In an industry as complex as finance one of the ways FinTech startups can have the greatest impact is simple: by making services straightforward for the end users.
Insurance is just one vertical where startups are trying to declutter the user experiences, to create more efficient services which provide customers with greater transparency.
Digital Risks CEO Cameron Shearer highlights the role of, “first-hand experience of the problems,” in inspiring the launch of its insurance for digital businesses service. He said: “Trying to get professional and cyber insurance as a small business certainly wasn’t very easy.
“At the time, in Australia, there were data protection reforms taking place, and as a result there was a growing interest in cyber protection. This ultimately lead to Digital Risks being born.”
Jodi Cartwright, CEO of 1919 Insurance also sees the need for the focus in insurance to shift and said, “having worked in insurance for 20 years, I just thought there was a better way of doing things that was centred around the customer.”
Now4cover CEO Michael Muzio highlights the common consumer problems that his company aims to fix as, “complexity of the buying process, lack of transparency of the product, dual pricing and excessive fees charged.”
With so much frustration around existing services and processes in this centuries-old industry it is as ripe for disruption as any aspect of FinTech with massive revenues up for grabs.
Incumbent insurers won’t be caught sleeping
Traditional insurers, however, have been able to learn from the impact that the first wave of FinTech startups made on transactional services such as payments, remittances or loans and begin to adapt to changing customer demand.
Marina Zubrod is CEO of Asuro an InsurTech startup founded by German insurer Hoesch & Partner. She claims that current most insurers are in strategic decision making processes of, “how they want to participate in the rise of InsurTech startups, because the majority doesn’t argue if they should participate, rather how and when.
“Insurers are at the same decision path as banks were 2 to 3 years ago in terms of innovations.”
Similarly to how incumbent institutions have woken up to the opportunities that FinTech partners can offer so too have startups changed their approach from one of disruption to focusing on better enabling traditional players.
Cartwright says 1919 Insurance is not aiming to steal market share away from traditional insurance firms but to, “make it easier for customers to access what traditional insurers provide.”
Established firms might be aware of their need to work with startups that can bring transparency and efficiency to the industry but in practise these partnerships can be strained.
Cultural differences strain working relationships between startups and corporates
The cultural differences between decades-old brands and startups and, perhaps more than anything else, the pace at which the two operate create difficulties in these working relationships.
Shearer highlights speed, “or lack there of,” as a major challenge and said, “ It’s a notoriously slow industry, certainly when it comes to innovation. It took us quite some time to get regulated and put our commercial relationships in place with underwriters.”
Muzio suggest that incumbents are getting better but, “the pace is still slow and driven by legacy systems with vested interests making change difficult to implement.”
For startup companies these pain points are often still seen as worth it to work with established names who can lend their reputations to younger brands starting up in these such a relationship-based facet of FinTech.
Muzio highlights the, “brand strength of the main product providers and their propensity to flex a renewal price based on what a competitor might change,” as a major hurdle for a company attempting to compete with the incumbents. He adds, “Often we quote a competitive price to a customer only have that matched by their existing provider.”
For big companies with hundreds of staff the process of digital transformation, while more cost-effective in the long run, can be painful as well with Muzio saying, “most digital initiatives result in fewer staff required overall which means traditional insurers have to make redundancies. Not an easy process.”
Access to data will expand what kind of products are possible
As insurance shifts Zubrod suggest that it will be, “transparency, cooperation and product individualisation,” that holds insurers attention and shapes the future of the industry.
One of the key forces driving these changes is the increased access to rich data sources and open access to artificial intelligent algorithm that can crunch through that data to offer more personalised services, explained to consumers.
Shearer points out that most policies are, “inherently quite complex for the average Joe, particularly professional and cyber coverage.”
He suggests that, “the adoption of machine learning and robo-advisors will provide better transparency, trust and ultimately better protection for the customer.”
Another field of technology that will impact the future of insurance is the smart home and insurers’ ability to process and make use of the vast amount of data the devices can collect. Cartwright says the growth and use of connected devices, “will reshape home insurance provision particularly from a risk prevention and mitigation perspective.”
She also highlights how some of the new business models emerging will prompt change in the industry and say the sharing economy, “will force underwriters and actuaries to challenge long-established thinking.”
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