ISSUE#8 bucksThe are in Buckeye!big Lloyd’s ● Vitesse ● Instanda ● CLARA Analytics ● YuLife ● Zego ● Kita Pie Insurance ● Duck Creek Technologies ● Omaha National ● MIS ● Insurtech Insights INSIGHTS FROM CAPITAL HILLS? How Future50 America’s rising stars view the funding challenge TAKEPARTNERYOUR InsurTech Scout’s on a matchmaking mission SEEINGBENEFITSTHE The digital reinventinnewcomersgworkers’compensation IT’SWHERECREDITDUE marketsunlockinsuranceLeveragingtocarbon JobsOhio’s Ron Rock on why startups are heading Midwest... NORTH AMERICA FOCUS
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Speaking of a new and better way…
Derisking offsetting
Ohio is committed to business development and innovation across the financial industry. Ron Rock, Senior Director of Insurance and Insurtech at JobsOhio, explains how state enterprise is targeting this increasingly important part of it
39 Stars in their eyes
36 At the eye of the storm McKenzie Intelligence Services, reveals how its Global Events Observer is changing the way risk is perceived and managed, as catastrophic events become more common – and costly
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Employment-based insurance is the most common private health coverage in the United States. And it’s where tech is proving key to bringing down premiums and improving benefits
That’s a pretty stark warning to any insurtech that benefitted from the crazy funding rounds of the last two years that they must properly focus on the basics.
Zego, the UK’s first insurtech unicorn, took the road less travelled when it started offering usage-based vehicle insurance to gig workers. The market’s getting busier, but it’s still out in front
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What’s the landscape like in the US for intrepid insurtechs heading West?
Last issue’s spine tingler, 'Never be limited by other people’s limited imaginations', is a quote from Mae C. Jemison, engineer, physician, former NASA astronaut and the first black woman to travel into space.
Could embedded insurance help address the exceptionally low rate of pet protection in the UK? Duck Creek Technologies explores the potential A thoroughly modern mobility
One insurtech that’s clearly proved its worth is Branch Financial, one of a growing
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30
As Lloyd’s of London prepares to roll out a new claims settlement platform across its delegated authority business, we talk to the payments company that architected it
41 A job well done
There are more insurtech solutions available than ever before, but if you’ve scaled to the point at which they become useful, how do you choose? Instanda, offers advice
number of American insurtechs that has eschewed the tech strongholds on the coast to build its base in Ohio. In the teeth of the US experiencing its highest inflation in decades, Branch raised $147million in June and officially became a unicorn.
Insurtech Insights canvassed Future50 America insurtech finalists and some friendly VCs to come up with the Top 6 Tips for navigating a changing investment landscape
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ISSUE #8 2022
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4 24
4 Finding Mecca in the Midwest
Climbing ‘Capital’ Hill: The best strategies for investment success
Sue Scott, Editor
On page 4, we ask Ron Rock, JobsOhio’s senior director of insurance and insurtech, why the state is on course to do more VC investment in the sector this year than last. Perhaps it’s because startups there take good advice. Rock says sometimes an insurtech 'needs to come down to earth, take stock, and make adjustments’ if it’s to jump off that shelf to investors.
Clearspeed voice analytics represent a quantum leap in risk accuracy for insurers. How is it achieved?
At ITC Vegas this month, a main stage event will interrogate experts on what makes an insurtech an attractive investment proposition. Maybe the answer can be found a 29-hour drive east.
Collins concludes that it’s not that investors aren’t spending, but – just like many cost-conscious consumers now on both sides of the Atlantic – they’re standing infront of shelves, packed with choice, and scrutinising hard what’s value for money.
ffnews.com Issue 8 | TheInsurtechMagazine THEINSURTECHMAGAZINE 2022 ISSUE #8 All Rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying or otherwise, without prior permission of the publisher and copyright owner. While every effort has been made to ensure the accuracy of the information in this publication, the publisher accepts no responsibility for errors or omissions. The products and services advertised are those of individual authors and are not necessarily endorsed by or connected with the publisher. The opinions expressed in the articles within this publication are those of individual authors and not necessarily those of the publisher. EXECUTIVE EDITOR Ali Paterson GENERAL MANAGER Chloe Butler EDITOR Sue Scott ONLINE TEAM Lewis Johnson-Pitt PRODUCTION Taylor Griffin HEAD OF CONTENT Douglas Mackenzie CONTACT US ffnews.com DESIGN PRODUCTION& creativemedia.co.ukwww.yorkshire ART DIRECTOR Chris Swales PHOTOGRAPHER Jordan “Dusty” Drew ONLINE EDITOR Lauren Towner VIDEO TEAM Lewis Averillo-Singh Max Burton FEATURE WRITERS Aniqah Majid Sean Martin Sue Scott Fintech Finance is published by MEDIAADVERTAINMENTLTD. Pantiles Chambers 85 High TN1TunbridgeStreetWells,1XP CONTENT TEAM Bobby AniqahSumanMajid SALES TEAM Tom ShaunNicoleDickinsonEfthymiouRoutledge IMAGES BY www.istock.com PRINTED BY LA Printers Ltd "PROUDLY NOT ABC AUDITED"
Growing your MGA: The tipping point
26 Paws for thought
“For startups that raised significant amounts of money in 2020 and 2021 on shaky fundamentals, the current environment may become extremely painful, if not life-ending.”
Her Majesty Queen Elizabeth 11 21 April, 1926 - 8 September, 2022
THEINSURTECHVIEW
20 Game on!
It comes from Bradley Collins, CCO of Insurtech Insights, in his fascinating exposition of the investment market on page 14 of this issue. He draws on the experience of the Future50 America cohort of startups and scaleups that Insurtech Insights has identified as being the most successful in this current wave of investment austerity.
Having spent a lifetime investing in, or seeking investment for insurtechs, Manjit Rana knew there had to be a better way to find an ideal technology partner. So he created it
3 INSURTECH MAGAZINE: CONTENTS
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The faster payments revolution
With still so much uncertainty surrounding the trade in voluntary carbon credits, Natalia Dorfman, Co-founder and CEO of startup Kita, believes insurance could be key to reaching net zero
MeccaMidwest
“We have a diverse ecosystem that can cultivate and support the insurance sector,” says Rock, “and insurtechs are an important part of the mix. We work arm in arm with the state to encourage world-class corporations, entrepreneurs, and talented individuals to build their businesses and careers here.”
The growth of the state’s financial sector in the past decade is due in no small part to the efforts of a unique private economic development corporation, called JobsOhio, a state-authorised, not-for-profit that has lately been turning its attention to insurtech as a specific focus of initiativesJobOhio’sopportunity.insurance/insurtechareheadedbyRonRock, who has a strong background in financial services, spanning 20 years. Rock has been heavily involved in business development, giving him the credentials to lead innovation and investment programmes in the insurance sector.
“Banking and insurance are key contributors to our economy,” says Rock, “and Ohio ranks as the fifth largest economy in North America. We’re home to progressive financial brands such as Klarna, and we have nine large insurance companies in the state. Insurers are constantly thinking about business development, how to become more efficient, and how to reach customers in their preferred channels with new offerings. This is the driving force behind the insurtech initiative within JobsOhio.” Ohio provides many advantages for startups and established businesses alike, says Rock. It has thriving metropolitan and
commercial areas such as Cincinnati, Cleveland and Columbus, there is a favourable state regulatory environment, and the cost of living is far lower than in popular business locations
So, when companies choose Ohio, part of Rock’s role is make sure they access the strong local community of business partners, customers and talent that can help to grow a business and put it on the map. JobsOhio brings all the parts together and channels creative energy into successful collaborations.
