The first wave of InsurTech innovations in the period 2010–17 have already made profound impacts on the traditional insurance value chain. Internet-based innovations in insurance prior to the invention of the term InsurTech concentrated on the product price comparisons and broadening product distribution channels through the Internet, for example, Policybazaar in India¹ illustrates the importance of price comparison portals in more price-sensitive markets while the rise and fall of InsWeb in the US shows the limitation of pure Internet insurance distribution channels. The key features of this wave of InsurTech innovations (starting in 2010) are the disaggregation of the insurance value chain and connected insurance – anywhere anytime. Traditional retail auto product design and pricing have been changed by the availability of telematics, and pricing algorithms based on usage-based insurance and behavioural-based insurance.² Underwriting processes are being enhanced by ubiquitous smartphones and big data algorithms running on the cloud.

China’s ZhongAn insurance, with a strong Internet startup gene since its founding in 2013, utilized cloud computing and real-time pricing to issue over 100 million package transportation insurance policies during the 11 November 2015 ecommerce big promotion day.

Drones and aerial images are being used to underwrite properties and accelerate property damage claims. Cape Analytics uses machine learning to identify the property risk level based on aerial imagery. Dropin has developed a platform for live streaming video from drones or smartphones to help insurers adjust claims remotely. Wearable devices can bring rewards to policy-holders who practice healthy lifestyles by lowering their healthcare costs. In 2016, Springbuk, a healthcare analytics firm, published a research finding claiming that over a two-year period, employees using wearable fitness monitoring devices had an average US$1,292 lower healthcare costs than employees in the control group.³ UK-based Neos provides a home insurance product, underwritten by Munich Re, which comes with eight sensors and a camera to help detect potential issues in a home. When your home becomes safer because of connected smart devices and enhanced driving technology continuously pushing driving risks lower, personal risks become more standardized and commoditized.

While these innovations help insurers innovate on the supply side of insurance business, it is widely accepted that policy-holders have difficulties in understanding the features of these insurance products and appreciating the cost/benefit of the offerings. We see an important and emerging opportunity to combine traditional actuarial pricing and reserve models with more innovative arsenals, such as big data and artificial intelligence, to create sophisticated analytics for visualization and product customization on the demand side of insurance business.

We should not overstate the capability of big data and artificial intelligence in predicting the probability of occurrences of unforeseen events such as illness, disability, car accidents, or even deaths that individuals and families may encounter, over traditional actuarial methods. Mobile apps and online platforms developed by independent InsurTech startups help policy-holders or potential insurance purchasers better understand their risk exposures and insurance needs. Swiss company FinanceFox claims to be the first completely independent service platform for insureds’ needs with access to all one’s insurance contracts anytime anywhere and policy exchange with one click. Moreover, we envision that the next wave of innovation for online finance platforms will push the demand side of financial services analytics to a much more sophisticated level. Individuals and families will have access to an online real-time 360-degree view of all physical and intangible assets, liabilities, and unforeseen event risks and solutions. Personal finance platforms such as Mint and Personal Capital have pioneered the concept of comprehensive personal asset and liability analytics with a focus on the cash flow analysis. China’s Ant Financial pioneered the concept of “digital life”, which consolidated customers’ payments, insurance needs, and wealth management activities into one platform.

Institutional asset liability management practices have evolved from cash flow analysis to economic valuation of financial statements to scenario-based economic projections. In the US, life insurance companies are required to perform cash flow testing while European Solvency II is a comprehensive principle-based insurance regulatory framework that requires economic value simulations. An updated personal asset liability management system may extend its capability beyond cash flow analysis of bank deposits, salaries, mortgages, car loans, credit card payments, and various liability payments.

For the emerging Chinese middle class, getting “real-time” valuation of their real estate holdings, cars, investment portfolios, and deducting the liabilities to arrive at their net worth is a welcome utility. Several Chinese FinTech startups, such as WaCai and 51 Credit Card, incorporated comprehensive personal finance book-keeping functionality in their apps. Demand will also increase for projections of future personal asset and liability cash flows and valuations, as well as various insurance needs and coverage by life cycle stages. For instance, recent hot topics among Chinese middle-class families include the financial impact of having a second child, increased tax-advantaged savings for retirement, and long-term care insurance for ageing parents. A sophisticated asset liability projection system with user defined “what-if” scenarios will facilitate making better decisions. Such a high-value sophisticated financial analytical toolkit was not available on the individual level before the emergence of FinTech and has yet to appear in the personal apps marketplace.

The rise of robo-advisory⁴ addresses individual asset accumulation for long-tail customers in the wealth management industry. In order to apply asset allocation optimization algorithms, the investor’s risk appetite and risk tolerance must be evaluated. The spending pattern and attitude toward saving or borrowing can be accurately depicted by analysing one’s bank statements, thus providing a powerful predictor for one’s risk aversion.

However, we argue that InsurTech should serve as the core of a 360-degree, personal asset liability management system as opposed to an aggregation of parallel functional modules dealing with deposits and credits, investments, book-keeping, investments, and insurance. When we consider the most important needs and protection that a person or a family encounter, we see healthcare services, retirement savings, protection against accidental mortality, primary resident damage, and many unforeseen events as the truly life-changing contingencies. Insurance companies already collect the most sensitive data – on health status, retirement needs, life coverage, property value, and more. InsurTech, utilizing embedded traditional actuarial models for evaluating contingent event probabilities as well as big data predictive analytics, can paint a much clearer picture of an individual’s unforeseen event risks, and provide better cost, and benefit, analysis for insurance coverage. Important insights can also be gained into credit rating, and annuity payment projections for annuity contracts, risk coverage for illness and disability, the cost of insurance for mortality, expected motor vehicle premium rates, and agents’ commission structure. These suggestions make insurance products more transparent and easier to understand, and can create a new personal asset liability system that connects the demand side of financial services to the supply side.

A cloud-based automatic pricing and underwriting solution can be developed to provide straight-through processing. Truly customized insurance solutions for individuals or families therefore become a reality because the parameters needed for actuarial pricing are uploaded directly from the policy-holder to the insurance company with almost instantaneous underwriting and insurance issuance. Insurance coverage plays a vital role in optimizing a personal or family utility function by providing certainties surrounding personal wealth. We predict that an integrated personal asset liability platform can effectively lower the liability cash flows by lowering mortgage rates, car loan rates, and credit card rates for the customer, while enhancing the risk appetite on the investment side.

We are working towards the next generation of comprehensive personal finance platform with InsurTech as the centre of the architecture with full asset liability analysis capabilities delivered by key functional modules including the WealthTech-enabled investment module, the LendingTech-enabled deposit and borrowing module, a book-keeping module, and a social networking module to connect with the financial advisory supply side. Welcome to the Personal Asset Liability Management System.