Fintech Finance presents: The Insurtech Magazine 06

ISSUE#6

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CHANGING TACK Why Admiral’s taking the helm of a new startup fleet

TAKING THE PLEDGE

Dacadoo’s Peter Ohnemus on why the industry has a duty to transform

Vital signs

A new framework for working with ‘the little guys’

AGE OF WISDOM What Mobiquity’s latest study tells us about loyalty and ‘the young’

Could insurance data have spotted COVID sooner?

INSIGHTS FROM Chubb

William Russell ● AstoryaVC ● Tech Nation ● Admiral B3i ● Tigerlab ● Bought By Many ● Mobiquity ● Trulioo ● Fabrick ● Melissa ● Vlot ●

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THEINSURTECHVIEW ISSUE #6

COMMENTARY 22 The secret of a happy partnership

2021

Tech Nation’s Victoria Roberts explains how taking the Fintech Pledge will smooth the path for both incumbents and insurtechs

32 Ahead of the game What Mobiquity’s new study tells us about loyalty and the ‘young’

LIFE & HEALTH 4 Wealth in health Why Dacadoo Founder Peter Ohnemus believes data gathered via more digitally-engaged insurers could have flagged the COVID crisis sooner

9 Net gains How Vlot, ‘the Leicester City of the life insurance market’, got off the bench and started to play with the giants

13 Changed in a heartbeat When expats’ lives were upended by both politics and a pandemic, William Russell accelerated its digital transformation roadmap to help

NEW BUSINESS MODELS 24 The Pioneer spirit The head of Admiral’s new venturebuilding business on why the insurer wants to launch a fleet of startups

27 Rebuilding insurance Tigerlab believes ‘bite-sized’ cover is the future – but how to do it profitably?

30 Grr…eat to know you Bought By Many broke into the unicorn club this year, but it wouldn’t have been possible without faithful partners

OPEN FINANCE 35 The shape of things to come Fabrick explains what collaboration means Italian-style, and how insurance is benefitting from open finance

What value do we put on our health? Probably a lot more than we did just two years ago.

Studies suggest that those of us who, pre-COVID, dragged ourselves out jogging or to the gym once or twice a week, have significantly increased our activity – by up to 88 per cent, according to one global survey.

So, that’s the good news. The bad news is that most health and life insurers don’t have a clue who’s putting in the effort and who isn’t; who’s heading towards a lifestyle-related illness that’s likely to cost the insurer and the insured dearly.

And they’re certainly not intervening to protect both wealth and health.

As Peter Ohnemus, founder of Dacadoo, points out in our cover feature (page 4), ‘the key objective for an insurance company is to look after you’.

And not just the individual, he argues, but all of us. If insurers had a better handle on data, they might even have helped flag COVID sooner, he suggests.

38 Infinite ways to bridge the gap

EXECUTIVE EDITOR Ali Paterson EDITOR Sue Scott ART DIRECTOR Chris Swales US CORRESPONDENT Jacob Bouer ONLINE EDITOR Eleanor Hazelton Lauren Towner PHOTOGRAPHER Jordan “Dusty” Drew

B3i is an industry initiative working to mutualise the benefit of distributed ledger technology. CEO John Carolin explains how it’s already creating real value in reinsurance

IDENTITY VERIFICATION 40 A global challenge Trulioo set itself a big task when it laid out its ambition to ensure everyone in the world can participate in the digital economy.

Now that challenge seems more urgent than ever

49 Risk on the radar Why Florian Graillot, insurtech influencer and Founder of specialist venture capital fund AstoryaVC, believes the sector is a long way from reaching its full potential… and one pitchdeck he’d like to see

44 Spot on!

Melissa pinpoints why geocoding technology improves customer service, reduces risk and improves efficiency for insurers

SALES TEAM Chloe Butler Tom Dickinson Karen Estcourt Serena Khemaney Shaun Routledge

FEATURE WRITERS David Firth ● Tracy Fletcher Rachael Harrison ● Martin Heminway Natalie Marchant ● Sean Martin Martin Morris ● Frank Tennyson Sue Scott

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Fintech Finance is published by ADVERTAINMENT MEDIA LTD. Pantiles Chambers 85 High Street Tunbridge Wells, TN1 1XP

Did you recognise last issue’s ‘spine tingler’? “In the end, you're measured not by how much you undertake but by what you finally accomplish” was by ex-US President Donald Trump

DLT 46 Reinventing the value chain

Chubb demonstrates how embedded insurance creates endless opportunities for large-scale insurers

THEINSURTECHMAGAZINE2021

There’s clearly a conversation to be had between us – the individuals who own that data – the companies we exchange it with, and state-backed organisations working to keep us safe.

That raises lots of red flags to do with digital identity and data protection; how an open finance framework intersects with non-financial actors; how to make the partnerships necessary to deliver it work. And while you’re pondering all that, I’m off for a run with the dog. Sue Scott, Editor

ISSUE #6 CONTACT US www.Fintech.Finance news@fintech.finance DESIGN & PRODUCTION www.yorkshire creativemedia.co.uk

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Issue 6 | TheInsurtechMagazine

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LIFE & HEALTH INSURANCE: HEALTH Could data gathered via more digitally engaged insurers have flagged the impending COVID crisis sooner? Peter Ohnemus, founder of B2B insurtech Dacadoo, believes so, which is why redesigning the industry’s approach will do both it, and society, a massive service If the pandemic has forced governments to prioritise public health over public wealth, that’s not because the two are in opposition.

Wealth and health have always been two sides of the same coin, but it’s taken a rampant virus to expose just how codependent these broad indicators of a well-functioning society truly are.

Nothing is black and white, and two key

features of this vpandemic graphically illustrate that. Lockdowns are a choice between excess COVID-19 deaths now and the excess deaths known to accompany a recession, which a lockdown will likely cause. Meanwhile, an element of remote working has been embraced by some companies, even as restrictions ease, in acknowledgement of the fact that a healthy and happy workforce at home generates more wealth than a stressed one in the office.

For an industry straddling health and wealth, insurance has traditionally offered a safety net rather than trapeze training for balancing the two. Your health insurer steps in when you’re sick, but is absent when you’re making decisions that affect your health. And life insurance kicks in when it’s already too late to make a lifestyle intervention that might prolong your existence.

As the founder, chairman, president and CEO of B2B insurtech Dacadoo, you could

say Peter Ohnemus is consumed with addressing this distinctly inefficient system. The premise upon which Dacadoo is based is simple enough: if insurers take a more active role in the lives of their customers, encouraging healthier lifestyles, they save on claims while the consumer improves their health and their wealth (through discounted premiums) – and there’s that warm glow generated from knowing their insurer is actually invested in their wellbeing.

Dacadoo is Ohnemus’ latest venture, but potentially the one that will leave his most impactful legacy. A serial entrepreneur, he sold his previous business, a sustainability rating firm called Asset4, to Thomson Reuters in 2009. A year later, he turned his attention to the intersection of health and wealth.

“My previous business gave me the idea,” he says. “If you can carry out a sustainability rating of a company – looking at things like water and energy use – then you can rate the sustainability of a human life.”

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www.fintech.finance

And, so, he rolled up his sleeves and got to work, building the team to build the research that would program the algorithm that could deliver the goal.

First came the Health Score – a measure designed to quantify any individual’s physical and mental condition. While there’s an element of gamification at the user interface to engage consumers in the rating process, it’s no gimmick.

The assessment is based on 100 individual health data points, which are based on more than 300 million people years of clinical data.

“For five years we were like a biotech company,” says Ohnemus. “That’s how long we spent working on the Health Score, investing close to 20 million of our own money, to create a holistic, integrated overview of an individual’s health. It’s now our core product, and it’s built so that anyone can understand it.

Even a 10-year-old child understands that, if your Health Score is 100, on a scale of one to 1,000, maybe it’s not so good.”

Ease of understanding at the front-end, belies the complex artificial intelligence (AI) and machine learning going on at the back to create a single, personalised score. An obvious boon for risk underwriters, introducing an element of gamification means that if you’re someone who impulsively checks your social media, stocks or your daily steps, you’re likely to become a keen follower of your health rating, too.

Gamification is just one global trend that Dacadoo correctly anticipated.

Another is the rise of wearable technology – a crucial source of the real-time health data that Dacadoo’s Health Score is based upon. Barely a market in 2010, when Ohnemus began the project, last year half a billion wearable devices were sold worldwide.

“Nanosensors are becoming more and more powerful, and that’s taking us into a completely new generation of healthcare,” says Ohnemus. “Healthcare today is the largest generator of data. We all know the Apple Watch, the Fitbit, the Garmin, but soon you’ll see hundreds of different sensor vendors that can automatically measure your blood glucose or your cholesterol, just by placing a small device on your skin.

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“And the storage of all that data is getting cheaper, too, with the Cloud. If an insurance company or a bank wanted to store one petabyte of data 10 years ago, they’d have had to spend about €10million per year. Today, it costs less than $30,000 on the Cloud per month.

And that’s only going to get cheaper.”

So, the business case for Dacadoo has unfolded to script – and the Switzerland-based firm hasn’t been short of takers for the Health Score tool, which insurance companies can integrate with their products via an API. In fact, soon, insurers started asking for more.

“The insurance companies came back to us and said ‘could you build this kind of machine learning and AI with the Health Score to help us create a next-generation lifestyle coach?’ So, we built a 4,000 rules-based coach to encourage healthy living, sleeping, nutrition and activity.”

Working in tandem with the Health Score, this automated coaching feature couldn’t be more timely. Few of us were

If nobody looks after themselves, the solidarity principles of insurance – of mutual interest – just won’t hold.

In that case the sector will go bankrupt aware of ‘comorbidities’ before the pandemic – but the listing of diabetes, hypertension and obesity alongside COVID-19 on hundreds of thousands of death certificates has been a wake-up call for individuals who might previously have been careless with their health.

“Eighty-five per cent of all the people who have unfortunately passed away from COVID – and I lost good friends myself – also had one or more chronic diseases,” says Ohnemus. “So, an important proportion of deaths might have been prevented with a healthier lifestyle.”

A large-scale Oxford study from June, 2021, has already found that severe COVID-19 infections in young people could mostly be explained by obesity. This complemented a study of more than 48,000 patients in the US, published in April, which

found physical inactivity is associated with the most severe COVID-19 outcomes.

These health issues were already generating alarm before the coronavirus struck. In 2019, England saw more than a million hospital admissions for obesity-related treatments – up 17 per cent on the previous year. Such figures have inspired Public Health England’s 2020-25 strategy, which targets poor diet and physical inactivity – alongside smoking and alcohol consumption – as the key behavioural risks to people’s health.

“The World Health Organization (WHO) also issued its global healthcare study in December,” adds Ohnemus, “and it said that only 39 per cent of all people worldwide are doing the recommended 75 to 150 minutes of real activity weekly.”

It’s another disheartening statistic for healthcare professionals who’ve been beating the daily exercise drum for decades. But such poor health also results in an eye-watering loss of wealth. A report from the Centers for Disease Control and Prevention recently estimated that 75 per cent of annual healthcare expenditure in the US – some $2.7trillion – is spent treating preventable chronic diseases.

In the US at least, insurers shoulder many of the costs associated with such poor lifestyle and health decisions. That means any feature they can add to their products to promote healthier lifestyles, could result in huge savings. A lifestyle coach appears invaluable when set against the growing epidemic of lifestyle-related illnesses and deaths in the western world.

“The key objective for an insurance company is to look after you,” says Ohnemus. “But if nobody looks after themselves, the solidarity principles of insurance – of mutual interest – won’t hold. In that case the sector, in my view, will go bankrupt as we get older, because a lot of people are very sedentary.”

Promisingly, growing evidence in the past five years shows that wearable and app-driven lifestyle interventions do boost health. In March, a British Journal of Sports Medicine analysis found that fitness trackers and step counters helped overweight people shed 10lb on average.

Other papers laud similar benefits, though most also highlight that people’s enthusiasm drops off after a time.

Issue 6 | TheInsurtechMagazine

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LIFE & HEALTH INSURANCE: HEALTH By linking gamification with the incentive of rewards that can be spent in an online store and potentially lower health insurance premiums, Dacadoo’s approach aims to extend users’ engagement.

The final product in the Dacadoo suiteis its Risk Engine, completed in 2018. Designed to assist underwriting, the engine rattles through an individual’s health data to calculate mortalities and morbidities – key outputs that determine premiums for health and life insurance.

“The Risk Engine is a standalone product that can score both your life and your health in real time,” explains Ohnemus.

“We took the best out of life tables – from the US, Japan, Hong Kong, Singapore and the EU – and integrated that data with lifestyle data from Dacadoo. The result is the world’s first real-time scoring engine, which can estimate relative risks for diabetes, cardiovascular disease, cancer and more – all in real time.”

The engine doesn’t need complete datasets to calculate these. Instead, it’s built to fill in the gaps in cases where there’s limited data. And, for the consumer, it represents a huge shift from physical consultations and piles of paperwork, towards remote, automated, convenient risk analysis.

“At the moment, 55 per cent of all life insurance worldwide is sold via agents,” says Ohnemus.

“Japan has 225,000 salespeople who knock on doors every evening.

There are 2.5 million independent sales reps in China. Of course, with COVID, nobody wanted to let them in. In any case, the consumer today is used to instant, real-time experiences with a user-friendly and fun interface. And that’s a transition that insurance companies will have to make. They will have to swim, or they’ll sink – that means entering the platform-based, client-driven economy.”

Dacadoo is working with the swimmers, including 35 of the world’s top 100 insurance operators by revenue and lives covered – the likes of United Healthcare Group and Aon. In March 2020, Dacadoo partnered with Manulife to initially offer its products to millions of customers in Hong Kong, Singapore and Vietnam. In May 2021,

it did likewise, with the insurance business of one of the world’s largest banks.

HSBC Life will integrate Dacadoo’s digital health engagement platform into the bank’s own health and wellbeing platforms, Well+ and Benefits+, which are rolling out to corporate and retail customers, starting in Asia.

Admirers are stacking up across the industry. The recipient of more than 25 awards, Dacadoo has been named one of Europe’s 11 most exciting digital health companies by Business Insider, and was one of just four companies out of 4,000 in the insurtech and digital health space that Gartner included in its Cool Vendor in Insurance 2021 report.

“For us, that’s the biggest recognition,” says Ohnemus. “Gartner serves more than 15,000 chief information officers and executives on their IT strategy, so them choosing Dacadoo was confirmation of the

If we’d had a digital health file system, we might never have got into this mess. Machine learning overlay would have shown ‘there’s something happening here’

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very hard work we’ve done in the last 10 years.”