Ohio is committed to business development and innovation across the financial industry. Ron Rock, Senior Director of Insurance and Insurtech at JobsOhio explains how state enterprise is targeting this increasingly important part of it
TheInsurtechMagazine | Issue 8 ffnews.com
One of campaignsour is called ‘Ohio is for leaders’... it’s cheaper to head west and run a business from here
In the heartland of America, far from the coastal regions traditionally associated with innovation and entrepreneurship, business is booming for financial service companies with bright ideas and the ambition to succeed.
4 NORTH AMERICA FOCUS: JOBSOHIO
Rock explains that JobsOhio has far more depth than the name implies. Although the Jobs prefix suggests an employment development agency, that’s only part of the story; it works to attract capital investment, encourage startups and strengthen established brands, which creates work opportunities.
In Ohio, historically America’s cauldron of industry, only manufacturing contributes more than financial services to the economy in terms of percentage of GDP. The capital Columbus is #14 in the North America 2021 Findexable rankings for best-developed fintech ecosystems and 39th in the world, having made a steep climb of 70 places over 2020.
such as New York City and San Francisco. There are also excellent inter- and intra-state transport links, venture capital is plentiful, and more than 200 colleges and universities nurture a growing talent pool for tech-driven companies.
5TheInsurtchMagazine
“The region’s impressive technology talent ecosystem has proven to be vital for our expansion and was a core reason behind our decision to scale here,” says Alex Frommeyer, co-founder and CEO of Beam Benefits. “We love the people, the culture, the lifestyle.”
Waving the flag for Ohio: It’s an obvious choice for saysinsurtechs,RonRock
There’s certainly no shortage of financial help for them. Incentive programmes include economic development grants, growth funds, and research and development grants. There are the heavily-funded ‘Innovation Districts’ in Cincinnati, Cleveland and Columbus, to help generate ideas and develop the infrastructure to attract more companies. And there is a JobsOhio Workforce Grant as well as its Talent Acquisition Services that offer customised sourcing, screening, and training solutions. As well as collaborating with regional economic development organisations, and federal authorities, creating structured programmes and investment initiatives to encourage and support insurtechs, JobsOhio has struck partnerships with universities and training organisations to ensure a highly skilled funnel of employees. The state turns out more than 35,000 college grads qualified to work in financial services every year.
Beam Benefits, best-known for modernising dental insurance with a first-of-its-kind connected toothbrush, which allows companies to potentially earn lower insurance rates based on their members’ dental hygiene, is on-track for another record year and expects revenue growth near 70 per cent in 2022.
HIgh
terms of premiums written and the amount of reserves it had to hold and the amount of claims it paid out. So there is often a learning curve, and sometimes an insurtech needs to come down to earth, take stock, and make adjustments.”
From an employee’s perspective, it’s good to know that Ohio’s composite cost of living index is significantly lower than the national and regional average; it ranked #1 for affordability in 2020 in the U.S.News Opportunity Rankings.
“The growth of not just Beam, but Columbus: the startup ecosystem, the tech community, the venture capital access that’s now available,” says Frommeyer. “That flywheel is now officially turning in central Ohio.”
quality, low cost: It’s cheaper to live and do business in Midwest cities
It’s no wonder that companies stay loyal to it. Ilya Bodner, who founded Bold Penguin to build software for the small business insurance sector, got started in Columbus in 2016 and was anxious to stay close to its roots when it went looking for a buyer to fund its expansion. When Bold Penguin was acquired by another mid-West firm with similar values – American Family Insurance Mutual Holding Co (AmFam), the country’s 13th largest P/C insurance group – in January 2021, he was delighted that it meant he could keep his local team together.
“Root was a company on the way up,” he says. “Although it has a great telematics product, it’s not ground-breaking technology in the insurtech space. Many insurers have been doing telematics for a while. I could see what Root needed to address to become more viable and successful. It was very upside-down in
The latter proved a wise choice for what is now Beam Benefits, one of the fastest growing companies in the US – as recognised by the prestigious Inc. 5000 list where it currently ranks at #808.
The deal, which attracted a huge amount of attention in the insurtech space, meant he could ‘put a pin on the map’, as he described it, confirming Columbus as what he believes is ‘the mecca of insurance’ in the States.
The new headquarters would have to have access to talent, capital investment, and more to facilitate the next stage of the startup’s growth. His choices were San Francisco, Seattle, New York, or a place like Columbus’.
took a different approach to its business model. Branch uses data and technology to make home and auto insurance easier to buy and more cost-effective.
Despite the economic impact of COVID-19 and the current recession, Ohio, says Rock, remains an attractive place to do business and he is optimistic about future growth. But with every company and new venture, he underlines the importance of getting the fundamentals right and offering something that the market truly needs. He cites the example of Root, a home-grown insurtech initiative.
In 2012, Alex Frommeyer began searching for the ideal place to move his Louisville, Kentucky, insurtech business.
“What experiencedwe’veat Beam, and what I think others have as well, is that in partnering with JobsOhio, you’re getting a partner who’s helping do creative problem solving because the problems might also be quite different, depending on the size, stage, and scale of the business,” says Frommeyer.
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“Not only did the community welcome us with open arms, but it ended up being the perfect market for a startup company to carve out its own story.”
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In contrast, another home-grown company called Branch Financial, launched in 2017 and headquartered in Columbus,
The digitally-enabled employee benefits provider for small to medium-sized companies, has more than doubled its annual revenue and member base, grown to nearly 400 employees, and raised $80million in Series E funding in the last three years alone. In June 2022, the company announced the addition of voluntary life, accident and hospital indemnity products to its portfolio, making Beam a one-stop-shop for ancillary benefits.
BEAM BENEFITS
“I’ve had many conversations with Branch’s CEO, and I was interested in how he approaches the market,” says Rock. “Branch only wants to grow as fast as its loss ratio allows, which is very wise.”
‘Columbus ended up being the perfect market for a startup to carve out its own story’
In June 2022, Branch, the Columbus-born startup that had the bright idea of bundling two P&C staples – home and auto insurance into a single transaction –raised $147million in Series C funding and officially became a unicorn.
‘Our expansion and growth is a testament to the success we’ve had in Ohio’
“We’ve found that a poor cultural fit is one of the reasons why a company value falls,” says Rock. “If there is a disconnect between partners, it’s going to hit the numbers. You have to work hard to get the right focus and a shared vision.”
One of its key reasons for locating in Ohio was the workforce. An America-wide sweep pre-launch had identified the state as having good access to talent from nationally ranked colleges and universities, while also offering a low cost of living and high quality of life.
We’re actually on course to do more venture capital investment in 2022 than we did in 2021
“We’re actually on course to do more venture capital investment in 2022 than we did in 2021,” he says.
Another success story is Beam Benefits, which, unlike Branch and Root, came from out of state. The digitally-native employee benefits company uses machine learning to give brokers and employers tailor-made quotes in seconds. It has raised more than $160million in funding and is now available in 44 US states. Both Beam and Root have benefited from support from Drive Capital – a Columbus-based VC fund that has amassed a $2billion war chest in assets under management, specifically to invest in technology companies outside of Silicon SpeakingValley.insummer 2022, Drive’s co-founder Chris Olsen, formerly at Sequoia Capital, said he sought out promising founders in regions overlooked by other investors. He firmly believes that if venture capitalists widened their scope, the American economy would be more competitive internationally. JobsOhio certainly makes a virtue of the state’s entrepreneurial spirit – and how economical it is to do business there.
“Our expansion and growth is testament to the success we’ve had in Ohio,” says Steve Lekas, CEO and founder. “With the cost structure, access to talent, strong infrastructure, the low cost of living, and support structures like JobsOhio, we’ve been able to thrive in Ohio.”
“One of our campaigns is called ‘Ohio is for leaders’,” says Rock. “And If you're travelling across North America, you might see us get a bit cheeky with our advertisements. For example, we compare the cost of doing business in New York versus Ohio; it’s cheaper to head west and run a business from here.”
