Insurance and banking veteran Daniel Fogarty noticed something different when he attended the last annual InsureTech Connect conference Las Vegas: the audience had tripled to about 4,500 people compared to just a year earlier.

“I'm sure they're thinking about how they can accommodate between 7,000 to 10,000 people next time because there's just so much interest,” he says.

It is a sign of the promise behind the booming Insuretech industry, which aims to reshape the general and commercial insurance sectors.

However, Fogarty – the founder of insurance startup Evari and former CEO of general insurance at Zurich, Australia and NZ – says change will be a long process given customers typically only interact with insurers once a year compared to near daily contact with banks.

“The industry is behind in tech because of that low customer engagement and the fact that their back-end systems can be very clunky. In my view they've then developed a customer experience based on their back-end rather than starting with the customer and working out what needs to happen on the back-end.”

Evari has built a cloud-based digital platform that offers small businesses more appropriate levels of insurance based on direct connections with popular cloud accounting software packages such as MYOB and Quickbooks.

“Insuretech in Australia is enabling not disrupting – it's something being done by the sector, not to the sector,” he says.

While the business aims to differentiate itself with a customer-focused digital experience that seamlessly integrates data, the insurance capacity is provided by certain underwriters at Lloyd’s.

It is this capital intensive nature of the industry, which is significantly more risky than other financial services sectors, that will create natural partnerships between many insurance incumbents and start-ups.

“Major insurers such as IAG, QBE, and Suncorp are all working with insuretechs.  In many cases, the insuretech is the front end to the customer with the risk coming back to IAG, QBE or Suncorp. They're working with insuretechs where they can… but then some insuretechs like us have to balance our overall strategy and consider how much of our IP do we expose to them?”

QBE chief executive John Neal told investors at its 2017 AGM that the global insurer had $50 million to invest in the sector and had screened more than 200 insuretech companies.

“Our bias is towards analytics, digital and Internet of Things solutions, which we believe can add value to our underwriting and claims processes, providing efficiency and service benefits for QBE and for our customers,” he said.

In October 2017, it invested in US-based RiskGenius, which applies artificial intelligence to insurance policies. A QBE spokesperson said the company’s innovation partnerships, which are being run by head of Global Innovation Lab, Ted Stuckey, are still at an early stage.

Similarly, IAG has opened insuretech incubators in Sydney and Singapore, and has also established a venture fund, aimed at “changing the way our customers live, by reimagining insurance to keep up with their ever-changing needs”. Suncorp has also been active, investing in fintech startup Trov.
The majority of insurers around the world have estimated that between 1 to 20% of their revenues are at risk from insuretech innovations, according to a PwC report. However, Brenton Charnley, the lead & co-founder of Insurtech Australia, says insuretech will ultimately become part of the established industry.
“Insuretech in Australia is enabling not disrupting – it's something being done by the sector, not to the sector,” he says.
A key aim of Insurtech Australia, which was launched as a standalone division of Fintech Australia in late-2017, is to help local insuretech companies expand globally. Insurtech startups attracted around $US1.69 billion in 2016 (although a significant portion was from two large deals), according to CBInsights.
“We're getting more startups closer to insurers to understand what they're doing and need – it’s a numbers game,” Charnley says.
The rapid growth and global expansion of Cover Genius, which enables companies to sell insurance to their customers, is a prime example of the potential.
While insuretech is making current insurance processes more efficient, over the longer term the industry may also see more innovative offers built on distributed ledger technologies.

The technology would allow insurance to be embedded in products, with the insurance taking effect from the point of sale. It could also allow for greater use of smart contracts such as AXA’s recent trial of its Fizzy flight delay insurance.
The product resided on the Ethereum blockchain, which is linked to global air traffic databases. Flight delays (of more than two hours) are recorded on the ledger, automatically triggering compensation paid to the customer, who avoids having to make a claim.
“More consumers are comparing insurers against digital competitors who aren't insurers – they're companies like Apple, Amazon, Google and Netflix which provide high-quality digital experiences,” says Charnley. “That's what they're expecting their insurer to be like.”

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