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InsurTech Continues to Build Momentum and Drive Change across the Insurance Industry

By Sam Evans, Founding Partner, Eos Venture Partners

Sam Evans, Founding Partner, Eos Venture Partners

Aquick look at recent news shows the breadth of activity across geographies, products, funding and areas of the value chain. Examples include continued rumours around how and when Amazon will enter insurance, a concentration of funding with a small number of companies raising significant amounts of money, activity in life and health, commercial lines, SME and microinsurance across the UK, US, Asia and Africa and finally multiple examples utilising AI, IoT and Big Data for distribution, underwriting and claims.

As one of the leading global InsurTech investors we see a lot of this activity. Areas of current interest for us include the sharing economy and how to tailor engagement and products for a growing sector of the economy where insurance penetration is low and speciality areas within commercial lines where proprietary data can be applied to improve pricing, risk selection, a move to active risk management and dynamic policies.

"Claims performance is the biggest driver of underwriting profitability"

One of the key trends that will transform insurance is the move to prevention and active risk management. Over time we expect, insurers to engage with customers via affinity and other partnerships, leverage the information available to tailor coverage and importantly use their market view of trends and losses to help clients adopt best practice and mitigate losses. In this environment, the insurance product moves to the background and the insurer engages with the customer via a service led platform or model.

Insurers therefore need to be more open to forming these strategic partnerships to access customers on a scalable basis, engage in a different way and leverage new data sources. We are starting to see the leading insurers embrace this approach.

One area where we expect to see a market correction is in InsurTech valuations which we believe continue to be at unsustainable levels. CEO’s are creating future problems for themselves by raising money at artificially high valuations and therefore placing significant pressure on their business to grow into those valuations. As the sector matures, we expect to see more down rounds and companies failing.

We are encouraged to see continuing InsurTech activity in Asia, which we believe will be a key area of insurance innovation. China and India are both major markets and recent announcements in India showcase some of the activity, for example, HDFC Life and Airtel have partnered to leverage Airtel’s telecom platform to provide affordable insurance to a wide audience and Sapiens India is working with incumbents to digitise their operations.

In the near term, we are looking to drive more activity in the claims area. Claims performance is the biggest driver of underwriting profitability and is also the biggest factor in customer renewals and therefore customer life time value. We believe there are opportunities to reduce indemnity spend via fraud tools and active risk management, lower claims handling expense through automation and improve customer experience through transparency, enabling a digital experience and increasing speed of settlement.

Overall we are encouraged by the continuing activity and look forward to work closely with our strategic investors and portfolio companies to spearhead innovation across the sector.

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