settled claims and add an administration fee for the startup to cover its costs of operations. Moreover, their customers can be sure never to pay more than they would with a competitive offering, thanks to a cap on premiums (secured by a traditional reinsurer). To promote accountability and reduce fraudulent behaviour, users can progress into “better groups” with lower premiums to pay if they are able to protect their bikes more effectively. The team started to test their offering with bicycles. It intends to move to a wider range of product offerings over time.

The venture dissolves familiar conflicts of interest by running a new business model. It is no longer incentivized to refrain from paying out claims (by binding profits to incurred claims) or increase underwriting profits like traditional insurance providers. Thanks to the use of state-of-the-art technologies, the company can operate cost-effectively and deliver a superior customer experience.