As wearables proliferate, sensors improve and more insurers are furnished with Dacadoo’s Health Score, fitness coach and Risk Engine, there’s real potential for private institutions to offer the kind of preventative health interventions we usually associate with the state.

“Our advanced AI can recognise chronic diseases early – so that you don’t get diabetes, you don’t suffer a heart attack,” Ohnemus says. “With this technology, insurers can start working with preventative programmes. So, before Peter becomes diabetic and costs $5,000 to $10,000 per year in insulin alone, I can try to stop him with a proactive approach. In future, this will be a natural part of our lives.

“The data is absolutely protected (we encrypt all data with a 256-bit key, which is the same as a nuclear power plant) and it’s

owned by the consumer. It could be written automatically into their encrypted electronic medical record and receive a score that gets updated [automatically, using sensors]. If there’s any kind of virus, vitamin deficiency, or whatever in their blood, they’ll get an automatic notification.”

With AI already outperforming doctors on diagnosis, real-time, automated health interventions may not be far off. If so, insurtech firms might emerge as the trusted bastions of both our health and our individual and collective wealth. But there’s something even more fundamentally game-changing in this model – especially in the current health context.

Dozens of retrospective papers have found that evidence of an unfolding pandemic was hidden in data from the start of 2020. Tweets and Google searches mentioning pneumonia-like symptoms offered glimpses of a new respiratory

Finger on the pulse: Insurers and consumers have a mutual interest in staying healthy

illness. It could have been seen as a warning sign. Real-time health data from millions of individuals across society is the Holy Grail for pandemic prevention, and it’s achievable, says Ohnemus.

“If we’d all had a digital health file system and a standard storage system for electronic medical records, we might never have got into this mess in the first place,” he says. "You could have had a machine learning overlay on different servers that would have shown ‘there’s something happening here’.”

In crisis planning, it’s often said that it’s wiser to build a fence at the edge of a cliff than to run an ambulance service beneath it. Dacadoo is changing the insurance landscape, building a long-overdue bridge between the self-interest of insurers, who’d prefer not to pay out, and consumers, who’d rather not get ill. There’s a symmetry between health and wealth that could, literally, be lifesaving if the industry adapts.

“The insurance companies that stay on dusty IBM mainframes – won’t survive,” says Ohnemus. “ And I don’t think they deserve to because they don’t add value to society.” www.fintech.finance

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LIFE & HEALTH INSURANCE: LIFE The minnow scores: Insurtech Vlot takes a different approach

Net Vlot CEO Michael Dritsas describes how it got off the bench and onto the pitch with the life insurance premier leaguers ‘We are the Leicester City of the life insurance market’ might seem a novel way to open the discussion about the services Swiss-grown B2B2C company Vlot provides.

But even for non-football fans, the unfancied and very unexpected minnow-champions of the 2015/16 Premier League season provide a useful illustration.

Like The Foxes, Vlot sees itself as a disruptor, outside of the hegemony of legacy life insurers (or established soccer powerhouses), challenging the accepted norms to put the consumer front and centre.

Vlot’s CEO Michael Dritsas, a man as gifted with descriptors as Leicester’s erstwhile coach Claudio Ranieri, fleshes out the analogy: “The current situation in elite football is a great comparison to life insurance,” he says.

“You have, let’s say, in Europe, the top 10 teams which are just behemoths. They are running a model that has been the same www.fintech.finance

s n i a g

for ages, just like the major players in insurance. In football it’s TV money, in life insurance, it’s established, stable revenue streams. With the latter, in essence, it’s a simple product; you die, you get money (in the case of term life assurance). So, with such legacy platforms, where is the incentive to innovate – why change something you don’t think is broken? This might be a controversial view, but I simply don’t see much innovation in the industry.

“Innovation comes from the willingness to look at things afresh and small fry like ourselves (or Leicester City, if you like) are best-placed to bring the change customers increasingly expect. And, again like Leicester City, we brought together talented people who are not afraid to go against the grain.”

In football it’s TV money, in life insurance it’s established, stable revenue streams.

With the latter, in essence, it’s a simple product… Where is the incentive to innovate?

In essence, Vlot – founded in 2017 – allows customers to access a much more nimble model that looks at their existing household income and compares this to what they would receive in the event of death, significant injury or retirement. It calculates if there is any shortfall in an individual’s financial provision and gives an honest analysis of whether additional cover is required – or not – by looking at someone’s personal circumstances, which may change for good or bad over time.

Vlot’s embedded interface, a ‘financial wellbeing tool’, operates within the existing systems of its partners – receptive insurers, pension funds, banks, mortgage brokers, companies that offer life insurance as an employee benefit – and offers a customer experience that is easy, reliable and flexible.

Dritsas says: “In the choice-driven world of Netflix and Amazon, consumers are telling us what customer experience they want. They want to be able to flip out their phone, put in their social security number, and it tell them ‘this is your current retirement pot. If you want to get in touch with a provider, click OK and your data will be transferred to ones that will analyse your situation, and you can then do X, Y or Z. Issue 6 | TheInsurtechMagazine

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LIFE & HEALTH INSURANCE: LIFE “You take your car to have a service probably every 18 months. People don’t do that with their finances. Why? Where is the quick check-up? You need to understand where you’re at; you need to maybe change your behaviour. Instead of which, the industry is still stuck with its, in many ways, outdated approach. At Vlot, we all come from the industry, and we all say the best sale is the sale where you don’t talk about the product, you talk about the need.”

That willingness to understand the very variable needs of an individual consumer is key. Vlot partners with organisations, but the underlying partnership is with the customer – establishing a relationship, whereby he or she feels comfortable engaging with their finances throughout their ever-changing lives. Trust and loyalty ideally promote frank discussions that allow the amount of cover to ebb and flow – increasing if there is a shortfall but also decreasing if the consumer has, for instance, been given enhanced benefits at work or there is a change to their marital status. Regularity of contact via more advanced technology is, in football parlance, an ‘open goal’ that the traditional institutions are failing to take advantage of, says Dritsas.

“We believe in leveraging the power of technology, i.e. workflows, the mobile phone, the power of data, data sharing, and having it all at someone’s fingertips.

For example, if someone starts a new job with a benefit plan, it’s a long, laborious and often off-putting task to check out a pension fund statement. We tell our clients to implement a QR code on their new joiners leaflet, or on a welcome email.

Employees can use their phone to scan it and see a personalised dataset that’s been input, through an agreement with either the partner insurer or pension fund they’re working with. It can be run through in under two or three minutes, is a much more satisfactory experience, and can typically be done in the workplace.”

This democratisation of life insurance extends to cutting through the endless associated paperwork. Instead, it offers something much more intuitive, user-friendly and faster, through a simplified three-stage process. Analysis looks at any gaps in coverage and how much it would cost to fill them. Coverage explains the bespoke offering in simple and clear terms. Life Planning provides the

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flexibility of coverage adjustment for life events, such as someone having a child, or, for instance if they stop smoking or lose weight. Throughout, Vlot never pushes a policy, because it does not work on a commission basis. But its partnerships with a number of insurers have increased their speed to market, driven down costs and vastly improved their customer experience.

The aim is to take the fear and fatigue out of arranging life cover and retirement

about harnessing technology and giving the client a choice.”

Dritsas continues: “We have a mission that we believe in; we want to make people financially responsible. It’s really about helping people, giving them tools to make the right decisions. Interacting with their insurers should be like a health check up – if people do it regularly, they will feel less stressed about things and can proactively take action.

“We are simply saying ‘hey, take some The ultimate goal: time, do an analysis, run through where To increase customer you’re at and then you’ll have the engagement and reduce information to decide on what you need’. customer stress Money is an emotional subject, so, although it might sound a bit altruistic, we really want to help people have less stress.”

But resistance to change among legacy insurers remains a problem, one that Dritsas says will have to be resolved one way or another.

“Companies need to embrace what is coming. Instead of being busy investing in the status quo, they should be looking to make their IT as adaptable and API-adoptable as possible in order to partner up. Because we can’t do it without them, and we don’t Top quotes Michael want to do it Dritsas Vlot savings. And, to do without them.”

[Legacy insurers] are kind that, it’s important So, unlike Leicester of stuck in a Suez Canal. to recognise where City, insurtechs aren’t Insurtechs need to be like the customer touch setting out to be little tugs and speedboats that points will be. Life giant-slayers. But… help them out. events like marriage, “We also see that birth and death are they’re kind of stuck You take your car to have a service self-evident, but it in a Suez Canal,” says probably every 18 months. People is in the workplace Dritsas, referencing don’t do that with their finances. Why? where, often, most the Ever Given cargo Where is the quick check-up? opportunities arise. ship lodged there in In Europe, the top 10 [football] teams Increasingly, people March. “Insurtechs are behemoths. They’re running a make financial need to be like the model that’s been the same for ages, decisions when little tugs and just like the major players in insurance. they receive a speedboats that help salary slip, gain a them out. But, if they Top Quotes Claudio promotion or join keep telling us ‘well, Ranieri Leicester City a company. no, we’re going to do It's important not to look down or Dritsas says: “In this ourselves’, at some behind you. Like a climber, you need that moment you point, we’ll just moor to look up. If you look down, you go need something our boat, carry it ‘Oh! My God, look where we are!’. that’s intuitive, that’s around the ship, put rapid, that just grasps It's not important how many it back in the water the moment of and cruise on. mistakes you make; it’s about interest and passes “We feel that how many chances you create. this information on there is more and In my opinion, if you only to a product provider show quality but no fighting more of a tipping or a partner. It’s point approaching.” spirit, you are half a player. www.fintech.finance

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LIFE & HEALTH INSURANCE: EXPATS

Changed in a heartbeat William Russell has played a crucial role in helping expats whose lives have been upended by politics and a pandemic. Inez Cooper, the specialist insurer’s MD and Co-founder, and Avin Talabani, Transformation Manager, explain their ongoing response

Life as an expat has never been so uncertain – or, potentially, so expensive. It can be difficult enough, in normal circumstances, being separated from your homeland by family arrangements, study, work or happenstance. But, as we know, the past 18 months have been anything but normal.

A global pandemic and Brexit have left tens of millions of people unsure of their status, and feeling confused and vulnerable, especially when it comes to accessing medical support.

In May, one of the biggest players in the international private medical insurance market (IPMI), UK-based William Russell, commissioned a survey among nearly 1,200 randomly-selected expats in five countries, to find out how they were holding up under the strain: the results were stark.

Thirty-eight per cent said their mental www.fintech.finance

health had declined during the COVID-19 crisis (12 per cent seriously), with 44 per cent regretting that they weren’t in their home country.

Commenting on the response at the time, Inez Cooper, MD and co-founder of William Russell, said expats’ experience of the pandemic had been made more acute due to isolation from family and friends, and language and culture barriers, while a lack of local knowledge may have prevented many of them from seeking the mental health support they needed.

For those whose lives straddle the UK and the EU, the situation is doubly troubling. Many have found it difficult to register their residential status in their host country, post-Brexit, which can mean they’re denied state healthcare, including COVID-19 vaccines. But neither are they able to return home to protect themselves because of travel restrictions.

It’s at times like these that an insurer that can not only deliver services fast and simply through multiple digital channels, but also offer responsive human contact, comes into its own.

“We’ve been doing phenomenally well, if you look at our Feefo score. We’re rated 4.5 out of 5, which, in the insurance space, is unique and really differentiates us,” says Avin Talabani, transformation manager for William Russell, who has been in post since the pandemic began. “We definitely want to maintain that human service, but we are also ramping up the ability for customers to interact with their policies digitally, both in terms of managing them and submitting a claim, as well as managing their healthcare more holistically.”

The insurer’s recent experience of how clients wished to access its services has mirrored that of others in financial services – online, and, increasingly, via mobile.

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LIFE & HEALTH INSURANCE: EXPATS “That people would like a hyper-personalised service, and more self-service, has been an ongoing trend.

But the pandemic effectively catapulted us three, four years into the future,” says Talabani. “Due to things like test and trace in different countries, and tracking the results of tests and submitting them online, people have got a lot closer to their mobile phones… it’s almost become an expectation that they want to be able to interact with us in that way, too – in their own space and in their own time. But then, if they do need to speak to us, we absolutely need to have somebody there who can help them resolve their issue, first time around.”

Cooper adds: “We’re real people, and we have a real responsibility to treat others as we would want to be treated ourselves. But, on the other hand, we’re a boutique provider, we’re competing with the insurance giants;

We’re real people, and we have a real responsibility to treat others as we would want to be treated ourselves Inez Cooper

our advantage is our ability to accelerate the digital transformation programme.”

The three-year transformation roadmap the company had in place at the beginning of 2020 for delivering its health, life and income protection business, has been condensed into an 18-month delivery timeline. And one of the tools it’s using to achieve that rate of change is Microsoft Power Apps Portals.

HUMAN-ENHANCING TECH Portals has allowed William Russell to provide customers with an interface that will give them access to, and the ability to interact with, various aspects of their quote and policy that are contained in the Microsoft Dynamics data lying beneath.

“It’s been really successful for us, in terms of our online quotation capabilities. Since we’ve released it, our conversion rate has increased by 50 per cent,” says Talabani.

“And that’s just on the quotations side. Our intent is to start extending that from just a quote, to quote, apply and buy, and then the onwards management of policies.”

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It’s more than a revenue-generating model, though. Allowing a digital exchange of information between insurer and the insured moves the customer relationship on in a dynamic way.

If the pandemic has taught us anything, it’s that looking after our health is a priority.

And, if we’re far from home, the penalty for not doing so is often financially severe.

William Russell releases annual data on claims made under international private medical insurance. In the year 2019/2020, one claim amounted to US$390,000, while the most expensive medical evacuation was $31,125. Cancer treatments were the most costly, while the biggest bills overall were incurred by expats living in Asia. Even routine healthcare costs abroad can be crippling. In Hong Kong and the UK, the price of getting a child vaccinated is upwards of £800, and don’t even think about starting a family in Hong Kong, where maternity care for expats runs into tens of thousands of dollars.

Worldwide, treatment costs have been increasing, year on year: poor lifestyles have prompted a rise in chronic conditions, and there are more expensive drugs and high-cost treatments available. Which is why investing in technology that helps both insurers and customers work in partnership to keep people out of the healthcare system, is seen as a priority from both an economic and personal perspective.

“We want to start including services that look at the customer’s health more holistically, using self-service capabilities,” says Talabani. “The data that flows from that allows us to assess whether somebody is heading towards a medical condition that can be avoided through lifestyle changes, so that they can avoid that diagnosis further down the line.

“People are themselves starting to look at health insurance and ask ‘how can this insurer really help me manage my health?’, not just ‘how easy is it to make a claim?’.

And there are additional partnerships, like telemedicine, virtual health and mental wellbeing, that we’ll be able to extend to customers, which they are now starting to expect more of as a result of the pandemic.”