According to Crunchbase data, venture capitalists injected more than $3billion into Columbus alone over the past 20 years, particularly into healthcare and insurance startups.
BRANCH FINANCIAL
But there’s a lot of noise in the marketplace and it’s important to separate the wood from the trees when looking for viable ideas and investment potential.
Many of the larger insurance companies Rock works with are setting up their own innovation departments and labs.
“One of my ambitions is to create a large state-sponsored event under the JobsOhio banner,” says Rock. “Think of events like Insurtech Insights or InsurTech Connect. Because Ohio is a growing base for insurtech in America and is drawing interest from across the world, it’s a natural meeting place for the insurance community.”
So you have to dig beneath the surface to make sure you pick a winner, something with a great business differentiator.”
With technology that allows it to bind insurance through an API and an embedded sales distribution strategy – as well as offering products direct to consumers and through agencies – Branch has grown its annualised gross written premium by 1,300 per cent and more than quadrupled its headcount in 12 months.
While acknowledging that investment in the global insurtech market has taken a knock over the past 12 months, Rock believes you shouldn’t read too much into one year’s figures.
Founded in 2017, Branch took advantage early on of JobsOhio’s Talent Acquisition Services.
TheInsurtechMagazine | Issue 8 ffnews.com
“I’m combing the landscape as a member of different investment committees”, he says. “When I look at what the VCs are investing in, they certainly have a lot of choices. If you're reviewing 100 different companies, you might come across 20 that do the same thing, another 20 that do something in another vertical, and they all look similar.
A key area in which it can help is ensuring the right cultural fit between insurer and insurtech. While insurtechs may have the technology and the bright ideas, plus enthusiasm in abundance, they don’t always have an insurance mindset and can sometimes move too quickly for traditional insurers with a more cautious outlook.
One way to facilitate that is by promoting old-fashioned networking.
Earlier this year, Branch announced its expansion to six new states including Idaho, Iowa, New Hampshire, South Dakota, Tennessee, and Virginia, bringing its total reach to 25 states, meaning almost half of Americans can access its products and services.
“We do a lot of different programmes with these companies. Although they’re trying to build from within, they also need external partnerships and guidance,” he says.
8 NORTH AMERICA FOCUS: JOBSOHIO
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may not provide the validation needed to process claims quickly and accurately.
Tara Shelton, Head of Desktop Solutions and European Development, The Cotswold Group
Clearspeed voice analytics represent a quantum leap in risk accuracy for insurers, says Jules Ehrlich, its Chief Product and Strategy Officer. Here, he explains how it’s achieved those targets – and at scale
Voice has a mixed reputation in insurance. Caller authentication technologies have been well-received but voice stress used to assess claims risk less so, for many reasons – including questionable accuracy.
COMPANY SPOTLIGHT: CLEARSPEED 11ffnews.com Issue 8 | TheInsurtechMagazine
The core technology uses automated questionnaires to ask exactly the same questions that claimants are asked now, such as ‘was someone other than you operating the vehicle at the time of the accident?’, ‘does your claim include property damage not caused by the fire/flood/storm?’, ‘do you know where your lost item is now?’.
Clearspeed’s voice analytics are nothing like the voice technology of the past. There is no use of voice stress or lie detection, no biometrics, no emotions, no inflections or hesitations, no natural language processing. This is new. And so much better.
With Clearspeed voice analytics, insurers deliver short, automated voice questionnaires to their claimants, connecting with them by phone, app, chatbot or web. Questionnaires can include both yes/no and open-ended
■ Any language means that the questionnaires are language- agnostic, making it very easy to accommodate every claimant.
■ No personal data collection means Clearspeed does not need to know who the claimant is or store any personally identifiable information (PII) to provide a risk assessment.
As speed is increasing, so is fraud, especially in these challenging times.
Clearspeed brings new and unique data to risk assessment. And with greater than 97 per cent accuracy, it’s helping insurers increase the number of claims they can process straight through with very high confidence by leveraging Clearspeed’s automated questionnaires, either from within their call centres, or as an instant follow-up to ENOL/FNOL or other methods of claims submission.
In the past, it was nearly impossible, or at least very cost prohibitive, to assess the accuracy risk of the answers that claimants provided. Today, insurers can leverage big data and AI capabilities with historical and even real-time information for more insight, but that can bring complexity, increase false positives and
■ Automated delivery means that the questions are asked the same way, in the same voice, without judgment, every time. And it offers consistent around-the-clock availability.
questions. Insurers can choose from the Clearspeed library of questions that have been successful with other insurers or create their own specific questions. There are a few essential features to understand with Clearspeed.
It’s impressive how something so simple can have such an immediate, positive impact
There is no bias in the automated delivery, nor in the scoring of responses. You can think of it pretty much like a metal detector at an airport when you go through departures – it doesn’t care who you are or where you’re from, just whether you’re carrying anything made from metal.
How it works
Some insurers actually apply a red/green short form questionnaire early on and more precision-based questionnaires
At the initiation of the claim, they are usually less concerned about pinpointing the risk in each response and instead are looking for a red/green indicator about whether to expedite or follow up. Here they will either use a low-risk Clearspeed result on its own to process the claim or they will add it as a contributing data point to their AI/data analytics to make a decision.
i hear you: The voicebringstechnologynewanduniquedatatoassessment
bother incurring the time and expense to request a receipt, review it, etc.
getting data from Clearspeed, it will find there are many ways to use the questionnaires to drive different and impactful outcomes, which:
The reason that the assessment is so accurate (greater than 97 per cent) is because our initial use case was all about accuracy. We needed to help our military screen for risk at scale in austere, remote combat environments. Lives were on the line.
TheInsurtechMagazine | Issue 8 ffnews.com
Further downstream, an adjuster or SIU investigator will relish the precise risk data that Clearspeed provides, to inform their next steps, confident that it is not a false positive or unproductive alert.
Powerful informativeand
Insurers have many opportunities to benefit from deploying Clearspeed within their claims process.
■ Reduce investigation downstream with precise risk data so investigators can easily focus in on where the claim risk lies
■ Reduce soft fraud
Getting it wrong was just not an option. So, we had to iterate over many years until no high risk was missed and false positives were miniscule. Once an insurer begins
In fact, you will absolutely delight your policyholders. And, even if you’re already doing this today, Clearspeed will provide a new level of assurance for those decisions. Expedited and automated claims settlements also naturally means lower operating costs.
■ Increase walkaways – insurers are seeing very strong numbers here
Low-risk claimants can move forward quickly, with a straight-through or expedited process that gets them paid faster. But this does not mean that higher risk claims are denied. Clearspeed simply provides a low to high risk alert, just like the metal detector. Getting flagged doesn’t mean that you don’t fly, it just indicates the need for someone to follow up. If you’re clear, you’re good to go. I
Optimising the claims process
bringsClearspeedanew and highly effective approach to screening for fraud at scale during claims processing
Supporting the ecosystem
n Clearspeed will be at ITC Vegas 2022 (September 20-22) in booth 3159, where visitors can learn more about how it’s helping process claims faster, reduce fraud, lower false positives and deliver a better customer experience. To find out more, go to Clearspeed.com.
■ Increase the percentage of claims that go straight through... quicker pay, lower claim handling time, higher assurance, higher customer retention
when they require more precise risk data. In either scenario, the data flows easily across the ecosystem.
It also means insurers can potentially rethink parts of their process. For example, if Clearspeed provides a low-risk score on a low-risk travel claim, maybe you won’t
COMPANY SPOTLIGHT: CLEARSPEED 12
Clearspeed is a highly secure Cloud-based service that operates worldwide and contributes effectively to the insurance ecosystem. It can integrate easily across all ecosystem platforms, from automated communications via Hi Marley, the intelligent communication platform for the insurance industry, to fraud and other analytics systems such as Shift or Friss, and to claims management via Guidewire or similar Insurersproducts.oftenuse Clearspeed data to enhance the accuracy of what they are seeing from their predictive analytics, either inserting the automated questionnaires at the very tip of the process or further downstream, once they have all the supporting data.
Clearspeed takes the recorded claimant responses and removes all noise from the voice signal other than the universal voice characteristics that we know to be associated with risk. It then checks for the presence or absence of these voice characteristics and scores them on a risk spectrum of low to high.
In the same way, Clearspeed is used to clear low-risk people very quickly and with a much higher level of assurance than insurers have been accustomed to. But it is never used to deny a claim. On follow-up, insurers can find that, even though the alert was warranted, the claim is indeed valid and gets paid. In a smaller number of cases, that follow-up determines there is actual fraud.
Together with our customers, Clearspeed is redefining risk assessment with unparalleled accuracy, speed and simplicity.
Clearspeed is effective, either standalone or fully integrated within an insurer's existing processes and platforms, with results delivered via API. Since there is no data to gather, no AI to tune, etc, implementation is comparatively short and generally takes less than a month.
Clare Lunn, Head of Counter Fraud, Markerstudy
■ Reduce your false positives
It’s no surprise that the past couple of years have seen a shift in the funding landscape across the market. Yet, despite the disruption, global investment in the insurtech sector reached record levels of $8.4billion in 2020 – up eight per cent from the previous year (approximately $7.8billion) – only to increase again in 2021 to $16.8billion; more than the amount invested in 2019 and 2020 combined.
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2021 wasn’t just the best investment year in insurtech history, but we also saw 23 ventures reaching unicorn status. However, as we come to what we hope is the
‘ClimbingCapital’Hill:
NORTH AMERICA FOCUS: INVESTMENT
For this issue, I focussed on our USA cohort to provide insights on the current opportunities and challenges in seeking investment.
In the past six months, the landscape has changed again; with high-interest rates and inflation, the cost of capital is increasing and this has resulted in investors being more prudent and calculated in their choices when investing in startups.
These were questions I asked to a selection of our Future50 America insurtech finalists, as well as investors, to gain valuable insights into not just how the next year might look for the market, but also how up-and-coming insurtechs can navigate these changes and still see success.
Bradley Collins, CCO at Insurtech Insights, canvassed Future50 America insurtech finalists and some friendly VCs to come up with the Top 6 Tips for navigating a changing investment landscape
The best strategies for investment success
How14 has the investment landscape changed over the past 12 months and how should investment strategies change as a result?
There is still concern about overpaying for deals and whether we are at the bottom of the market yet.
Asandorganisershostsofthelargest
end of the pandemic and a return to a ‘new normal,’ we see a different investment landscape compared to two years ago.
To give you some context, since launching Insurtech Insights in 2018, our vision has always been to surface exciting, talented insurtechs who are reimagining the future of insurance to help drive the industry forward.
in-person insurtech conferences around the globe, Future50 was a natural initiative for us. We collaborated with 20 incumbent insurer C-level execs, as well as our market intelligence partner Sønr, to curate a carefully selected list of the most exciting insurtechs from around the world.
Their caution is reflected in the fact that rounds are taking longer to close and the bar is higher for companies to raise.
According to data collected by Venture Scanner and analysed by the Deloitte Center for Financial Services, before the pandemic, investment was largely concentrated across a handful of insurtechs, focussed on changing individual problems within the insurance market. During and immediately post-pandemic, we saw an explosion of insurtechs offering digital transformation across the entire insurance value chain; from claims to sales, operations, risk, and – most importantly – customer experience.
Top-performing, high-growth companies were still raising sizable rounds at strong valuations, but it wasn’t as favourable a market, compared to the previous 12 months. Companies that were and are underperforming or growing modestly were and are finding it more difficult to raise.
Aside from a few notable exceptions, including wefox’s recent $400million raise, led by sovereign wealth fund Mubadala Investment, US funding rounds still tend to be bigger than in the EU, with more available capital, a larger market overall and higher valuations. We are still seeing $25million-plus Series A rounds in the US, which would be a typical growth round in Europe.
Scaleups that were able to raise funding with above-market valuations will likely need to readjust estimates if they require urgent investment funding. Indeed, we’ve already seen that happening elsewhere in the financial technology space. A dramatic example is Klarna, whose valuation moved from $45.6billion in 2021 to $6.7billion at its last $800million fundraise this year.
For startups that raised significant amounts of money in 2020 and 2021 on shaky fundamentals, the current environment may become extremely painful, if not life-ending
Large insurtech venture capital firms like FinTLV that have driven up valuations in the last few years and significant funding rounds from certain VCs have now slowed down or stopped altogether. That said, valuations at most stages are still higher than 2020.
They tend to be more careful in the way they invest in early-stage ventures and seek to validate more proof points than US investors. Investment size is often a fraction of what US investors are prepared to invest in startups.
2022 is clearly the year of readjustment. As the requirement for investors to yield returns to their limited partners increases, those that invest this year will focus on younger startups able to provide fair valuation estimates.
Bear in mind that, in the UK, investment is heavily driven by government support and tax incentives. These are the EIS (Enterprise Investment Scheme up to GBP £5million) and SEIS (Seed Enterprise Investment Scheme up to GBP £150,000), which allow investors paying taxes in the UK to benefit from tax advantages.
“We’ve always focussed on building a fundamentally sound business, and know that can lead to slower growth than our peers,” says Douglas Ver Mulm, CEO of Pennsylvania-headquartered Stable“But,Insurance.giventhe emergence of the reinsurer’s veto [the ability of your reinsurance partner to dramatically increase ceding premium or stop supplying risk capital altogether], this is now the only approach an insurtech can take if they are focussed on longevity.”
models with strong principles and well-defined unit economics to ensure that growth estimates are based on a fair rationale. Valuation estimates will need to be reasonable and have alignment with future growth forecasts.
THE CHANGING PERSPECTIVE
There are major differences between US and European investors to be aware of, if you’re seeking capital. For a start, the language used in legal investment documentation differs between the US and Europe, so legal teams that understand those differences become an asset.
VCs are no longer price takers. Valuations are down, particularly in the public markets and growth stage rounds. This is a result of the current macro economic environment with a return to more sensible valuation multiples, and greater focus on sustainable unit economics.
15
Top-performing,high-growthcompanies are still raising sizable rounds at strong valuations, but it’s not a favourable market compared to 12 months ago
If you’re a European-based insurtech, the good news is that US investors have gradually become more keen on investing in European startups, but they tend to prefer convertible notes while European investors are happy with equity investment.
It’s safe to say there are austere times ahead. The US, which passed an Inflation Reduction Act in August, is still running at around four times its usual inflation rate of two per cent. With the Bank of England base rate at 1.75 per cent at the time of writing and inflation estimated to reach at least 13 per cent in the UK, investors on both sides of the Atlantic will evaluate business
For startups that raised significant amounts of money in 2020 and 2021 on shaky fundamentals, the current environment may become extremely painful, if not life-ending. Startups that can handle this ‘return to reality’ will be stronger because of everyone’s renewed focus on sound fundamentals.
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THE STATE INVESTMENT:OF US v EUROPE
Make sure to get acquainted with each investor group’s investment thesis, too, as they also tend to be sector and market specific. European investors want to see clear product-to-market fit more than their State-side counterparts. Their preference is to invest in real products that have demonstrated traction with users.
DISTRIBUTION IS KEY Technology such as application programming interfaces (APIs), artificial intelligence (AI) and machine learning (ML) are a clear driving force for digital transformation between insurtechs and insurers. Insurtechs that are leveraging these most effectively, may see a higher rate of interest from investors. We see APIs being used to streamline quoting and sales in traditional, embedded and bundled distribution plays.