There are also economic and regulatory advantages of moving towards a more data-driven model with AI: the opportunity to contain expenses for both company and client, as well as better address fraud.

Unfortunately, says Talabani, there are

providers who will try to play the system.

“They’ll include lab tests and an x-ray as additional components of a claim, where they’re not medically necessary,” she says.

“We’ve got the opportunity now to partner with third parties that can use the medical data that’s coming from that provider to assess whether a treatment is medically necessary or not, and we can then interject and advise if a person doesn’t need it.”

She believes the super-fast timeframe the firm has set itself for achieving these goals is doable, partly because it’s not operating on an ancient legacy system.

“Being a smaller company also makes us more agile,” she adds. “Quite often, we’ll have an idea and get the decision-makers in the same room, on the same day, to say ‘let’s go for it!’.”

It’s also a workforce that’s balanced in both gender and ethnicity.

“The different backgrounds of our people, and their varied experiences, help us understand whether an application is going to be a one-size-fits-all, or needs customising to be personal to the different geographies and cultures our expats are based in, whether that’s using different languages or different conversational tone, all while being respectful of those local

Since we’ve released the customer interface using Microsoft Power Apps Portals, our conversion rate has increased by 50 per cent Avin Talabani

cultures; even how we can be more mindful of people who may have mental health issues, or have suffered a particular trauma,” says Talabani.

The reality is that, post-pandemic, people will likely be a lot more circumspect about basing themselves abroad – and, certainly, they’ll be looking for protection they can depend upon if they do.

“We are here to help people when they’re going through hard times, and make sure they feel supported, financially and emotionally, when they contact us; to feel that they can rely on us,” says Cooper.

Wherever you are in the world, that’s a comforting thought. www.fintech.finance

Graphical Representation and Regression Formulation of Link Ratios Thomas Mack identified the stochastic regression model that underlies volume weighted average link ratios. Other authors, including Murphy and Venter, have developed these ideas further. A graphical representation and regression formulation of link ratios makes it clear what assumptions underpin the methods and extensions thereof.

"There is pleasure in recognizing old things from a new viewpoint."

Richard Feynman Consider the (diagonally opposite) Incurred Loss triangular data from the American Reinsurance Association.

In general, each link ratio (y/x) is the slope of the line from the number pair (x,y) to the origin.

The graph below plots the cumulatives in development year one versus the cumulatives in development year zero for accident years 1981 to 1989.

The caption on the right is for the point (5,655, 11,555) corresponding to accident year 1984. The caption on the left is for the point (1,092, 9,565) corresponding to accident year 1985.

The slope of the blue lines represent the corresponding link ratios – which is 2.043 for 1984 and 8.759 for 1985.

Acc: 1985 Value Dev 0: 1,092 Value Dev 1: 9,565 Ratio: 8.759

Cum.(1) vs Cum.(0)

Acc: 1984 Value Dev 0: 5,655 Value Dev 1: 11,555 Ratio: 2.043

Accordingly, an average link ratio, equivalently average trend, is an average slope through the origin.

This means that the method can be formulated as a regression (Mack (1993)).

Let y(w) denote the cumulative in development period j for accident year w and x(w) the cumulative in the previous development period, j-1.

We can write, y(w) = b * x(w) + e(w),… (1) where b is the slope of the line (equivalently, the average link ratio), and e(w) is the difference between the actual value y(w) and the corresponding point on the average link ratio line (b * x(w)).

When actuaries use link ratios there are two critical assumptions: • The expected value of the next cumulative is conditional on the previous cumulative multiplied by an unknown factor.

• The selected link ratio (factor) is optimal for prediction.

The optimum value of b is found by weighted least squares estimation according to the scale of the error terms e(w).

Let the variance of e(w) = v * x(w)delta For the following values of delta (0, 1, 2): • 0, or constant variance, the weighted least squares estimated of b is the volume squared weighted average link ratio.

• 1, the weighted least squares estimate of b is the volume weighted average link ratio – sometimes called the chain ladder ratio.

• 2, the weighted least squares estimate of b is the arithmetic average link ratio.

In the graph (previous page), the red line is the best least squares line through the origin and the green line is the best least squares line that includes an intercept. The latter appears to be a better model.

Murphy (1994) extended the regression formulation to include an intercept term. y(w) = a + b * x(w) + e(w), … (2) where a is the intercept term, but b is no longer the average link ratio.

Given that the intercept is positive in the previous graph, the slope of the line with an intercept term is less than any average link ratio (through the origin).

We can obtain visual indications of whether a line with an intercept (Murphy (1994) method) or a line through the origin (Mack (1993) method) is better.

Most importantly, the focus should be on the incremental model, Venter(1998), even if a = 0: y(w) – x(w) = a + (b-1)*x(w) + e(w), … (3) where y(w) – x(w) is the incremental data point.

When you use a link ratio to project the cumulative in the next period in essence you are only projecting the next incremental as you know the current cumulative. This is the reason all the focus should be on equation (3) not (2).

But what if b in equation (3) is statistically equal to 1, (Venter(1998))?

Incr.(1) vs Cum.(0)

Then the incrementals in development periods (j) are not correlated to the cumulatives in the previous development period (j-1). That is, any ratio applied to the cumulatives does not predict the incrementals!

Here is a graph (right) of the incrementals in development year 1 versus the cumulatives in development year 0.

Corr. = -0.117, P-value = 0.764

Note that the correlation is zero (slope not statistically significant). Equivalently b – 1 = 0.

In this case, the reduced model only contains an intercept term. y(w) – x(w) = a + e(w) … (4) In this model, the incrementals across the accident years are random numbers from a distribution with mean a, and variance, Var(e(w)). If e(w) has a constant variance, then the ordinary least squares estimate of a is the arithmetic average of the incrementals y(w) – x(w).

It turns out, if you graph the incrementals in any development period against the cumulatives in the previous period, you will note that there are no statistically significant correlations. All the b-1 parameters are statistically zero.

The assumption that the incrementals are random, might not be true. A case in point, is development period two.

This suggests that we need to include an accident year trend parameter in model (3).

Incr. (2) vs Year

Corr. = -0.841, P-value = 0.009

The equation that includes the intercept, accident year trend and slope can be written: y(w) – x(w) = a0 + a1 * w + (b-1)*x(w) + e(w), … (5) where a0 is the intercept, a1 is the accident year trend parameter and b-1 is the incremental coefficient.

The family of models included in the Extended Link Ratio Family (ELRF) are represented by equation (5) between each two consecutive development years. The significance of the parameters is determined by the data.

Link ratios have no predictive power for this incurred loss development array. The optimal combination of parameters uses simply an intercept term with the exception of the regression equation between development periods 1 and 2 where an accident year trend is also statistically significant.

Mack, T. (1993). Distribution-free calculation of the standard error of chain ladder reserve estimates.

ASTIN Bulletin: The Journal of the IAA, 23(2), 213-225.

Murphy, D. M. (1994, March). Unbiased loss development factors. In CAS Forum (Vol. 1, p. 183).

Venter, G. G. (1998). Testing the assumptions of age-to-age factors.

In Proceedings of the Casualty Actuarial Society (Vol. 85, pp. 807-847).

Volume weighted average link ratios do not distinguish between accident years and development years Incremental Data Set

Accidental Years

Developmental Years

Consider any triangle with incremental values where: • alpha denotes the sum of the values in the red rectangle, • beta denotes the sum of the values in the green rectangle (one development year), and • gamma is the sum of the values in the orange rectangle (one accident year).

Let p denote the incremental value projected for the accident year represented by the gamma values for the next development year.

The value alpha represents both the aggregate of the row sums in the red rectangle and the aggregate of the column sums.

The volume weighted average when you cumulate the triangle in the traditional way is (alpha + beta) / alpha. If you cumulate the triangle for each development year down the accident years, then the volume weighted average is (alpha + gamma) / alpha.

Accordingly: If you cumulate along the development years, and

If you cumulate along the accident years. QED. We know that development years are not like accident years.

CONCLUSION: Link ratios have got nothing to do with the structure of the data.

For the incurred array we plot the incremental values versus development year. We also plot the values versus accident year.

Note the different structure.

Clearly, we expect any incremental loss development array to decay to zero, but you would not expect the same pattern down the accident years.

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Accessing data and information through the ELRF™ 2020 application is a pleasure.

The Extended Link Ratio Family (ELRF) modeling framework provides diagnostics for testing assumptions.

Residual plots versus development period, accident period and calendar period are also used to assess model specification error. Any patterns in the residual plots show features of the data that the method is not describing.

The Y versus X and Y - X versus X plots (left) provide diagnostic testing of the intercept and ratio minus one. Formal tests are provided in the regression tables.

Here there is no relationship between the incremental Incurred in development period 3 with the cumulative Incurred in development period 2.

Link ratios do not have predictive power.

ELRF™ 2020 Standard: • Over 144 link ratio methods including Bornhuetter-Ferguson and Expected Loss Ratio Methods • Link ratio methods formulated as regression estimators • Extensions including intercept (Murphy) and constant accident year trends for each development year • Diagnostic tools • Bootstrap distributions by accident year, calendar year and total

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COMMENTARY: THE FINTECH PLEDGE

The secret of a happy partnership The relationship between insurtechs and incumbents has not always been easy or mutually advantageous. But with six major insurers now signed up to the Fintech Pledge, Victoria Roberts, Director of the Insurtech Board at Tech Nation, believes it’s the start of something good “Five years ago there was a juxtaposition in fintech – a buy versus build debate. But people in the big institutions have recognised the value of working with fintechs, and ‘partnership’ is no longer a dirty word.”

So says Victoria Roberts, director of the Fintech Delivery Panel and the Insurtech Board at the government-backed business growth network, Tech Nation.

But Roberts won’t kid you that collaboration within the insurance industry is easy. Just like the wider fintech world, many

Better together: Insurtechs and corporates can learn to love each other

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projects have floundered in the last few years. When the often vastly-different cultures of startup and incumbent collide there can be messy results. In a nutshell, mutual ignorance between big and small has meant the two sides often don't know how to work together.

To that end, Tech Nation helped develop the Fintech Pledge last year, hailed as a first step in improving mutual understanding and communication. In September the UK’s five biggest banks signed up, and in April six major insurance players followed – Admiral, Aviva, Brit, Esure, Lloyd’s and Munich Re Digital Partners.

The pledge is one of many tools being employed by the Government and the financial sector to ensure Brexit doesn't derail the country’s progress in leveraging its position as a world-leading fintech hub. To understand why insurers are also being invited to sign the Fintech Pledge and urgently implement its actions – within six months – though, it's worth looking at a study that examined the mismatch between insurtech and incumbent.

The Treasury-backed Insurtech Board, run by Tech www.fintech.finance

Nation, last autumn brought together insurers, entrepreneurs, investors and consumer groups, and, with help from Lloyd’s Lab, collated views from all sides. Established insurers complained that startups had weak knowledge of insurance products, the wider sector, and the myriad of regulations that govern processes. Sometimes even the fundamentals were misunderstood – the report highlighted cases of insurtech staff having little knowledge of how underwriters priced a product, for example. This led to frustration and ‘hand holding’ – potential clients said too much effort was often needed to turn a good idea into a workable solution.

On the flip side, insurtechs said they were baffled by the ‘opaque’ processes employed by incumbent firms, and the huge due diligence questionnaires they were told to fill out. One typical complaint was that ‘people come out of the woodwork’ to review their solution, with weeks needed for multiple departments to give approval – or veto the project. Add in what was described as the ‘culture of a slow no’, plus an absence of payment for proof of concepts, and insurtechs were sometimes left struggling to stay afloat as they fought to secure a deal.

The research concluded that signing the Fintech Pledge was a logical step to improve partnerships between insurance industry players: a very public sign of good intent and a commitment to better understanding. But it also urged incumbent firms to adopt an entrepreneurial spirit within their organisations ‘to reach a point where innovation is recognised and rewarded, rather than restrained’.

A hangover from the 2008 financial crisis was pinpointed: the report said the strengthening of compliance regulation had, in some cases, created one-size-fits-all processes and fostered a risk-averse culture that meant opportunities to innovate were now being missed.

Trevor Maynard of Lloyd’s, the Insurtech Board’s head of innovation, said building an innovation culture would mean going ‘beyond scouting the best new propositions; it means the whole organisation adopting an entrepreneurial mindset, which enables rather www.fintech.finance

than hampers new collaborations. It is vital we bring together insurers with insurtechs, to bridge between the inquisitive and the experienced, and to see where existing barriers are hindering relationships’.

Roberts says the Insurtech Board report and the Fintech Pledge aren’t the first pieces of work to aid partnerships, but previous efforts hadn’t encouraged incumbents to consider their own weaknesses.

“We’re in the second iteration of the Fintech Delivery Panel, or FDP 2.0,” she says.

“With the first, which started in 2017, the banks worked to produce the Onboarding Guidelines. This was essentially a sort of bible for fintechs, mapping out what they might be asked by an institution when seeking a partnership.

“It was a fantastic resource, with an emphasis on what fintechs could do to prepare. However, the inspiration for the Fintech Pledge was to ask ‘what is the role the institution can then play in ensuring onboarding [of a fintech/insurtech] is efficient and effective?’. It’s really looking

Both sides have more to offer than they agree to deliver when they sign a contract at what institutions can do for their prospective partners; to have that enhanced transparency and communication in order to overcome the asymmetry you get sometimes, where, for example, the institution knows it’s a three- or four-month [onboarding] process, but the fintech’s thinking ‘brilliant, I’ve got the contract’.”

Emma Huntington, CEO of Admiral's in-house venture-building unit Admiral Pioneer, understands how tough it can be for a startup to partner with a large corporate.

“It’s not because they don’t want to work together,” she says. “It’s just because they are completely different business models.”

She’s pleased to see the Pledge signed

by Admiral for the benefit of her own team, sitting within, but in many ways very different from, the rest of the organisation.

It ‘helps set out transparency, understanding and obligation on both sides’, she says.

Culture is at the heart of the issue, and while insurtechs and incumbents can both benefit when each collaborates to create a customer-facing app, or regtech

software, Roberts says people can learn much more from one another if they truly embrace their partnership.

“I think there will always be a superior regulatory breadth of knowledge in the institution that the insurtech can really benefit from,” she says. “But the agile nature of the insurtech can also be eye-opening, and bring quite a refreshing culture into the larger organisation. Certainly, both sides have more to offer than what they agree to deliver when a contract is signed.

“Institutions that signed the Pledge are global and complex by nature,” she adds.

“It is hoped it will drive a focus on innovation right through their organisations, help them ask whether their procurement, legal and strategy teams are aligned towards the important role that insurtech could play.”

The Insurtech Board study and Fintech Pledge come at a time of reflection for the UK’s wider fintech industry due to the potential for change brought by Brexit.

There’s no doubt Britain can lay claim to being the epicentre of European fintech – the $4.1billion of investment made in the country last year was more than the sum raised in the next five countries combined. But at the time of going to press, the memorandum of understanding on cooperation between UK and EU financial regulators was still unsigned. So, Britain presses on, with the government-backed Kalifa Review, published in February, helping guide development of the sector in the near-to-medium term. Changes to listing rules to attract fintech IPOs to London, ‘tech visas’ for global talent, a ‘scalebox’ and a new Centre of Finance, Innovation & Technology are among the plans. But Roberts believes the soft power of the Fintech Pledge will bring big changes from within.

She says: “My aspiration for the Pledge is that its core principles, around being clear what your onboarding process is, having a named contact and providing regular feedback, will be incorporated into each institution in a way that fits its needs. Some might use it as an opportunity to enhance the process, reduce the time to do a proof of concept; others to fly the flag for innovation and raise the internal funding available for it.

“Either way, Tech Nation will continue to encourage a wider range of institutions to join this commitment. But we’ll also keep talking to the fintechs and insurtechs about what they’re experiencing on the ground.”

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NEW BUSINESS MODELS: DIVERSIFICATION Leading the fleet: Admiral isn’t content to conform

The

Pıoneer spırıt Admiral has sailed across several industry horizons, but CEO of its venture-building business, Emma Huntington, has now been given a ‘blank sheet’ to create and launch a fleet of startups… not all of them insurtechs General insurance is at a pivotal point, fashioned by both the predicted and the unexpected.

It was already facing the anticipated future challenges of a world growing less reliant on fossil fuels, and more reliant on digital technology, when the colossal and sudden impact of the COVID-19 pandemic flipped a headwind of change into a tailwind of innovation.

Overnight, as lockdowns were imposed,

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the daily routines for millions of people were dramatically adjusted. And one of the most impactful consequences was that working from home became a new norm, forcing less reliance on the car – with the jury still very much out over whether there will ever be a full return to pre-pandemic practices. There’s plenty of pressure – political, economic and social – for things to stay this way.

A recent report by the Centre for Research into Energy Demand Solutions, for example, concluded that instead of pushing forward with a £27billion roads investment programme (which, in itself, is subject to challenge on its compliance with the UK Government’s climate goals), much of this money could be diverted to carbon-reducing projects that deliver health, safety and wellbeing benefits for all. That would tie in, the report notes, with other policy goals, such as re-vitalising town and city centres,

which need to reinvent themselves as a result of the accelerated decline in retail and office utilisation.

An Admir-able approach For companies like general insurance and loans group Admiral, the UK’s largest motor insurer, the slump in vehicle use caused by the pandemic was a rehearsal for what could be a future reality.

It was the first insurer to react to the pandemic in 2020, spontaneously distributing £110million in flat-rate, automatic refunds to all its motor customers in recognition that their decreased time on the road would mean fewer claims. And it invested a further £80million in reducing prices and providing specific support packages for NHS and emergency services workers, including the waiving of motor claims www.fintech.finance

excesses and providing free courtesy cars if their vehicles were written off or left undriveable due to accidents. Its agile, decisive approach to the crisis further cemented customer loyalty and retention (for which it already had an award-winning reputation), helping it to post pre-tax profits of £638.4million in its 2020 financial year, up 21 per cent on a year earlier.

But, long before ‘lockdown’ was part of our everyday vocabulary, the company that changed the way most of us shop for car insurance by launching the first price comparison website (PCW) in 2001, had been thinking about how it might respond to a world where jumping into your car wasn’t the default option.

Veygo, which has become Admiral’s short-term motor insurance brand, providing app and online-based instant learner and temporary driver cover from one hour to 30 days, was set up in 2017, with a separate team dedicated to exploring different technologies, use cases and business models for future, mobility-related insurance. Now that team will come under the remit of Admiral Pioneer, a wider-ranging new venture-building business, created at the beginning of last year to seed, grow and scale a new fleet of disruptive techs for the insurer. Two launched this year: Toolbox By Admiral, which has a standalone site, currently offering tool and contents cover from £1/day for the thousands of tradespeople who work out of the back of their vans in the UK; and Kooalys, a green auto insurance product for the French market, which encourages and rewards companies for decreasing CO2 emissions in their vehicle fleets.

“In both cases, at this early stage we are focussed on learning as much as possible about the needs of customers in these segments and how we can constantly refine and improve our propositions as these markets evolve,” says Admiral Pioneer CEO Emma Huntington, who joined from Nationwide Building Society, where she was head of innovation and venturing. She says she was handed a blank sheet by Admiral before the pandemic to conceive, launch and grow www.fintech.finance

businesses in insurance, non-insurance or a combination of both, with a particular focus on mobility, the future of work and living to 101.

“Our aspiration is to have a significant impact on Admiral’s commercial business lines in the longer term,” says Huntington.

“Insurance is absolutely critical to people’s lives – it’s your health, your home, how you work, your mobility. The work done by Admiral Pioneer will allow Admiral to offer prevention-type solutions in all these areas, as well as value-added solutions for customers that go above and beyond, but also include insurance.”

At the core of that is how the company gathers and consumes data.

Last December, Admiral announced a tie-up with open banking fintech Credit Kudos to boost the credit decisions process for its loans business, pledging at the time to increase the use of open data to offer ‘new and revolutionary products’ to ensure it can respond and adapt to its customers’ needs. During 2020, it doubled the number of machine learning models pushed into production, moved a vast part of its business to scaled, agile working, and transitioned the majority of its customer data to the Cloud.

The work done by Admiral Pioneer will allow Admiral to offer more prevention-type, value-added solutions for customers that go above and beyond, but include insurance “Open data, and obviously our own industry data, is allowing insurers to not only structure their products and risk, but also to think about risk in different ways,” says Huntington. “It’s also enabling partnerships, which are more seamless than you would’ve seen in the past.”

In April this year, Admiral was one of six leading insurers to sign up to the Fintech Pledge, developed by Tech Nation, the UK Government-backed growth platform for tech companies and their leaders, to provide a standardised framework for institutions to partner with startups and scaleups. While Huntington’s remit is for Admiral Pioneer to pump-prime the

company’s own new business models, she sees the Pledge applying just as much to the relationship between her unit and the rest of the organisation: “Because we are an insurtech, in and of ourselves, building startup businesses, albeit owned by Admiral. When creating those businesses, we want the benefits of Admiral Group, but with the freedom and ability to move at pace, test and learn and try new things. It’s why we absolutely support the Pledge.”

Looking at development of the wider industry, she adds: “Government support in this is hugely valuable. We want to have a strong, thriving financial services sector, including insurance, and it’s so important that we develop new capabilities, and really strong commercial businesses.

“Some of the insurtechs created in the UK will be global but if they can start here, that’s fantastic for our sector, for vour economy, and the people with talent within our space.

“It’s important we innovate, foster talent, partner and help smaller businesses succeed. If we can do that together, to mutual advantage, brilliant.”

Already an international business with operations in Europe and the US, in April 2021, Admiral completed the disposal of its online comparison sites Confused.com – the first car insurance PCW – Rastreator.com and LeLynx.fr to Zoopla Property Group, which owns USwitch, in a deal that netted the insurer about £460million. It has said it will continue to work closely with them and the innovation centre it set up that’s attached to them, while maintaining an internal core of 500 of its own technologists, all working to improve and create new digital processes for Admiral Group.

In October 2020, digital analysts Deltabase rated Admiral for its advanced use of digital technologies, noting that the launch of Admiral Pioneer should help ‘increase the chance of Admiral being the disruptor rather than the disrupted’.

While that was before the disposal of its ground-breaking PCW, this Admiral clearly has its telescope trained on another distant, disruptive horizon. Or, as Deltabase concluded: “Whilst more traditional and less digitally-mature insurance companies may be sitting ducks for disintermediation and disruption by insurtech startups and scaleups, Admiral demonstrates it has its finger on the pulse of digital innovation.”

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NEW BUSINESS MODELS: MODULAR INSURANCE Platform provider, Tigerlab, believes the experience of the past year-and-a-half will stimulate demand for ‘bite-sized’ cover, better suited to our re-engineered lifestyles. Chief Operating Officer, Holm Schimanski, sets out what he thinks insurers need in their kit to provide it profitably A perfect storm of technological advances, elevated customer expectations, cultural behaviour change – and a pandemic – have accelerated the rate of disruption in the insurance sector.

To survive and thrive in this new landscape, where opportunity and risk vanish just as quickly as they appear, insurers are reviewing operating models and approaches to customer experience.

Holm Schimanski, chief operating officer of Tigerlab,

an omnichannel, Cloud-based provider of the i2go platform-as-a-service, working mainly with small-to medium-sized insurers, believes most people have grown increasingly dissatisfied with the level of service they received over the past 12-to-18 months, and are re-evaluating the merit of insurance as we know it.

He believes it heralds a decisive shift towards more modular cover, built around specific users, reflecting individual circumstances; products designed for modern living that move the industry away from the archetypal insurance policy, most of which people never read and half of which aren’t relevant to their needs anyway. Consumers will increasingly dictate the terms on which those products are offered.

Take motor insurance. Due to several lockdowns, social distancing measures and a rapid shift to remote working, vehicles have been more off the road than on, of late. But, while motor insurance customers might be spending less time at the wheel, they have most definitely been in the driving seat when it comes to forcing changes to suit their modified needs.

“Motor insurance is the prime example,” says Schimanski. “Customers

are saying ‘why do I pay the same price for insurance when I have nowhere to go and I can’t use my car?’.

“We’ve seen new insurance models benefit from the situation – they can adapt the pricing, and adapt the product to customers’ current situations.

Customers have been forced to find alternative ways of purchasing, renewing or changing their insurances, and we see this trend in usage-based insurance in particular,” he adds.

Tigerlab’s developer sandbox is busy with responses to this new normal – from wedding cancellation cover in the light of unpredictable public protection measures, to electric scooter insurance as towns and cities embrace car-less commuting, and usage-based insurance for those still reliant on them. They’re all examples of how dramatic changes in the way society is organised threaten to make most traditional insurance irrelevant.

Tigerlab, which has grown into a global company from its innovation hub in Kuala Lumpa and now has a Swiss HQ, advocates ‘bite-sized’ insurance products that can be stacked to provide a range of cover, bespoke to the person buying it.

g n i d l i Reburance insu www.fintech.finance

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NEW BUSINESS MODELS: MODULAR INSURANCE The problem is, modular products will almost certainly be pegged at much lower price points, and perhaps involve shorter cover periods. The challenge, then, is for insurers to find the right technology that can not only deliver these but maintain a relationship with the insured that inspires them to return – since volume, repeat and related purchases become key in monetising this model.

As the Internet of Things (IoT), and the sensors that connect our homes and vehicles to risk underwriting models, evolve, automation and up-to-the-minute data will play an increasingly important role in helping insurers to get hold of clear, actionable insights that benefit their customers, says Schimanski.

And, while he acknowledges that the new model is a challenge, he believes it can, in fact, flip traditional approaches to hard-selling insurance, through better engagement that informs customers and empowers them to choose from wider options that are more precisely tailored to their needs. He has three key pieces of advice to insurers…

Stack it high

and conversion rates would change, if they implemented a certain strategy.

“We work with a lot of telematics providers, and we ingest a large amount of external data because, in an ideal world, you gather as much information as possible, pinpoint that to your persona, and then evaluate the upselling possibilities.

“It’s better to give a small, bite-sized product to your customer, and not oversell them something that, at this point, they don’t need. Stacking the products makes it very easy to just upsell a small portion of it, and customers won’t see that as necessarily a bad thing.

You might have to sacrifice initial costs for the sake of retention, but, ultimately, we believe that engagement will drive revenues by driving retention rates “If we incorporate that into a payment strategy, we can spread the additional premium across monthly payments, or offer a sort of pay-as-you-go service. Then customers are, from our experience, very happy to accept upsells and cross-sell options, if it provides the value they need.”

Customer-designed insurance “Insurers need to move away from trying to sell everything at once, to a point where they can stack different products and offer smaller products at lower prices,” says Schimanski.

“First, they need to understand their customers, that they are not dealing with a single cohort, but different personas. Each persona has a different customer journey and, depending on that journey, the engagement model will, of course, change.

“Our usual recommendation to clients is that they start small, choose a persona, a single target they can handle, because establishing a customer engagement strategy for their entire customer base is a lengthy process and might overwhelm most insurers.

“That’s why we provide additional services – for example, using data to simulate how their revenue would change, how their customer acquisition

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“The educated insurance customer doesn’t really look at price, but instead value for money and what they get in return. And that goes back to the idea of how insurers build their products. How big are they?

What kind of value do they offer customers, and how easy is it to actually customise the product?” says Schimanski.

“A lot of Tigerlab’s clients put heavy emphasis on convenience. They don’t have strict cancellation rules. Customers can also pause their policies, then reinstate them.

“It’s about trying to give full control back to the customer so that they can manage their own policy with total transparency.

This also translates to giving the customer a choice of ways to pay for the insurance.

“Distribution also needs to be right.

Customers will choose insurers because they are accessible to them. A lot of insurers know online distribution is important; that they need to be online, to be on aggregators and to work with brokers or agencies. But they need to have a proper commission model that goes along with this distribution model, so that whenever a customer is looking for new insurance, they will find it.

“Another important aspect we bring to our clients is an omnichannel approach; we map out the customer journey and all the different channels, whether email, via the website, social media, agents or brokers. Insurers that build convenient products and convenient ways to communicate them will win eventually.”

Attention and retention v

“Customer engagement is one of the most critical success factors for customer acquisition and retention,” says Schimanski.

“Keeping customers engaged will lead to higher retention rates and, ultimately, higher revenue rates. So, you might have to sacrifice initial costs, for the sake of retention, but, ultimately, we believe that engagement will drive revenues by driving retention rates.

“There’s this age-old insurance conundrum where everybody says ‘how can we come to a situation where the customer actually starts buying insurance, instead of us constantly selling it to them?’. I think customer engagement might hold the key to that.

“As an insurer, and as a software provider, engaging in the right way, with the right customers, leads to trust. If we can convince them to stay with us, it also leads to upselling/cross-selling possibilities; customers will start buying insurances as opposed to feeling a particular insurance product has been forced onto them.

“Historically, customers don’t ever hear anything from their insurer unless their policy is up for renewal. Instead, insurers need to be closer to their customers, and have a high frequency of information, but keep that information flow relevant.” www.fintech.finance

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NEW BUSINSS MODELS: PARTNERSHIPS Bought By Many has scaled rapidly since focussing solely on customer-driven pet insurance, developing its own model of MGA. In the year it broke into the unicorn club, Chief Financial Officer Luisa Barile says it wouldn’t have been possible without its partners Dogs naturally run in packs and, according to one pet insurer, so should insurance companies.