Proposition is key – understand how your solution fits into the complex insurance world
The economic environment for raising a round dipped south in Q2, and it became much more difficult to raise, even at compressed multiples, for many founders.
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Fenris Digital’s Linton believes any insurtech boss looking for capital needs to be creative in their strategy.
TOPMunichBergsma,ReVenturesTIP$
We are entering a period of uncertainty and have had to make tough strategic pivots that enable us to be more efficient and focussed
The trend for founders should be wisdom in decision making, focus on building winning, trustworthy, and reliable teams
Ben
“To do so, there are a few key areas that we’re looking to prioritise: product expansion, unlocking new distribution channels, expanding into new markets and growing our team,” says co-founder Laura McKay. “We are particularly interested in embedded channels for life insurance.”
Among our Future50, Fenris Digital –which raised £2.7million from VCs in early 2021 – is serving agencies, brokerages, carriers, and financial services providers of auto, home, life and small business commercial insurance with its APIs.
SO, WHAT’S THE ADVICE?
Have a clear, focussed fundraising strategy from the start – don’t forget to build a Plan B and Plan C
FOR A $UCCE$$FUL RAI$E
“More than ever, it’s important to practise disciplined and strategic decisions that allow us to optimise for profitability, unit economics and an extended runway.”
“Now we are entering a period of uncertainty and have had to make tough strategic pivots that enable us to be more efficient and focussed,” says McKay.
“Some fellow founders have run multi-pronged processes where they
Laura McKay, PolicyMe
Extending runway should be the number one priority for CEOs right now
Find ways to extend runway, and if possible, reach profitability instead of counting on another big check to Findspendinvestors that can make good advisors
a numbers game: A investmentmulti-prongedstrategymightbebest
“The trend for founders should be wisdom in decision making, focus on
PolicyMe raised seed funding in the grip of the pandemic and launched its first digital insurance product exactly a year later, in April 2021.
Sabine VanderLinden, CEO, Alchemy Crew
Product knowledge, value and placement is by far the most important focus for the insurtechs I interviewed. Investors are no longer giving out large amounts of funding before seeing product-to-market fit.
It’s
They should find ways to extend the runway, and, if possible, reach profitability instead of counting on another big cheque to spend, too, cautions Ben Bergsma, a principal at Munich Re Ventures.
“Capital conservation is what I’m preaching to my portfolio companies at all stages,” he says.
“Extending runway should be the number one priority for CEOs right now. VCs don’t want to invest in companies that will burn through a new funding round quickly, so demonstrating a focus on the bottom line is important.”
bootstrap harder, pursue a raise with prior investors and new investors, while also exploring an early exit by acquisition. It's a numbers game, so keep on swinging, listening to feedback, and iterating your pitch to attract the right investor.”
“We use machine learning with our vast enrichment data and deliver a suite of predictive algorithms to optimise outcomes at key points in the insurance customer lifecycle,” explains CEO Jennifer Linton.
Get the right team in place from the beginning Align every dollar spend with ROI
“Our APIs are used to streamline quoting and sales in traditional, embedded, and bundled distribution plays. And we orient around the applicant or policyholder for these insights, across all products in both commercial or personal lines.”
“Given the challenging fundraising environment currently, it’s important to be efficient with your capital base, which usually translates to lowering your operating expenses wherever possible.
building winning, trustworthy, and reliable teams,” says Sabine VanderLinden, CEO of Alchemy Crew, which works with insurers on corporate venturing.
The current cost of living crunch has spurred Canada-based PolicyMe on its mission of leveraging tech to deliver simple and affordable insurance to more families.
“When scaling fast, cash tends to be available, but expenses pile-up, too. Hold count on every dollar spent and keep them aligned with ROI.”
If possible, raise more than you think you need and extend runway
“This team of superstars gives Stable the ability to navigate pricing, operational, regulatory, and reinsurance/capital risk as if we were a much larger organisation.
“Our employees at Nayya are extremely mission-driven. A team that works hard, sticks to company values, and pulls toward a common mission is critical for success,”
Alandscape:changing But investorscaninsurtechsstillkeepon-side
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There, only 23 per cent of the population has private health insurance, and the rest rely on an overstretched and underfunded public healthcare system. This means 160 million Brazilians do not have guaranteed access to good quality health care services because they can’t afford it.
And it’s not just about the product or solution you are offering. Focussing on building the right team from your earliest stages will pay dividends as you grow.
Product fit is an important fundamental that healthtech startup Sani demonstrated a good grip of when it pivoted from data
“It is not always easy for a founder to know where to focus his/her attention. It will be key during scaleup stage to surround yourself with those who can take jobs away from you so that you can focus on what you are good at doing,” says Alchemy
“We’ve assembled an investor team of current and former underwriters, actuaries, brokers, claims experts, insurance carrier executives, reinsurer executives, and insurtech executives,” says Stable’s Ver Mulm.
Whether creating an insurance product or selling technology into a carrier, insurtechs need to demonstrate their understanding of the multiple complexities and risks in their insurance space and their ability to solve the challenges relating to these. It also requires an understanding of markets and their individual needs for solutions or product placements that can set you apart and make you favourable to investors.
collection and analytics to providing healthcare insurance in Brazil in 2020.
The days of raising $20million on a few policies or a pilot project are gone
“Make sure you understand the milestones and proof points you need to hit to raise your next round. If possible, raise more than you think you need and extend runway,” he says.
I’d go as far as to say as we can navigate risks just as well as a carrier, but with a much more capital-light operation, thus creating more value for our investors.”
It is important for startups to ensure they take the time to refine their proposition, based on well-articulated, user-led assumptions and backed by proven evidence to lay before investors that will all ensure the long-term sustainability of business models.
“The company will grow around three times in 2022 and we want to set the fundamentals to keep the growth pace in the years to come,” Vitor Asseituno, president and co-founder of Sami, tells me.
“The days of raising $20million on a few policies or a pilot project are gone,” confirms Ver Mulm of Stable Insurance.
James Tootell, Investment Director, EOS Venture Partners
Crew’s VanderLinden, who has some last words of “Marketingadvice.iscrucial for growth, so create systems to ensure that marketing is not seen as a cost centre, but as a value-creating engine,“ she says.
FROM SEED TO GROWTH
have a fundraising plan and start earlier, is the advice from James Tootell, Investment Director at EOS Venture Partners.
Funding rounds are taking a lot longer to close for most growth-stage companies, so
“Our advice to other insurtechs is to develop a team that has their heart and mind in the right place so that you’re working towards your mission daily, and to find where your product truly thrives in the market by uncovering the human need behind your technology.”
Douglas Ver Mulm, Stable Insurance
Insurtechs, especially those focussed on distributing their own product, also need to find a group of insurance-focussed investor champions. That level of expertise is significantly more valuable than money and gives any future investors confidence. It’s something Stable Insurance has proved particularly adept at.
believes Sina Chehrazi, co-founder and CEO of Nayya, a New York City healthtech working in the area of employee benefits.
Increasingly, investors want to see a plan to profitability/breakeven rather than a loss-making plan to the next funding round. Make sure you have a Plan B and Plan C if going out to raise capital soon i.e. internal shareholder round, venture debt, reduced cash burn.
SmartStream’s fully integrated suite of solutions and platform services for middle- and back-office operations are more relevant than ever – proven to deliver uninterrupted services to critical processes in the most testing conditions. Their use has allowed our customers to gain greater control, reduce costs, mitigate risk and accurately comply with regulation.
With AI and machine learning growing in maturity, these technologies are now being embedded in all of our solutions and can be consumed faster than ever either as managed services or in the cloud.
Simply book a meeting to find out why over 70 of the world’s top 100 banks continue to rely on SmartStream.