Bought By Many’s enthusiasm for partnership working is understandable.

Originally established as an insurtech offering niche cover in a broad range of circumstances, its business took off

when it paired up with Munich Re Digital Partners to focus exclusively on developing customer-centric pet insurance.

It’s also a case study in how alpha players and whippersnapper startups can come together to reshape an industry by creating business models that support the UK’s ambition to unleash a new generation of financial services.

There is, of course, already a long history of collaboration in an industry that is predicated on a network of operators that all need each other to bring a product to market: reinsurer, underwriter and broker, with, more recently, specialist managing general agents (MGAs), acting on behalf of one insurer, and price comparison websites (PCWs) added to the mix.

With digitisation comes another motivation for players of every breed and size to collaborate, this time by working closely with a new generation of data aggregators and technology providers.

Overcoming the cultural differences between them, though, is no walk in the park. To help address that, insurance firms have been invited to sign the government-backed Fintech Pledge, setting out a voluntary framework in which such partnerships can flourish and, in April, six major players did – including Munich Re Digital Partners.

The Pledge seeks to manage expectation, avoid exploitation and maximise benefits for both sides.

And, for Luisa Barile, chief financial officer of Bought By Many, signing it is necessary to allow the insurance industry to modernise.

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“Collaboration and partnership haven’t always worked well in the last few years; there have been frustrations on both sides,” says Barile. “The Tech Nation Insurtech Board published, thanks to the support of Lloyd’s, a report on the collaboration of incumbents and insurtechs, which analysed the reasons why there have been challenges in really getting the partnerships to work. It looked at what could be done to lower barriers, and that was the background to participation in the Fintech Pledge – there was a strong recognition from both sides that partnership working is the way to go.”

As co-chair of the trade association Insurtech UK – which has more than 100 members across the industry – Barile says there is a strong desire to move forward through collaboration.

“Tech Nation and Insurtech UK are engaging extensively with the Treasury and the Government to create the environment for our members to flourish,” she says.

“For that to happen, insurtechs need access to capital. The UK is a fantastic place for investment, though there are areas we must look at to ensure insurance becomes the centre of attention and doesn’t fall into the shadow of fintech investment.

“Secondly, insurtechs need to collaborate, and, since London is an insurance hub, it is a natural place where this collaboration can happen.

“Third comes regulation, and insurance is a highly-regulated industry. But the Government has been highly engaged and is looking at how to simplify processes for companies that operate in a very different way to the traditional insurers.”

Investment target In terms of investment in insurtechs, the Insurtech Board reported a year-on-year increase of 61 per cent in 2020, to £250million, and a large chunk of that was Bought By Many’s Series C funding round of £78.4million, led by FTV Capital.

In June this year, it announced it had raised a further £270million in Series D funding through its holding company Many Group Ltd. One of the largest insurtech investments in Europe, it was led this time

by Swedish investor EQT Growth with participation from Munich Re Ventures, among others. It was widely reported to

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have taken Bought By Many’s valuation to more than $2billion.

Now with a headcount of around 250 staff, the pet insurer aims to build on its international expansion, which has already begun in Sweden and the US, under the ManyPets brand. The US, especially, offers huge potential, since less than three per cent of pets are currently covered by an insurance policy there. But Bought By Many wouldn’t have reached the stature needed to take on such a market without the support of much bigger partners.

Barile says: “We are not a full-stack insurance company, we operate as an MGA, and, especially in the early years, we wouldn’t have been able to provide the policies we did without the support of our capital partners – particularly Munich Re. Not many companies can set up from the start as a fully-independent, full-stack insurtech, because that requires a huge amount of capital. The barriers to entry are really, really high. So, partnerships are important, especially at the beginning – and even more so when your clients are other insurance companies – for insurtechs to flourish and continue to grow.”

There has always been tension around whether insurtechs are competing or collaborating, and the truth is, it’s a bit of both In Bought By Many’s case, the firm focussed solely on pet insurance after identifying a need among customers that wasn’t being met by existing players. Its policy administration system is built on APIs: it develops its own policies, giving it the flexibility to respond quickly to the market, launching new products in a matter of days, all of them underwritten by Great Lakes Insurance, a division of Munich Re. It continues to be driven by customer data and feedback, and offers features such as completely paperless online claim capability, video calls with a vet, and a price guarantee that means renewing customers are not charged more than new ones.

“Insurance is probably not the first industry that comes to mind when people

think about the digital experience, but it is an industry that needs to transform, and I think everyone realises that the moment is now,” says Barile.

“The pandemic has been an accelerator, both from a customer expectation perspective and the operating point of view of the insurance companies.

Partnerships are going to be the answer, yet insurance companies are very complex, and not the easiest organisations to change and adapt – partly because they tend to be very risk-averse. Nevertheless, over the last few years, we have seen an increasing number of partnerships, both B2B and B2C, where insurers have partnered with software providers to automate processes.

“In Bought By Many’s case, we get capacity from Munich Re and run the entire process, from the acquisition of a customer to the support and the administration of the customer, up to and including claims.”

Because MGAs, like Bought By Many, tend to specialise in an insurance niche, the head of the UK’s MGA Association has said they are front of the queue to benefit from technology partnerships, particularly with others that can provide marketleading data capture and analytics.

Barile is hopeful the Fintech Pledge will prove to be a turning point for partnership working, after a period in which some incumbents have attempted to digitise on their own, with, she says, ‘mixed results’.

“There has always been tension around whether insurtechs are competing or collaborating, and the truth is it’s a bit of both. Bought By Many couldn’t have achieved such a level of growth without the support of partners, but we’ve also delivered really good value for our partners, both from an underwriting and investment perspective.There are definitely positives on both sides of the table.

“I think, for us, being one of the most mature insurtechs in the UK, it’s always important to see the sector growing with us. Ultimately, we want to see better outcomes for customers, and we are convinced that insurtechs can deliver that.

“We also want to ensure that standards are high for the whole industry, and that the elements that have allowed us to be successful can be replicated by companies in other sectors.”

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COMMENTARY: CUSTOMER LOYALTY

Ahead of the game Brian Levine, Vice President of Strategy and Analytics at Mobiquity, walks insurers through its latest study into loyalty among younger insurance users – and why providers should stay one step in front of them Canadian ice hockey star Wayne Gretzky famously said: “I skate to where the puck is going, not where it has been.”

That’s not a bad mantra to have in business, too – it’s the ability to anticipate and provide for future customer demand and behaviour that separates the companies that survive and thrive from those that are outflanked by the future.

The problem with the insurance industry, though, according to Brian Levine, vice president of strategy and analytics at full-service digital transformation enabler Mobiquity, is that it’s ‘still very much where the puck is’ when it comes to innovation – heavily focussed on digitising to meet current customer needs but not greatly concerned with those of the younger

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generation coming up behind, who it mostly regards as too fickle to warrant investing in heavily. While, if correct, that is understandable, it’s also short-sighted, argues Levine, citing what’s known as the Innovator’s Dilemma.

“Companies that focus on underserved [for which, in insurance, read ‘younger’] customers are those that wind up building better digital tools for the future and, ultimately, taking the business. If the big companies aren’t investing in young, underserved customers – if all they’re doing is digitising what exists – then they’re not seeing where those young customers are going,” he says.

It’s easy to see why insurers would want to focus attention on older, more loyal, premium-paying demographics – the problem is, the definition of ‘older’ is

creeping up all the time. Mobiquity’s recent report, How To Drive Loyalty And CLTV (customer lifetime value) Among Young Insurance Customers, revealed that consumers aged 55 and under were three times more likely to switch insurers in the next 12 months than those in the 56-orolder category. Under-55s are also between 50 and 100 per cent more likely to use digital tools to manage their insurance, according to Levine. These customers place twice as much importance on being able to use an insurer’s app – with policyholders aged between 25 and 40 indicating that the availability of good digital solutions is a key reason for switching providers. In particular, they are looking for a better mobile app, more online options for changing their policy or handling claims, and an easier-to-use web portal. www.fintech.finance

You only have to look at New York-based insurtech Lemonade to see how advantageous ticking all those boxes can be. The startup uses an artificial intelligence-based chatbot to make buying contents and liability cover simpler, more transparent, and pared down to a matter of seconds. Claim payouts are made fast, too – about a third of claims are settled in three seconds. And there’s a giveback feature that donates unused premium to charity.

Lemonade is clearly marketed at price-sensitive Millennials – who often rent, have a lower income and might appear more capricious in their buying habits than previous generations, but often simply have motivations, such as social conscience buying, that weren’t embraced to the same extent by previous generations.

The thing to note here is that Lemonade, by accurately gauging and engaging with the ‘younger’ lower-value market, ended 2020 with a million customers and well on its way to being a global brand, with footholds in Germany, the Netherlands and France.

Levine would argue that Lemonade is tackling the Innovator’s Dilemma precisely by targeting the disaffection, not to say distrust, felt by younger consumers towards insurers; acknowledging the high likelihood of them switching, and capitalising on the impact of digital tools to attract and keep them. Where all those things meet is ‘a great space to invest’, says Levine. So, why are incumbents reluctant to?

“They’re minimising risk in their portfolio today by not creating this added expense, which would hurt profitability,” Levine suggests. “They know that [by not investing] they won’t see a flood of customers leaving in the near-term. But, on the other hand, they are not minimising the future risk of that happening,”he says.

What’s needed, in his words, is ‘a culture of being both customer-centric and learning-centric’; using a blend of contextual data and customer trend research to identify what customers are likely to want in the future; learning about where the industry is headed, too, in terms of things like partnerships, added value and embedded insurance, if they want to gain and retain future www.fintech.finance

generations – because, despite the received wisdom, retention is entirely possible, says Levine. If they can anticipate what future customers are going to want, then they can get a strategy in place. A key element of that is knowing what’s likely to constitute added value for this group.

“People, especially those in the under-55 category, are so aware of the value of their time now – they know, thanks to Google, that they’re a commodity for advertisers, for instance – and they are more thoughtful about their own value to an insurer. So, what’s important is the exchange of value,” says Levine. “If an insurer is going to ask more from you, if they’re going to want you to pay more, they have to give you more. So, what more can an insurer do for you, that makes you feel that the amount your premium was raised by, is coming back to you in other areas?

This is where digital tools come in.”

Services such as automatic accident detection and digital home monitoring tools to both prevent and assist claims are examples, he suggests, of such a fair exchange of value. The Mobiquity report indicates that such innovation not only makes younger users more loyal, but encourages advocacy through social media and positive reviews, which

What’s important is the exchange of value. If an insurer is going to ask more from you, they have to give you more in return influence others’ propensity to download and onboard with an insurer via its app.

It’s a virtuous circle.

It’s as much about psychology as technology, says Levine: “It’s leveraging people’s thinking about the digital space.”

The app is key, he says. Across all age groups surveyed for the Mobiquity report, 38 per cent of customers said that they’re less likely to switch insurer if they’ve downloaded its app.

“We also have 40 per cent saying they’d consider switching to a company with better reviews. So we should put these two things together,” says Levine.

“As an insurer, I want them to download the app and to try it out. I then embed a pop-up that gets them to write a review if they’re having a good experience. This, in itself, can lift the number of reviews and the score of your reviews significantly.

“Getting them to download and review has two effects: we see better reviews in the app stores, and because there’s a correlation between positive reviews and the likelihood to download, the insurer’s app will get downloaded more.

In addition, if, as a consumer, I’ve made the commitment to this company by downloading, and if I’ve made a public statement that this app is good, social psychology tells us that I’m more likely to believe it’s good, and more likely to stay.”

Insurers might find that while the over-55s appear content (for now, at least) to pay premiums, year-on-year, regardless, there’s a deep well of users among this group, too, who would appreciate digital progress. Forty per cent of over-55s use apps to manage their banking, after all, but just one in 10 use digital tools for their insurance.

By comparison, about half of younger people use banking apps and about a third manage their insurance online.

In reality, the over-55s are still ramping up their digital usage – they just started a bit behind.

So, what are the key messages for insurers in all of this?

That younger people are not less loyal per se, but because they are (generally speaking) more used to surfing for products that better suit them, by price, value or relevance, they are more likely to switch unless providers offer relevant added-value tools and services to engage them.

That the over-55s’ loyalty to a provider is not an indication that they would not use and appreciate more digital tools, and that such tools would likely result in users becoming recruiting sergeants through the posting of positive app reviews and referrals.

That digital innovation can redraw the widely perceived image of insurance as an industry that, in Levine’s words, ‘takes and doesn’t give’.

And, finally, that newcomers like Lemonade can, and will, take and hold on to the next cohort of insured unless incumbents respond by skating to where the puck is going.

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OPEN FINANCE: ITALY

The shape of things to come Paolo Zaccardi, CEO of Fabrick, explains what collaboration means Italian-style, and how insurance is benefitting from open finance

As company taglines go, ‘shaping finance together’ is a pretty apt description of what one of Italy’s most innovative businesses is doing across the financial landscape.

Even the company name, Fabrick – to English speakers, at least – purposefully blending ‘fabric’ and ‘brick’, suggests strength in combination and a creative mix.

Fabrick is indeed about co-operation and exploiting the power of many, and it is both mobilising and inspiring Italy’s fintech community. The company describes itself as a B2B2C ecosystem, and its CEO, Paolo Zaccardi, is clear about Fabrick’s role in promoting change and uniting different technology and financial players to create better services.

“Fabrick is an open finance ecosystem, based on an open platform model,” says Zaccardi. “Our mission is to create interactions between banks, insurance companies, large corporations, fintechs, startups and other parties.”

The Fintech District, a Milan-based www.fintech.finance

innovation cluster, was the first Fabrick initiative, and it now has more than 170 startups working on a wide variety of projects. Fabrick is encouraging this type of collaborative and entrepreneurial spirit across financial services throughout Italy and beyond, reinforced by a platform that manages APIs on behalf of service providers and publishes them on the Fabrick Marketplace.

“We enable banks, insurance companies and large corporations to produce and publish APIs,” explains Zaccardi, “as well as use APIs to build services for end-customers. We started in Italy three years ago, and today we’re Italy’s leading platform. It’s a sort of booster for the open banking and open finance model, and we’re adding many different types of service. We now have 1,700 APIs on our platform.”

While Europe’s revised Payments Services Directive (PSD2) has been a great enabler, it’s the breadth and versatility of the open banking movement that excites Zaccardi.

“The possibilities go well beyond banking,” he says. “For instance, insurance and utilities are both spaces where you can combine services. The important thing is to understand what the value is for the end-customers, who are always seeking simple and convenient journeys.”

By making crossovers, you improve

efficiency and customer experience, and all that information can be managed on top of a single, open finance platform.

“The real change is the openness,” notes Zaccardi. “A platform, in general, is multi-sided, and open finance means we have many providers – across the banking space, the insurance space, the payments space, and so on. They all provide APIs that you can combine, in order to improve customer experience.”

Just one example of that is investment provider Moneyfarm (which, incidentally, counts insurer Allianz among its investors and targets the Italian and UK markets).

It is extending its business on top of Fabrick’s platform via API connections.

For insurers, there’s a customer perspective and an organisational perspective, says Zaccardi. Open finance means there are countless customer touchpoints created – and insurance is a sector that usually suffers from a lack of quality connections with end-customers.

“Many large insurance companies are developing a sort of digital wallet,” says Zaccardi, “so they can manage and deepen their customer relationships.

Payments are a key touchpoint. Imagine having tens of millions of customers, and you can provide them with a digital wallet, a sort of banking-lite, to manage payments. It’s a very good way to increase contact and strengthen a relationship.”

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OPEN FINANCE: ITALY One of the first truly dynamic insurance wallets, as opposed to ones used simply as a store of information, is that of US insurtech startup Marble, which aims to keep customers engaged through rewards and notifications, as well as the ability to bundle, compare and keep track of all their policies at a glance.

Zaccardi believes insurance companies can go much further than they are.

“Through the data flow, you can better understand the real needs of your customers,” he says. “You can understand the level of credit that they need, or the level of investment they could have.

Which means you could provide savings and pensions products, among others.

A growing number of companies are now looking to complement traditional insurance products with banking products, all based on mobile banking or on digital wallet solutions.”

Fabrick developed and, until recently, wholly owned, Italy's first and leading challenger, mobile-only bank Hype. It’s now a co-investor, having created a joint venture with open banking platform Illimity – a move Fabrick sees as promoting the open finance agenda in Italy. The Hype basic account gives the option to buy insurance in-app and its premium subscription users get travel, shopping and ATM theft coverage bundled with the account. It’s Fabrick’s own, home-grown case study of what can be achieved with open finance.

“Hype has more than 1.4 million customers,” says Zaccardi, “and it has at least three insurance companies integrated through APIs, so it can provide its customer base with simple insurance products from the likes of Zurich, integrated with the bank’s app. That’s very powerful, because you can embrace several products and have just one customer experience.

“The same with other banks – if you are an insurance company with an API published on top of a platform, you can reach banks that want to provide your product to the end-customer. So, there’s a combination of possibilities between consumers of APIs and producers of APIs that will open up new channels for the insurance companies.”

The Fabrick platform isn’t just about front-end integration. Remodelling products to offer customer-driven, micro insurance with maximum flexibility – the modular approach promoted by Tigerlab

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and others – impacts critical processes throughout the organisation. The nightmare of handling complicated payments and commissions when you have millions of tiny, turn-on-turn-off contracts for cover has to be addressed. In fact, it just wouldn’t be conceivable to offer such products if the modular, third-party technology wasn’t available to make it even work from a process point of view, let alone work profitably. The collaborative nature of the ecosystem that Fabrick promotes means that the close relationship between the API consumer and the API producer – Boot on the other foot: Zaccardi says 70 per cent of incumbents have projects with startups

We provided the engine and Net Insurance worked internally to connect with other kinds of services, such as providing credit during the sales process. It’s important to enable the sales network, so when you’re selling policies, you can integrate other services like these.

“Everything has been digitised, using PSD2 to aggregate information from many accounts. It has real-time information about the payment flow, which helps with reconciliation, providing credit for customers, and onboarding.”

The payment is now effectively invisible, observes Zaccardi, and when you make the payment invisible, onboarding, renewals and other activities are smoother and more efficient, which, he says, boosts both customer acquisition and retention.

Fabrick provided a similar solution for HDI Global, creating a ‘pay by link’ option, based on the API provided by Fabrick, which simplified the payment process across a network of 500 agencies. It enabled end customers to pay in real time, with a choice of payment methods.

“In Italy especially, insurers are very much in favour of collaborating to build better services,” says Zaccardi. “We have data showing that more than 70 per cent of incumbents are beginning projects with startups, or with external actors, in order to create insurtech initiatives and other projects. These projects will become part of open finance because it’s the best way to innovate.”

Customers are driving transformation, says Zaccardi, and insurers must respond to their desire to manage their money better and to switch between accounts, by collaborating to create those freedoms.

Legacy, he says, is no longer an excuse not to because open finance allows for building something external to an existing system, which can then be reconciled to it through easy API integrations.

“Open finance is an unstoppable trend,” says Zaccardi, “and we’re just at the beginning of the curve. We’ll see many more players working together in a way that combines collaboration with competition. The backbone will be open finance and open banking, and the result will be much better customer experience.”

In Italy especially, insurers are very much in favour of collaborating to build better services

which is almost symbiotic – means such disruption (and more, as yet unimagined) is not only conceivable but very much deliverable.

Fabrick’s own core products, offered as ‘packaged solutions’, all revolve around payments. Among its customers for these are Net, a digitally-led, customer-driven provider of micro insurance products and embedded insurance, which distributes through both legacy and challenger banks as well as insurtechs in Italy; and HDI, a global insurer that works through various traditional distribution channels.

“We are optimising the payments value chain and creating an automatic reconciliation between payment collections from customers and the reconciliation in the organisation’s account system,” explains Zaccardi. “Again, by combining different services and digitising, you improve overall service.

“Net Insurance’s goal was to create a single payment management engine.

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OPEN FINANCE: APIs

INFINITE WAYS TO BRIDGE THE GAP Embedding insurance in someone else’s transaction flow can create endless opportunities for large-scale insurers, says Chubb’s Sean Ringsted

The global protection gap is widening. According to one report, it reached US$1.2 trillion in 2019, the chasm between economic and insured losses driven by natural disasters, mortality and health, with Asia and Latin America emerging as the most exposed regions.

But that was before the world was plunged into a risk scenario that was off the scale. As lifestyles and employment practices across both the richest and poorest societies in the world changed as a consequence of the COVID-19 pandemic, underinsurance became an issue for us all. Take the number of people forced into gig work, many for

fast-growing platform companies, who have little or nothing to fall back on when laid off due to illness or injury.

In Latin America, few have had access to the ultimate protection – life and disability insurance, including unexpected funeral expenses, which have hit many families in the current crisis hard.

It was against this background that global insurer Chubb and the world’s biggest neo, Nubank, leveraged API-driven technology to launch a fully digital life insurance offering in Brazil, embedded into the bank’s app last December.

Underwritten by Chubb, Nubank Vida was one of the first to use the integration capabilities of Chubb Studio, the global digital product distribution platform rolled-out by the company three months earlier. Described as ‘insurance in a box’, it aims to simplify and streamline distribution of Chubb’s insurance products through partners’ digital channels around the world.

The Nubank Vida initiative enables quotes, bill payment and account management all to be transacted digitally – basic coverage including natural or accidental death, as well as funeral assistance for family members and living benefits covering hospitalisation for accident or disability.

“The Nubank partnership is a great opportunity for us,” says Sean Ringsted, chief digital officer and chief risk officer for Chubb Group. “It has 40 million customers in Latin America and we’re offering them life insurance with literally three clicks. We’re taking a product you might think is pretty complicated to buy, involving a lot of paperwork, and putting it there in the app, with three questions.”

Such is the power of embedded finance – the ability to provide coverage and protections as a native feature within a product transaction, a user service or as part of someone else’s platform. It has the potential to transform the distribution model and Chubb is an incumbent insurer demonstrating it can be monetised at scale.

Innovation leap: APIs will extend insurance to those with too little or none at all

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The Chubb Studio concept enables the insurer to penetrate the value chain in retail, e-commerce, banking, fintech, airline, telecommunications and many other of its partners’ industries, exploiting the still nascent concept of open finance.

“It provides the foundation for you to layer on additional services, offered at the right place, at the right time: in the case of insurance, to offer products in a way that's seamless and very contextual,” says Ringsted.

“Chubb Studio allows us to pass on our products and services, through an API tech layer to our partners and ride the rails of embedded finance."

While the launch of Chubb Studio signalled a strategic shift towards this new model for the insurer, it had already implemented API integration with third parties, notably through its 2018 partnership with southeast Asia's super app Grab. It began by giving Grab’s driver-partners access to insurance services, including loss of income, per-ride schemes, personal accident policies and motor plans, through their Grab driver app. At the start of 2020, travel insurance, underwritten

by Chubb, was made available to Grab’s Singapore-based customers, too, instantly available from S$2.50 per day for travel to any destination globally. Going forward, the two companies continue to explore leveraging data technology from Grab’s platform, including telematics, machine learning and predictive analytics, to offer insurance solutions personalised to the specific needs of different private-hire vehicle drivers in the region.

The Chubb partnership was announced as part of the launch of Grab Financial, the fintech platform within the Grab ecosystem, which provides, among other things, payment, reward and loyalty services.

“Grab is a very good example of a fast-growing tech company that’s going into other services and verticals,” says Ringsted. “We’re able to put our insurance product straight into the transaction flow for the passenger to say ‘do I want to buy this?’ yes/no and away you go.”

Chubb’s most recent tie-up has been in the Mexican market with another super app, Colombia-headquartered unicorn Rappi. Announced in May 2021, more than 10 million users now have 100 per cent digital access to insurance products and services provided by Chubb. They include mobile phone theft or damage protection, www.fintech.finance

coverage for fraudulent internet purchases and identity theft, as well as home insurance and contents protection.

The key takeaway from these and other initiatives is that they're not simply affinity marketing, where insurance comes with a related product; rather, they are embedded into the user’s experience of that product. And it exploits a key feature of the emerging insurtech ecosystem – the ability to play to ones strengths.

“First and foremost, we’re covering the risk, that”s the differentiating factor for insurers,” says Ringsted. “It takes balance sheet expertise and, because you’re also in a regulated industry, you have to be thoughtful in terms of where and how you offer insurance.”

From the partner and consumer’s perspective, though, it needs to be seamless; it’s comparatively easy to onboard and incorporate payments for an insurance policy into an app, but a truly digital process should also include policy management and claims.

As Ringsted says: “At the end of the day, our promise, as insurers, is that we’re going to be there to pay at the moment of need. We have to make that financial transaction back to the customer, and make sure that is as seamless and digitally integrated as the premium payments.”

The Nubank partnership is a great opportunity for us. It has 40 million customers in Latin America and we’re offering them life insurance with literally three clicks in the app In that, Chubb is among a minority of legacy insurers to have made the most of API technology. As the Open Insurance Initiative (OII), noted in 2019, having collected a significant amount of data on the adoption and usage of APIs from across industry, only 21 per cent of incumbent insurers were directly providing access to APIs, with insurtech startups unsurprisingly leading the way in providing access to services and products.

At the time, founder of the OII Fouad Husseini commented: "The overall picture is not a pretty one. The focus of this

accessibility is on the distribution of simple insurance products with 78 per cent of APIs doing one thing, albeit doing it very well, serving products and concluding a sale completely online. Only 10 per cent of APIs allow for claims-related functionality, which clearly implies that an important element of the service still relies on offline intervention."

Further research showed that, globally, the largest number of available open APIs were auto insurance related (25 per cent), these providing traditional as well as usage-based insurance and roadside assistance solutions. The second largest segment was made up of travel insurance and parametric flight delay insurance (20 per cent), with life insurance (17 per cent) ranking third. It was also noted that, despite an ever-expanding number of insurtechs, ‘the pain of point-to-point integration is continuing, so is the cost and time expended in receiving regulatory approvals and so has the absence of truly disruptive platforms that can build financial ecosystems of significant scale’.

But that was before the launch of Chubb Studio. When it comes to leveraging APIs at scale, Chubb has few peers, giving it a distinct advantage over newcomers and potentially a decisive role in extending financial services to those who historically have had no or only limited access to them.

"When you go to Southeast Asia, as an example, there’s 400 million people, yet only 100 million have full access to banking services,” says Ringsted. “Embedded finance will open up a new cohort, and bring banking to those people who previously couldn’t access or afford traditional banking. And, as you open up those new pools, they will need insurance products."

New pools, like that growing cohort of gig economy workers mentioned earlier.

They are an obvious potential target for health and life cover, given, as Ringsted says, ‘they have very unique needs that require insurance and we can respond to that’, especially since the digital tools to provide health services have also changed: “Think of telemedicine, and the ability now to access a doctor remotely, quickly, and cheaply, and being able to bundle all of that up with insurance.

“Regulators are still figuring out how to manage embedded finance, but I think the opportunity, in terms of how we provide products and services that allow businesses to increase the size of their pies, is endless.”

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IDENTITY VERIFICATION: INCLUSION

Aglobalchallenge Digital identity verification provider Truilioo set itself a big task in ensuring everyone in the world can participate in the digital economy. Now that seems more urgent than ever. Hal Lonas and Garient Evans discuss inclusion, trust and the impact of a crisis-accelerated shift to online services With more than a billion people lacking any legal form of identification, and therefore denied access to even the most basic financial services, the post-pandemic ambition to ‘level up’ society leaves many policymakers unequal to the task, however virtuous the ambition.

And, of all the available financial services, insurance is increasingly being seen as a critical tool for not only reducing the limitations faced by many people who are anonymous to the system; but also for helping those who have emerged from poverty to manage their risk and thus, hopefully, never fall back into hardship.

During the pandemic, the absence of such a safety net has been the painful reality for millions, especially in countries without public healthcare that’s free at the point of delivery, forcing families with no life or health cover to pay for treatment out of inadequate savings (if they have them at all), or else stare into a hungry abyss following the loss of a breadwinner.

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It was precisely to avoid such human catastrophes that Canadian regtech Trulioo began building a digital ‘trust network’ back in 2011. Its mission was to ensure that everyone was someone in the eyes of the world – and, specifically, of financial institutions – by creating an online digital identity from multiple, verifiable data sources that are dynamically updated.

With more accessible personal information comes more ability for people to control their economic outcomes, it argued. They would be better able to access the resources they needed to prosper on an individual level, and this would unleash new levels of growth on a country-wide scale. Put another way, it was talking about the levelling up of the global economy, long before the phrase became a vote winner.

In the 10 years since it was founded, Trulioo has refined the technology with which it hopes to achieve its purpose, and expanded the territories in which it hopes to deliver it. It now provides real-time

identity verification for five billion customers and 330 million businesses, in nearly 200 countries, through its GlobalGateway identification platform – it’s become the world’s largest identity verification marketplace.