&AI,theLet’ssmartstream-stp.cominfo@smartstream-stp.comtalkaboutnextwaveinMachineLearningManagedServices
“Wouldn’t it be easier to know in advance who is most likely to be up for a conversation? Reducing this wasted sales and market expense and effort needed a completely different approach. We also needed a way to address common questions such as ‘what’s really interesting in the insurtech space right now?’ and ‘which insurtechs have a compelling claims-related proposition?’. These are not the types of questions you can answer with a simple database of insurtechs and a few filters.”
TheInsurtechMagazine | Issue 8 ffnews.com Gameon!
Rana is no stranger to insurance and the startup scene. He’s a seasoned innovator and entrepreneur who’s founded several companies, mentored
There are thousands of Insurtechs worldwide competing for the attention of insurers and investors. While challengers and disrupters abound, collaboration is now part of the changing marketplace in which buyers and sellers seek the right partners and the best deals. But knowing who to choose isn’t easy when there’s so much noise and many insurtechs with very similar business models and propositions.
This is the problem which Manjit Rana aims to solve with InsurTech Scout, his newly launched ‘introduction and collaboration platform’.
numerous insurtechs, is a regular speaker at industry events and was a co-founder of AXA’s Innovation Hub. He also founded Ingenin, an award-winning insurance innovation consultancy, over a decade ago – before most of the insurance world had even heard of the term insurtech.
Rana explains: “The impending global recession is likely to see sales and marketing budgets tightened and businesses left needing to find more direct and cost-effective ways of identifying and collaborating with partners. It’s going to be significantly
Smashing it: InsurTech Scout’s goal is to take the guesswork out of partnershipstechnology
INVESTMENT: 20
Rana and the team wanted to create a platform that, in an ideal world, would be engaging to virtually everyone across the
With his latest venture, Rana is developing a digital global community platform for everyone who is involved in the insurance sector: insurtechs, insurers, service providers, investors, advisors and consultants.
Having spent a lifetime investing in, or seeking investment for, insurtechs, Manjit Rana knew there had to be a better way to find an ideal technology partner. So he created it
harder for insurtechs to justify reaching out to dozens of insurers and investors when more than 90 per cent of them are unlikely to be interested.
Rana and his colleagues have been developing the platform ‘under the radar’ for the last two years but it’s hard to keep these things hidden for long.
“Having been on both the investor and insurtech sides in the fundraising process, we looked at how we could make the whole experience more efficient for insurtechs, from tracking which documents are being shared with which investors, to having a single secure data room with the latest versions of all their investor-related documents. The market needed a ‘one-stop shop’ so we built the functionality into the platform,” says Rana.
interested in, and the platform will bring the relevant parties together.
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seem to be much that the team has not thought about.
Getting to the top ranks of the leagues generates rewards for the individuals
“We have our own low-code/no-code development platform so we can genuinely deliver new functionality within days where most companies would still be capturing and agreeing requirements.“Oneofthebig four consultancies reviewed the platform and stated that it would probably have taken them more than three years to develop something similar with a considerably bigger team.”
InsurTech Scout is a digitised ecosystem that feels like a combination of match.com, LinkedIn on steroids and Fantasy Football. It’s an interesting approach as it involves gamification and even has its own virtual currency.
InsurTech Scout is a digitised ecosystem that feels like a combination of match.com, LinkedIn on steroids and Fantasy Football. It even has its own virtual currency
“We’re already looking at how we can connect our virtual currency to real-world benefits. For instance insurtechs exchanging accumulated Kudo$ for services such as legal advice, marketing support or consultancy services,” says Rana. “For early-stage startups this can be a great way for them to progress their minimum viable proposition without needing to raise very early stage money at the lowest valuation.”
Real-world investors can also save time and resources by setting alerts for the kinds of insurtechs they are potentially
“We applied the same thinking when we looked at how we could disrupt our own consultancy services.”
The platform’s powerful analytics engine generates unique insights that are not available through other solutions, from simple, real-time market trends to showing insurers what their claims handlers think is compelling for them currently.
The gamification feature could also be an interesting way for organisations to make their staff more aware of the current propositions being created by the insurtech community or the disruptive technologies they are working with, or even exposure to their next-gen business models, all of which can be useful insights when they are looking at solving business-as-usual problems within their departments or roles.
“Currently, more than 80 per cent of proofs of concepts or trials fail to progress into full production use in the business units, leading to wasted expense and frustrations, both among insurtechs and corporate entities,” says Rana. “As an innovation and creative problem-solving consultancy, we are accustomed to addressing these types of problems. We often challenge our consultancy clients to look at their problems through a different lens: ‘how would Amazon or BMW address the challenge?’, for instance.
‘investing’, as well as for the insurtechs attracting the Kudo$.
“Insurtechs are constantly looking for the next opportunity to promote their proposition to the insurer or carrier
Co-founder Kali Bagary adds: “We had the luxury of developing the platform with a diverse team working remotely across the UK, India and South Africa during the COVID period.
From the way that the platform shares only relevant information with individual stakeholders, to its unique ‘Tinder-esque’ voting functionality, there really doesn’t
All platform members earn virtual salaries, which they invest into virtual portfolios of insurtechs so that they can compete against other people across the industry in trying to identify league-toppers.“Ourgamification feature uses our digital currency, which we’ve named Kudo$,” says Rana. “It works a bit like Fantasy Football, with members using the currency to invest in insurtechs. For instance, a claims handler may want to see which insurtech has an interesting proposition for total loss scenarios at the moment and could look at relevant insurtech profiles using the powerful segmentation tools, then explore their business models and the technologies being incorporated, and see how they solve a particular problem. Next, they would compare the offering with similar propositions and decide which one they believe is likely to attract the most attention from other InsurTech Scout members, and hence end up at the top of the appropriate leaderboard or league. They can ‘invest’ some of their Kudo$ in the ones they want to back.“
“We’ve had approaches from organisations outside insurance,”he says.
“We’re delivering a version of the platform to a major retail brand, based in the UK, as well as a global electronics corporation, based in Asia. And we will put the technology behind a new governmentfunded initiative to bring together startups, government support programmes, corporate partners and mentors for a major UK region over the next few months.”
industry, rather than just a few analysts in strategy or innovation teams, because he knew that getting people in the business units involved in the selection process when working with insurtechs would create much higher adoption rates.
community, and insurers are keen to move from the ‘innovation theatre’ or beauty parade model of scouting to a challenge-driven model where the business defines which challenges it wants to find the insurtech solutions for,” says“InsurerRana. department heads can capture their key challenges and then decide whether they want to expose those challenges and request ideas or solutions from across the organisation, or would like responses from the insurtech community instead.”
Policy administration systems (PAS) These are the foundations that underpin an insurance company’s digital strategy. The capabilities provided by a policy administration system can enable an insurer or MGA to fundamentally shift its ability to compete in an evolving digital insurance landscape.
In today’s world, underwriting doesn’t have to be this way. Underwriters don't even need to be pulled into every application. Insurtech has the capacity to issue instant outputs that could otherwise take hours, if not days, to complete with manual processing. In a competitive market, this can mean the difference between winning and losing new business.
Growing your MGA
From an MGA’s perspective, it’s when you realise that, to grow your business further, you need to adopt a more comprehensive technology solution (amongst other things) to underpin your operations. What and when depends on the layout of your current processes, the size and capabilities of your team, and the in-house culture you have
Manual underwriting workflows
A lot of MGAs will have been aware of the impending need for a more modern software solution for some time. The most common issues that typically lead an MGA to its tipping point are:
Having the ability to grow your business without worrying about the effect on proprietary tech solutions, or the
WHAT TO DO WHEN YOU REACH A ‘TIPPING POINT’
If you’re an MGA that has been putting off the ‘technology conversation’, then chances are you’ve reached a tipping point –the point at which a series of small changes or incidents becomes significant enough to cause a larger, more important change.