In 2020, Trulioo was listed among Canada’s 100 fastest-growing companies, with an annual growth of 503 per cent. But the challenge – or, looked at through an investor’s lens, the business opportunity – is still huge. McKinsey forecasts that the identity verification (IDV)-as-a-service industry will grow to US$20billion by 2022 with a total addressable market growth of nine-to-15 per cent annually.

Throw into that mix the huge and many permanent lifestyle changes forced upon the world by the COVID-19 pandemic, and the result is a demand for digital IDV that has never been greater.

In early June, Trulioo completed a $394million Series D round, putting it at a $1.75billion valuation, led by TCV, one of the world’s largest growth equity firms, www.fintech.finance

with participation from existing investors.

It gave Trulioo the capital to accelerate its goal to become an end-to-end identity platform, and it made two key appointments recently, to deliver it.

Garient Evans joined as senior vice president of identity solutions, and Hal Lonas as chief technology officer.

Evans, who has more than 20 years of experience in credit, identity, fraud, document verification and compliance, has been brought in as Trulioo continues to develop ways to deliver even smoother digital identity verification. Meanwhile, Lonas, who has been a technology leader for 25 years, now heads up all aspects of Trulioo’s technology development, ensuring the adaptability of its technologies around data, privacy, security and the expanding ecosystem of identity verification, with a particular focus on the use of biometrics.

Joining Trulioo is never just a career move: you have to buy into its mission to democratise the digital economy.

And Evans says that aim for him is ‘very personal’, even if the scale of what’s left to be achieved is mammoth.

“It’s not going to happen in my lifetime,” says Evans, “which means that Trulioo’s got a lot of work ahead!”

For Lonas, this particular moment in history, though, represents a critical opportunity to catalyse change.

“The pandemic has really accelerated us into the future,” he says. “The technological transformation of businesses is accelerating, and we’re in the right place, at the right time, to really help them and individuals take advantage this new digital economy.”

A REAL MELTING POT For insurance, the pandemic prompted a spike in interest in health insurance and life cover, but also a shift towards usage-based insurance as habits changed – a move towards having a number of smaller policies for specific risks that signals a large uptick in the expensive (for the insurer) and time-consuming (for the consumer) process of onboarding and mandatory know your customer (KYC) and other regulatory checks.

The roots of mandatory identity verification in financial services were laid down by the USA Patriot Act in 2001, which sought to prevent, detect and prosecute money laundering and the financing of www.fintech.finance

terrorism, and spawned similar KYC and anti-money laundering (AML) laws globally. As e-commerce developed, strict privacy legislation was also introduced by regulators to protect consumers’ personal data from being misused or falling into criminals’ hands.

E-commerce gave rise to the emergence of big techs like Amazon, which changed consumer expectations forever by offering fast, secure and convenient onboarding to the point where every business operating in the digital economy must now up their game. And, as Evans points out, their arrival has also fundamentally changed financial services.

“Now the tech providers are financial services,” he says. “In 2017, Amazon lent US$1billion in cash advances to its merchants. So the lines are blurred, between companies that were strictly technology, or e-commerce, or marketplace; now they are clearly participating in this market. Walmart even applied to be a bank about 15 years ago; they were denied that, but they have continued to offer financial services.

The technological transformation of businesses is accelerating. We’re in the right place, at the right time, to help businesses and individuals take advantage of this new digital economy Hal Lonas

“And what all that has meant is more choice for consumers. Gone are the days when someone sticks with the bank where they opened their first account; now people have many relationships, maybe even dozens of relationships, spread across their financial lives.”

Evans suggests that the way financial institutions can compete with that is through a combination of strategy, technology and talent.

“For me, strategy is the intersection between customer need and product value. Some institutions are so obsessed with managing risk, that they’ve made their

products really hard to get hold of; while others just have horrible technology that doesn’t allow the match between product value and customer need. But getting the strategy right is nearly impossible unless you have a flexible core technology.

“Gone are the days of set it and forget it; those who are responsible for user experience should view their work as being highly scientific, where they’re constantly testing resources, features and capabilities. If the underpinning technology doesn’t allow for that type of experimentation, the right strategy is going to be nearly impossible.”

Institutions have at least acknowledged the need for customer-centricity.

“When it comes to talent, the largest bank in the US has more than 800 job postings for individuals with the term ‘user experience’ in their profile, which is roughly 10 per cent of all of their openings,” says Evans.

“The demand for talent to be able to drive a better customer experience, is just one sign of how financial services view this as an area of competition and core competency.”

But there is still a tension between build, buy or partner in order to innovate, he adds.

“Traditional banks are buying services from solution providers like Trulioo, where almost the entire onboarding experience is outsourced via APIs. You have some institutions that have tried to build their own offerings, with mixed success, and then you see some traditional institutions, like Goldman Sachs, having a tonne of success building things on their own, as with [its digital bank] Marcus.

There are others that have just abandoned the effort to have a completely digital experience of their own.

“So, what you can expect to see is a tremendous amount of merger and acquisition activity playing out over the next few years, where traditional institutions that can’t do it themselves buy players that are truly innovative.”

SIZE DOESN’T MATTER Trulioo, meanwhile, continues to plough an independent furrow, exploring every opportunity for contextual, proportionate, secure and fast IDV – and not just for large organisations. Authenticity and fraud prevention is just as important for a start up or small business, which arguably has more to lose and much to gain from digital verification software – smaller players in underbanked markets in particular.

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IDENTITY VERIFICATION: INCLUSION Trulioo recently announced that it had developed facial recognition and document verification technology to enable smaller businesses to have the same level of online protection, and offer the same level of access to customers, as large corporates. The new features allow for ID documentation verification and biometric authentication for an added layer of security. This enables small and medium-sized enterprises (SMEs) to check the authenticity of government-issued ID documents and use facial recognition with liveness detection to ensure the person creating the account matches the photo on the ID document.

That technology is likely to play a major part in Trulioo’s drive to capture more business in the US, where documents like

progress of the Indian Government’s Aadhaar project in capturing the biometric details of 1.3 billion people since 2009.

“India’s leading the way, and I think we can expect that kind of thing to become more prevalent, globally, in the future,” he says.

That raises another set of complicated questions about the storage and use of such data, and who owns the key to it.

The success of the Aadhaar project was underpinned by trust, which was called into doubt during the pandemic when the data collected was linked, unbeknown to the owners of those identities, to another programme involved in the vaccine roll-out.

Trust is one of five vital components identified by Trulioo for creating a successful digital identity ecosystem, the

We don’t think there’s a one-size-fits-all approach, so we explore things like biometrics, bank ID, device intelligence and document verification, to meet different needs Garient Evans driving licences, which vary hugely from state to state, are still commonly used for identity verification.

“Just look at the proliferation of documents in the States,” says Lonas. “We have been able to take care of that for our customers by building technology that makes a complicated set of connections seamless for them.”

Lonas is convinced that biometrics used for digital identification will become commonplace globally, partly because of the pandemic accelerating inclusion.

In a recent Trulioo blog, he wrote: “The development of biometric-based, digital and electronic identity and document verification services, has been critical in providing a means to effectively identify people online, enabling them to perform digital tasks in a safe and secure manner while operating remotely.

“Unsurprisingly, we have seen a large increase in demand for those services, with this trend likely to continue in the future, and, with it, the need for ownership and source of identity – something everybody has a right to.”

There is, however, a question over whether ‘identifying the world’ can be achieved without state-backed intervention. Lonas acknowledges the

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others being simple onboarding, user experience, security and fraud resilience.

“Everybody wants that low-friction, high-confidence, high-trust experience, but then sometimes that creates contradictions in the space,” explains Lonas. “Where do we set the dial to ensure the lowest friction with the highest confidence and trust?

Making sure all consumers feel comfortable and confident with not only the onboarding experience, but transparency around the security of their data and where it’s going, is a balancing act. They want to know they are dealing with a trusted partner.

“In future, this is a perfect opportunity for artificial intelligence (AI) to help us process the amount of data we need, and spot the subtle signals that, amidst all the noise, make sure we identify people correctly.”

Evans agrees that the use of AI and machine learning will only expand as the need for effective data processing and analysis becomes ever-more critical.

“I’ve heard the quote that data is the new oil. And, much like oil raw from the ground, it needs to be treated in a particular way to make it valuable,” Evans says. “It’s not enough to have fantastic data; you need to be able to derive actionable insights from it. To prevent money laundering and terrorist actions, and accurately identify individuals is a never-ending exercise.

“To meet compliance requirements, a financial institution must be able to mine data and transactions and then investigate and report on anything it finds that the laws say is has to do something about.

“Cutting-edge institutions will bring in onboarding experts and work with third parties in the identity space, like Trulioo, to secure customer interactions and ensure their compliance. These organisations rely on us to test new technologies and new capabilities, and bring them the best possible solutions.

“They realise that building a network of really advanced global technology like ours would take them a decade to do, as it did us. We don’t think there’s a one-size-fits-all approach, so we explore things like biometrics, bank ID, device intelligence and document verification, in order to meet different needs and we’ll continue to be a flexible marketplace for these solutions.”

That’s one mission accomplished, then, even if identifying the entire world does take a while longer.

Everyone is someone: And Trulioo aims to demonstrate it

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IDENTITY VERIFICATION: GEOLOCATION Insurance has, for many years, been viewed as a necessary, though largely unwelcome, commodity that consumers only interact with when they absolutely have to – a reality that resulted in considerable complacency among providers.

However, trends are converging to change that, and not least among them are demands from an increasingly savvy, and progressively younger, customer base. That’s coupled with a challenging economic marketplace, following a global pandemic that has forced businesses of all types to improve efficiency and get better at acquiring and retaining users, and offering an overall better experience to them. On top of that is the need to manage the growing threat of fraud.

Here, Barley Laing, MD at global identity and data verification service provider Melissa’s London office, describes how its pioneering development of geocoding technology is supporting this cultural shift.

Founded in 1985, Melissa now serves 30,000 customers worldwide, including heavyweights like Bank of America, Citi, Aviva and Volvo Financial Services.

It provides a range of tools and services that offer alternative solutions to the

Geocoding technology is helping improve customer service, reduce risk and improve efficiency for insurers.

Barley Laing, MD at global ID and data verification provider Melissa’s London office, explains how challenges of anti-money laundering (AML), fraud protection and the identification of politically-exposed persons, among other enterprise-wide risks. It does this through age verification, national ID services and contact data validation. However, it’s Melissa’s cutting-edge development of geocoding technology that offers a potentially exciting new solution to a number of longstanding conundrums in insurance.

THE INSURTECH MAGAZINE: Can you describe Melissa’s geocoding technology and why you’re so excited about it?

BARLEY LAING: It’s the process of appending geocodes, or longitude and latitude, rooftop geo-coordinates to a

verified postal address. Anywhere in the world that has a verified postal address can be geocoded.

Address is part of the fundamental background data for insurers, and geocodes enable them to plot exactly where a property is and, in doing so, helps them assess the different types of risk that might apply to contents or valuables kept there. They can then come up with a very precise premium that suits the location.

Taking the UK as an example, there are different geographical factors, such as flooding, cliff erosion for coastal properties, or high-crime-rate areas.

Using our very specific co-ordinates, insurers can precisely judge those risks.

As a global operation, we can also apply geocodes to things like volcanic eruption, which we’ve seen in the past few years in Italy and Iceland, for instance. Or to places experiencing excessively high winds, even to areas where there is armed conflict.

Large-scale, global insurers might run geocoding quite frequently, to establish the changing nature of risk and adjust their insurance policies and premium profiles accordingly.

Industries like insurance used to apply a one-size-fits-all approach to premiums.

Spoton!

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Now, the markets are fracturing, becoming more focussed on individuals, and there’s a lot more personalisation going on.

So, using geocoding to understand the geographic factors better, also enables insurers to market certain types of policies, and secondary insurance products, to other people in that cluster.

TIM: What implication does this more accurate, automated process have for know your customer (KYC) and anti-money laundering (AML) compliance compared to traditional onboarding practices?

BL: You have people applying for insurance policies many, many hundreds of thousands of times globally at any point in time, and it’s critical, at that moment of engagement, that the insurer firstly makes the process as simple as possible for the customer.

Any automation they can apply, at that touchpoint, will help ensure the customer ends up taking a policy.

A good example of this kind of automation is auto-address lookup. Most people now use mobile devices to enter address information, and 20 per cent of data that is entered online has inaccuracies.

By automating the process, you prevent such mistakes. The user is asked to put in a postcode and is presented with the best matches of addresses for that postcode, then selects their address from a dropdown menu, which is auto-populated into the web form. This is not only really important for insurers, but the customer journey is also improved because these automated tools reduce the number of keystrokes a customer has to make by up to 70 per cent.

Even then, though, you’re only capturing verified information at the first point of contact, then applying that to the rest of the lifecycle. The issue insurers, like other markets, face is that data degrades over time. People marry, move, change jobs, die, and all of these elements of data that underpin their insurance policies, are in a constant state of flux.

Ninety per cent of organisations tell us that data quality is a real issue for them.

They may have captured good data to begin with, but we expect two per cent of that data to degrade every month, and, when you round that up over the course of a year, you get to a point where nearly a quarter of their database may have inaccuracies in it. If the data is inaccurate, what does that mean for the policy that is www.fintech.finance

still live with that customer? Is the risk profile the same as when they onboarded?

Onboarding with strong KYC and AML processes is an absolute necessity, but the key for insurers is to make sure they refresh their data over time, as often as they feel is reasonable for their particular business.

This can help address fraud, too. When someone speaks to an insurer, they have a lot of qualifying questions, and companies are very keen to establish that the information they have gathered is correct.

Geocoding, applied to a verified address, helps to limit the potential for fraud, because knowing precisely where a customer is, on a geographical basis, allows the insurer to determine factors that an individual may not necessarily discuss during a phone call, or on a web form.

TIM: What about the complexity around different regulatory onboarding requirements in different jurisdictions, like BaFin in Germany?

BL: Geocoding is a big win in terms of this. There are probably four billion addresses worldwide, and that information is changing on a second-by-second basis.

TIM: What other advantages are there for the business in keeping data reviewed?

BL: Data is one of insurers’ most valuable assets, and it takes some looking after.

As I’ve said, it’s not just about the point of entry, but also the ongoing improvement, correcting, and making sure their customer database is as fresh as possible.

This means they’ll have each customer’s up-to-date postal address, their verified email address and phone information – effectively a multichannel way of accessing their customer, so they can reduce their risk of losing them by communicating with them in the way and at a time the customer wants them to.

With a precise address, you can also add other determining factors, like demographics, and pull out, from a customer name and address, if, for example, they’re married, if there are children in the family, and get an understanding of the household income.

All of those things can be good ways of assessing what potential there is for sales of additional financial products and services.

TIM: And are there benefits for customers, too – now and in the future?

BL: We’re seeing insurance companies move towards offering more than just insurance products, and the more they understand their customer, the better able they are to do that appropriately. They can improve that customer contact by applying different suppressions to the database. If companies apply movers and goneaways to their address database, they can keep in contact with them, and hopefully still provide them with insurance policies.

But it’s also a question of not damaging the customer relationship and brand reputation. There are things like deceased persons flagging, for instance. People pass on and it’s really important – to protect the family’s and friends’ feelings as much as anything – that insurers don’t make the So, while insurers can buy some address data and build a system in-house, working mistake of continuing to try to communicate with that person. They can only ensure that with a specialist like Melissa can ensure doesn’t happen by applying the correct postal address data remains up-to-date. suppression technologies, and that can only Melissa has an encyclopaedia of more be done if they have the correct address than 240 country address formats (all the data, with a geocode, in the first place. countries in the world). We multisource All of these things enable firms to operate our reference data for each of them and as efficiently as possible, ensure a better enable address standardisation between customer experience and make each insurer those different formats. We constantly update the information, so insurers are only more competitive in their market. After all, there are plenty of alternatives out there ever accessing the most contemporary for customers to look at, so insurers need to data, allowing them to get on with selling be on their front foot. It’s no good relaxing. policies and keeping customers happy.

There are probably four billion addresses worldwide, and that information is changing on a second-by-second basis… if the data is inaccurate, is the risk profile the same as when a customer onboarded?

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DLT: INTEROPERABILITY

RE-INVENTING THE VALUE CHAIN John Carolin is CEO of B3i, an industry initiative working to mutualise the benefit of distributed ledger technology.

Here, he explains how it’s already creating real business value in reinsurance

The insurance industry is in a race to modernize and make best use of new digital technology in order to respond effectively to current external and internal challenges.

But is it leveraging the technology to its full potential?

The list of external challenges the insurance industry is currently facing is undoubtedly quite long. It ranges from COVID-19, volatility in financial markets and investments, through to an increasing frequency and severity of natural catastrophes. However, there is a fundamental, internal challenge that persists: unnecessarily wasteful administration. This has resulted in admin costs as a percentage of revenue increasing by 40 per cent in the insurance sector between 2009-2018, while other industries have been able to cut costs by 20 per cent during the same period.

Where does this admin problem stem from? Players in the risk transfer industry have made incremental investments to improve and to digitise their internal processes and procedures. At the same time, business complexity, including transactional volumes and data requirements, has grown significantly. In order to place and administer a single

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contractual agreement among the various parties involved, manual processing, recalculations and reconciliation still account for a significant proportion of the work carried out; as much as 35 per cent of operational costs are back-office admin. Despite incremental improvements being achieved, the industry has not yet reached, at global and wide scale, a satisfactory level of process automation, and remains still strongly bound to manual processes.

Against this background, it’s clear that companies’ individual digital transformation strategies will not get us to where we need to be as an industry.

Instead, it is vital that we transform the common foundations of the industry and thereby fundamentally change insurance operations, end-to-end. This is something that cannot be achieved by insurers or intermediaries acting alone. So which technology to choose in order to optimise and automate market-wide processes, to generate significant savings in time and cost?

Companies’ individual digital transformation strategies will not get us to where we need to be as an industry… it is vital that we fundamentally change insurance operations, end-to-end Various market players decided to form B3i, initially started as an industry consortium, which was later incorporated as a for-profit company, to realise the potential of blockchain and distributed ledger technology (DLT) in the insurance industry. The clear objective set by the shareholders, which include 21 major insurance companies across www.fintech.finance

the world, was to develop standards, protocols and a network infrastructure to remove friction in risk transfer.

In 2016, research commissioned by PWC highlighted the extent to which DLT could radically transform the reinsurance and retrocession value chain. Reinsurance expense ratios are normally five to 10 per cent of reinsurance premiums. However, due to admin efficiencies, reduction in claims leakage and fraud, PWC estimated that 15 to 25 per cent of expenses could be removed with a DLT solution, which could amount to an industry-wide saving of $5-10 billion. These findings were broken down further by BCG research in 2018, stating that detecting risk concentration automatically could improve combined operating ratios by around one percentage point and automating reinsurance processes a further four to five percentage points.

Promising figures, and we at B3i wanted to understand the implications in more detail. As a first step, we tested assumptions around scalability of the technology, focussing on Cat XoL and the reinsurance placement. Then, in June 2019, we conducted a testing hackathon with brokers, insurers and reinsurers and asked participants to set up real scenarios to stress test our reinsurance prototype and provide feedback. Testing revealed that by reducing manual entry and reconciliations, up to 30 per cent of administration cost savings could be achieved across the end-to-end reinsurance value chain.

Already in October 2019, we were able to provide a group of 20 insurers, major brokerage firms and reinsurers with the opportunity to participate in complex placements, which were conducted as part of 1/1/20 renewals or as a re-creation.

This parallel approach enabled direct comparison of process efficiency and proved that DLT was enterprise-ready.

Participants involved in the renewal placements reported various business enhancements, ranging from reduced administration, increased auditability, to improved workflow efficiency, better interactions with the business network, higher contract certainty and better sharing of sensitive data. www.fintech.finance

Following another year of continuous engagement with our customers, we released major enhancements to B3i Re (B3i Reinsurance, our first application built on top of the B3i Fluidity platform) in September 2020. Recent validation with customers anticipates that B3i Re will have a positive impact on customer satisfaction, contract certainty, data quality, compliance, security, auditability, fraud detection and better use of business resources. Version 2.1, released in April 2021, brings further post-placement functionality, introducing claims handling for the first time.

B3i continues to work closely with industry participants to ensure new functionality is developed and, for the next release, broadening the type of business that can be placed and administered on the platform, extending functionality to include settlement, and enabling the generation of legally bound contracts on ledger.

Together with customers, B3i sets out to prove the businesses benefit of the B3i Re application and protocol, extending this approach to derivative products and new projects. The growing codebase of reusable components within B3i’s network and DLT platform Fluidity, and significant reductions in the cost of network infrastructure is accelerating the delivery of functionality across a number of customer projects.

BUILDING AN ECOSYSTEM By creating the protocols to facilitate efficient reinsurance administration, we developed the underlying technology that enables us to provide an ecosystem that facilitates the rapid development of third-party applications, which can interoperate with other applications on the network. B3i’s Fluidity is a platform and network that enables an ecosystem supporting the development, distribution, monetisation and operation of interoperable applications. Within this ecosystem, we have developed a risk transfer language, which provides a class library of common insurance domain objects on which all applications can be rapidly built for interoperability.

This enables multiple firms to better collaborate than on a stand-alone basis and without the need to build every application from the ground up, thereby redefining boundaries across industries.

Furthermore, the ability to connect with other industries is key to reaching new customers, developing new revenue streams and increasing market share.

Altogether, more than 40 companies are involved in B3i as shareholders, customers and community members.

There has never been a better time to collaborate in order to transform insurance business and to establish a functionally-rich ecosystem for the benefit of all stakeholders. There is a rising demand to enable more integration, to increase efficiencies and to improve collaboration across different ecosystems. By working together with shareholders, partners and members of the growing B3i network, we can identify and address industry problems and drive forward the adoption of relevant DLT-based solutions at scale.

By mutualising blockchain and DLT for the benefit of the whole industry, we aim to generate significant savings in time and cost that cannot be achieved by insurers or intermediaries acting alone.

SVOT IS KEY

Having a reliable single version of the truth (SVOT) is a game changer for brokers, insurers and reinsurers.

With DLT, parties to a transaction have access to the same information, at the same time, allowing real-time updates which all transacting parties can immediately see.

It means we no longer need to focus so frequently on synchronising various systems. Instead, each contract counterparty can operate with complete trust in the synchronised data, as it cannot be altered without all stakeholders being made aware.

This increased level of trust helps us remove data inconsistencies and the need for reconciliations among and within organisations, ensuring accurate and consistent data sharing between upstream and downstream functions. Any changes are supported by a full audit trail generated by DLT. Structured, trusted and automated data via a DLT infrastructure provides the opportunity to generate value and enables end-to-end business model transformation.

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DLT: CRYPTO INSURANCE

Risk on the radar Florian Graillot, insurtech influencer, investor and Founder of specialist venture capital fund AstoryaVC believes the sector is a long way from reaching its full potential It’s said that if a startup isn’t listed on the Astorya database of European insurtechs, it probably doesn't exist.

Florian Graillot, founding partner of the early-stage insurtech-focussed fund AstoryaVC will take that!

Launched in October 2017, Astorya's remit, including its Astorya.io automated scouting tool, has been to monitor the local startup industry and help spot emerging trends in that space.

Describing itself as the largest search engine for insurance and banking technologies in Europe, Astorya.io has identified more than 3,400 start-ups to date and publishes data including technology description, fundraising, team and founders’ information, business www.fintech.finance

partnerships and whether a startup is active or dead. It looks for embedded and open insurance businesses, those operating alongside the insurance value chain and, importantly, those taking a punt at new risks.

Astorya.io throws a spotlight on an under-sung member of the fintech family, which, Graillot believes, is a long way off reaching its full potential. Out of a total of just over €12billion in VC backing for European fintech startups during 2020 (according to Crunchbase), Astorya’s monitoring shows just over €600million was targeted at insurtechs – and a big chunk of that (€90million) went to one company, the UK’s Bought By Many. Yet the potential to transform a sector that has lagged banking in the transformation race by some degree is huge.

The apparent lack of investor activity is a source of disappointment for Graillot.

“In Europe, the insurance market is worth around $1,300billion of premium – having even one per cent of that, you’re already a huge company,” he says. “So, it should be a more attractive market.”

One reason it isn’t, he thinks, is that there’s no obvious insurance cluster on which to focus attention. There is no equivalent for insurtech of the London fintech ecosystem, for instance.

Rather, there are several ‘hubs’ each only comprising a handful of operators who share a city or country purely by accident of birth.

“Take Germany. There is Munich, with Allianz and Munich Re, and Cologne, with Köln and mutual Tier 2 players. In France, it’s the same; you have a few big players in Paris; most of the mutuals are in Lyon. So there is no one hub with all the players that could maybe drive innovation in that space,” says Graillot.

Neither has there been the hunger to create one – at least, not by the major institutions, who, until now, have not felt the same imperative as banks to find new revenue streams.

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DLT: CRYPTO INSURANCE Now that open banking has released the first open finance innovators from the stalls, though, that could change rapidly as providers seek to embed insurance services in their own offer.

In January, UK challenger Revolut teamed up with Chubb to broaden the range of insurance available through the bank’s developing ‘super app’, having partnered with insurtech platform Qover to provide embedded insurance for all its account holders the previous month.

German neobank N26 announced a partnership with Simplesurance in May, beginning with coverage for customers’ smartphones, which can be purchased, managed and for which claims can be initiated within the N26 app. Austria’s Raiffeisen Bank recently partnered with bancassurance platform Bsurance to offer

Eyes on the prize: Could crypto insurance be the next winner?

usage-based accident cover for customers on their way to the ski runs, giving them the ability to pay from their bank account through the Bluecode app.

Graillot watches the growing enthusiasm for embedded insurance closely. But, as an investor, what really excites him is genuine product innovation, something legacy providers, who dominate with often mandatory, commoditised products, are, by and large, not interested in developing themselves, he says. It’s what led AstoryaVC to back Sesame IT, a French deep-tech cybersecurity startup, which ensures the detection of cyberattacks on critical networks, and Wetterheld, said to be the first company in Europe offering easy-to-purchase, personalised weather insurance for farmers and others.

“Innovation is one strong pillar in our investment thesis,” says Graillot.

“Competition among these kinds of products is limited, but the challenge then is to have a market big enough to make

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money out of them, and be able to build a strong company… that’s the first issue.

The second is that there is no historical data on which to base the risk analysis – 13 years ago, for instance, Bitcoin didn’t exist.

Insurance companies don’t have the data around cryptocurrency, which means they don’t have a competitive edge in that market. And when it comes to accessing external data, new datasets, and gathering them together in one place, startups are more agile than corporates. The last point is that all this requires a lot of technology.

Attracting tech talent is more difficult for a corporate than for a startup.

“For those three reasons, we think that new risk is very exciting, hence our investment in this space.”

Of all the opportunities that currently have his investor antennae wagging,

protection if their wallet is hacked. Only two products have emerged within the last year, even as the pandemic fuelled another crypto stampede: Coincover Theft Cover, created by Lloyd’s syndicate Atrium in conjunction with Coincover, to protect against a broad scenario of risks, including hacking; and a crypto-denominated cyber insurance policy placed by Boston-based insurtech startup Breach with CoinList.

Coincover was set up in 2018 to establish an industry safety standard for cryptocurrency, which demonstrates an organisation has a superior level of compliance and business recovery arrangements in place. Its Theft Cover policy will be available to investors dealing with crypto firms using the Protected By Coincover mark. The policy incorporates a dynamic limit that increases/decreases in line with the price changes of the crypto assets, meaning the insured will always be indemnified for the underlying value of their token, even if this fluctuates over the policy period. It is backed by a panel of Lloyd’s insurers, including TMK and Markel.

The CoinList cover was made possible through a partnership between Breach and UK insurtech Nayms, a platform that allows cryptocurrency investors to reinsure crypto risk through insurance smart contracts.

In Europe, the insurance market is worth around $1,300billion of premium – having even one per cent of that, you’re already a huge company insuring cryptocurrency losses is the most intriguing and potentially one of the most valuable, says Graillot.

Losses to fraud in this space are becoming endemic and progressively bigger. Indeed, the Chainalysis 2021 Crypto Crime Report noted for example that a cybercriminal syndicate called the Lazarus Group is believed to have stolen more than $1.75billion worth of cryptocurrency in the time it has been active. Most recently, it was reported to have pulled off the biggest heist in the short history of cryptocurrency, transferring the equivalent of $281million (at the time) from the Australian KuCoin exchange in 2020. Although no investor lost out on this occasion as the majority of the funds were recovered and the remainder reimbursed by KuCoin under its own business insurance, for the vast majority of ordinary traders there is no

That cover is now available is a welcome development, given the potential for personal losses. But as crypto goes mainstream, becoming part of the business model for many ordinary companies, with financial institutions increasingly seeing the usefulness of cryptocurrency as a regular asset, Graillot argues there's a prima fascia case for more insurtechs with deep data capabilities to help mitigate the risks.

“Most of the companies we see in blockchain, crypto, DeFi, and so on, are to do with pure banking," he says.

“While these crypto insurance markets are at the moment still very limited, compared to others, the more value you have in that ecosystem, the more there is a need for insurance. Based on the market cap of these cryptocurrencies, and the poor regulation around them, I think this is a huge opportunity.” www.fintech.finance

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