Digital PAS systems guide internal resources to easily complete the policy administration life cycle, only stepping into the process where their skills or expertise are absolutely required. Customers are led through the price quote and application journey with simple and clear questions, allowing the MGA to repeat these processes for each new customer. The cumulative benefits of installing such modern, external PAS systems, boils down to having the ability – and the freedom – to spin up and implement new products easily and at pace. No-code platforms like Instanda provide reliability, availability and security, with the flexibility to roll out new propositions at will, and rapidly make tweaks to existing ones.
Upon binding in the Instanda platform, custom policies and declaration pages are delivered instantly, with payments scheduled and collected through the automated clearing house (ACH), resulting in electronic audit trails for speed and ease of premium accounting, broker and carrier remittance and painless renewals.
The right PAS is value-efficient, as error-free as possible and gives insurance organisations the resources they need to tweak existing propositions and ensure their product portfolio remains relevant. Broker and customer experiences are also improved
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As proprietary solutions creak at their seams – and the workload associated with manual policy administration becomes unaffordable – many MGAs find themselves going to market for a more comprehensive technology solution to support and accelerate the next phase of their life cycle.
our experience of the MGA market, the ‘tipping point’ is most commonly seen three-to-five years after an MGA has launched, and once it is writing approximately $5-10million gross written premium (GWP). At this point, the organisation tends to be out of ‘startup’ mode and looking to bring new business onboard in a more structured fashion.
To achieve high business value from a successful PAS transformation, you will need to look at fresh ideas to combat market pressures and make tough business transformation decisions along the way.
Drawingcreated.on
Scaling a business without a refined PAS – for example, creating new products, onboarding new brokers and sourcing new clients – can be something of a nightmare.
be drawn-out and time-consuming – even for risks that are traditionally less complex. From emailing brokers and double-keying risks, to managing policy information and navigating between spreadsheets to calculate premiums, it’s easy for important information to be lost or displaced.
Without the correct software in place, the underwriting and quotation process can
Studies have shown that 47 per cent of internet users will leave a page if it doesn’t load in two seconds or less, so it’s no surprise that insurance customers expect to receive a personalised and affordable quote from their providers, quickly and digitally.
by the automation of key processes and the freedom to access new distribution channels.
There are more insurtech solutions available than ever before, but if you’ve scaled to the point at which they become useful, how do you choose? James Elliott, MGA Lead at Instanda, offers some timely advice
A PAS forms the primary system of record for the vast majority of insurance organisations, regardless of business class or speciality. Maintaining a proprietary in-house PAS (particularly one that wasn’t built in the last five-to-10 years) often comes with elongated lead times for any significant change or progression, and a huge overhead financially, given the cost of software engineering talent. The key to meeting today’s market challenges lies in moving to a flexible ecosystem, of which an integrable PAS will form part.
■ Ease of integration
Cultivating innovation and entrepreneurship in an industry that is risk-averse by nature can undoubtedly be tricky, but putting it off
Most importantly, PAS systems stand as a single view of the truth, ensuring that data is readily available whenever needed. Secure and accessible storage of information lets MGAs regularly analyse performance, forecast their future and monitor customer treatment, expectations and outcomes.
■ Flexible workflows and distribution channels
in an industry that is risk-averse by nature can be tricky, but putting it off could harm your competitiveness and operational efficiency
■ A business culture that aligns with their own.
Utilising an insurtech’s automated underwriting services as you grow your business holds the promise of enhanced agency communications, improved tracking, more consistent underwriting decisions and faster throughput – all leading to increased return on investment.
■ Truly Cloud native
Eighty-five per cent of insurance CEOs believe that the speed of technological change is threatening their companies’ growth prospects. It’s time to start innovating and operating like a tech company: quickly, simply and nimbly.
Repeated failure to deliver the correct data to the correct stakeholders (e.g. carriers, customers and regulators) will create a very real barrier to an MGA’s success over time. As such, maintaining proper audit trails should be at the forefront of any digital innovation plan – especially when looking ahead to a period of substantial growth.
innovationCultivating
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could harm your market competitiveness and operational efficiency.
Insurers and MGAs also rely on their software solutions to help ensure full and effective compliance with growing regulatory demands, maintaining consumer protection and risk mitigation. Agile product testing, such as can be achieved with Instanda , lets MGAs conceive a product, deploy it within weeks and then distribute it to multiple channels in different ways. This enables companies to crystallise their product strategies in a fraction of the time that traditional systems take, without sacrificing any of the security measures that needed to ensure a product is watertight before it goes to market.
economically viable, the choices available to MGAs are continually improving. Worldwide insurtech funding reached an all-time high in 2021, with around $15.4billion across 566 deals, more than double the funding total for 2020. There are now a plethora of solutions which are targeted at helping these businesses to minimise reliance on rigid in-house solutions, spreadsheets and manual communication trails.
So, what should MGAs be looking for? These are five key features an MGA should have on their shopping list when they reach their tipping point and begin searching for technology solutions:
additional expense of bringing in new developers, allows MGAs and team members to focus on doing what they’re best at – whether that be underwriting, internal collaboration or fostering relationships with clients.
Regulations and delivery
Fortunately, with new generations of innovative software-as-a-service (SaaS) insurtechs becoming more
■ No-code (i.e. ability to configure products without developers)
revolutionFasterpaymentsThe
As Lloyd’s of London prepares to roll out a new claims settlement platform across its delegated authority business, we talk to the CEO behind the payments company that architected it, Vitesse PSP’s Phillip McGriskin
Ultimately, Vitesse wanted to find a way to leverage its global payments platform and automated treasury services to revolutionise how the money used to pay policyholders in loss fund accounts is managed. To do that, it needed to figure out a way of decoupling those accounts from the monthly reconciliation process and account top-up cycle that contributes to delays.
Trends Report 2022 showed that 61 per cent of defectcustomerstoacompetitorafteronebadexperience.“Weinitiallywenttotheinsurancemarkettohelp
Break with tradition: Faster Claims Payment is a major infrastructure change for Lloyd’s
INFRASTRUCTURE: CLAIMS SETTLEMENT 24
“Insurance is a very emotional subject. When people need that payout, it's because something has gone wrong. Getting their money to them quickly so that they can get back to where they were before the loss, is therefore one of the key features of an efficient claims process,” says Phillip McGriskin. As co-founder and CEO of payments provider Vitesse PSP, he’s been helping insurance clients deliver those payouts since 2014 – but only as far as the industry’s systemically complex processes allowed.
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Why is it such an important milestone? Because the vast majority of consumer complaints relate to claims handling – 68 per cent, according to financial information provider ValuePenguin’s report What Frustrates People Most About Their Insurer, and settlement delays were the second most vexatious issue.
Delivering a good claims experience isn’t just a nice-to-have – it can make the difference between a customer staying or leaving at policy Zendesk’srenewal.recent CX
And now it has. It’s called Faster Claims Payment (FCP), a funding and payment solution that facilitates direct access for agents to insurers’ funds over the Vitesse platform. Developed with leading players in the London insurance market and delivered by market operator Lloyd’s of London, FCP goes fully live in September 2022.
With FCP, the Vitesse platform acts as an intermediary between delegated claims administrators (DCAs), managing agents, insurers and reinsurers, handling applications from DCAs for funds from a managing agent’s account and making the payment direct to the policyholder in local currency, using their preferred payment method. And the platform does that in hours, not days.
insurers make claims payments, as we are good at sending money around the world,” explains McGriskin. “But one of the insurers we approached was Brit Insurance, which is a significant player within Lloyd’s of London, and it said ‘look, we accept that we could pay our claims faster and more efficiently so that it would cost us less, and give better customer outcomes. But the burning issue that we have at the moment is making sure that the money is there to pay the claim’.”
During its pilot phase, from July 2021 to April 2022, FCP delivered 5,512 payments totalling £15million, over 20 fully automated fund replenishment cycles.
“By January 2023, we would like to see the majority of managing agents have at least one or two binders up and running with this solution,” says McGriskin. “Once they’ve seen the efficiency, and how it works, we believe more businesses will load onto it. The way we have built and delivered the solution, it’s minimal work for managing agents and their downstream partners to get involved.”
The FCP solution allows delegated claims administrators – the client-facing third-party – to access funds directly from syndicates as and when required, reducing the need for the management of separate loss funds, and potentially eradicating them completely. That relies on clean, accurate and transparent data management, reporting and reconciliation by everyone in the chain – something else the Vitesse solution addresses.
Investing in new technologies can be risky in the current economic climate. With rising inflation and an impending recession, insurers and customers are all suffering from the pushback of austerity. The Financial Times reported, in late July, that the FCA had already warned insurers of the effects the cost of living crisis may have on consumers and their ability to keep up with premium payments. Against such a volatile backdrop, adopting a new claims settlement system may appear daunting, but it might just be the most cost-effective way insurers can mitigate loss and keep policyholders afloat.
Everybody HeadquarteredbenefitsintheUKand regulated there by the Financial Conduct Authority (FCA) and in Holland by the Dutch Central Bank, Vitesse specialises in moving funds from A to B fast. It works with financial services, payroll and global mobility customers but is unusual in having developed bespoke solutions for the insurance industry.
“On the payout side of things, there are benefits around cost and customer outcomes – cost is quantifiable, customer outcomes slightly less so. But when you go into the treasury functionality of these businesses and you start to equate the cost of having a billion pounds sitting in bank accounts, when you could be using that money to create activity, it becomes a positive for us.
Vitesse worked with Brit to find a solution, but it shared risks with other businesses in the Lloyd’s insurance market.
25
The idea so impressed Lloyd’s that it subsequently incorporated it into its Blueprint Two digitisation strategy, making the service available to every player in the market and, importantly, the delegated authority business, which represents 40 per cent of the premiums written at Lloyd’s.
“The far bigger play for these larger insurers is around the capital wins and being able to make money on their money. We’re starting at Lloyd’s, but these problems exist across the global insurance market and that’s where Vitesse is headed.”
“It didn’t make sense for them to be paying their part of the claim instantly and waiting two-to-three weeks for everyone else to catch up,” says McGriskin.
In the background, it's requesting and processing the accounting and reconciliation data in real time and ensuring the MA’s funds are continually replenished, so no time is wasted on top-up calls that could result in payment delays. Not only is the policyholder happy, but real-time lean management means the capital is always accounted for and the funds work harder.
“We’re talking about giving the managing agents within Lloyd’s up to 80 per cent of the loss funds they have typically had floating around in the market, back to them,” says McGriskin. “So, FCP provides excellent customer outcomes as Lloyd’s can pay claims faster than ever before. And, crucially, the members within Lloyd’s that are providing the capital to pay those claims, are able to make more efficient use of it.”
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“The cost-benefit analysis was the first thing we did,” says McGriskin. “Insurers operate on a dime, and there is no way they are going to buy something where they cannot see before they’ve signed that the money is coming back into the business.
transparency over all the capital deployed across their claims estate and also enabling bespoke reporting and full user access/rights control. We overlay that network with regulation to give our customers and banking partners comfort and security that funds are held in appropriately regulated and safeguarded structures, which is typically an improvement on how funds have been held to date,” he adds.
And so the idea for FCP, hosted on the Vitesse platform, was born.
We are ultimately returning capital to insurers, which they can then use to write more business. We’re also bringing the funds into a more controlled and regulated environment, where the risk around those funds is decreased. And the ability to hold these funds in a singular environment enables us to talk with managing agents and customers about how we can optimise that capital piece with them,” he adds.
The far bigger play for these larger insurers is around the capital wins, and being able to make more money on their money
“We have developed a global network of payment capabilities that allows us to deliver payments efficiently anywhere in the world, giving claimants choice and great payment outcomes,” explains McGriskin. “We put our treasury functionality on top of that to give our insurance customers real-time control and
At the same time, all types of insurance providers – from speciality risk to commercial, motor and personal lines – are driving to improve underwriting outcomes. Reacting nimbly to change is essential to
The data a customer gives when they buy the product or service is linked to the insurance provider, and a personalised policy is generated and embedded in the product at a cost that is priced into the product at the point of sale. Technology can also be used to generate a simple and transparent claims trigger, without the need to file a claim or liaise with loss adjusters.
profitable underwriting as well as growing market share.
Could embedded insurance help address the exceptionally low rate of pet protection in the UK? Shreyas Vasanthkumar, Managing Director EMEA at Duck Creek Technologies, explores the potential
The potential spans many product lines and goes hand-in-hand with risk mitigation – for instance, cyber-breach and data theft insurance could be included as standard on smartphones that have the highest level of security protection installed.
A recent survey by Duck Creek Technologies of pet insurance buyers in the UK, about their feelings on pet insurance pricing, availability, products and service offering, showed a market under-delivering for its policyholders and their pets.
The key to optimum customer experience is having a ‘single view’, simple, cost-effective bundled products and seamless interactions with their insurer where the customer can clearly see the value-add and benefits in order that they can make an informed decision about the product purchase.
A more holistic approach is clearly needed, and it’s a need that embedded insurance has the potential to meet in a market where too many policyholders have become disillusioned with traditionalEmbeddedinsurance.insurance has attracted strong interest from leading insurance giants and insurtech startups alike, as a potential new frontier for expanding the reach of insurance.
Imagine experiencing flooding at your business headquarters and receiving a
WHY DATA IS KEY
included, or a new smart watch that is covered for theft or damage from the point of purchase. And, while it is still conceptual in many fields, the idea of embedded insurance has the prospect to be a tech-powered game-changer. This is because the key priorities for insurers are policy development and speedy distribution of new products – connecting innovative and relevant products with customers at exactly the right time in their buying journey. This is particularly important in today’s uncertain economic environment with the cost of household living increasingly impacting consumers.
EMBEDDED INSURANCE 26
None of the pet insurance buyers we spoke to said that they were completely happy with the coverage they could get at a price point they could afford, leaving many to purchase a more basic plan than they would have preferred, which would only cover emergencies.
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The idea is to provide coverage as part of a product or service – for instance, a new car that comes with motor insurance
Essentially, embedded insurance has the potential to address both these drivers of insurance business: connecting with customers on a grand scale and helping to control underwriting outcomes. The secret ingredient is modern core systems architecture.
So, while the size of the UK pet market is projected to grow to £1.5billion in gross written premium by 2025, with an estimated 3.4 million pet insurance buyers, at the moment, 70 per cent of dog and 84 per cent of cat owners do not have insurance cover for their pets in the UK. Add to that the fact that 42 per cent of pet owners feel that insurance is too expensive. Insurers are under pressure to bring new, more relevant and affordable
There is a golden opportunity for insurers to use joined-up thinking, powered by technology, to reconnect with consumers and offer more relevant, fair and simple products that are backed by faster or automated claims.
The focus on joined-up data can help improve underwriting and pricing accuracy, enriched by pet information from industry sources and pricing, based on analytics from pet activity.
insuranceEmbeddinginto pet services or as part of the sale of products could revolutionise the fairness and relevance of insurance coverage for this market
27 centres, for instance, or as part of the sale of products such as pet collars or even pet food subscriptions, could help to revolutionise the fairness and relevance of insurance coverage for this market.
products to this growing market quickly, and optimise customer experiences. Insurance embedded in pet services, such as registration with a veterinary clinic, could support the end-to-end pet insurance lifecycle with a partner ecosystem offering vaccination plans, embedded smart-collar device coverage, online veterinary support services, pet activity tracking and much more, offering a highly relevant and significantly more transparent customer experience.
There is an abundance of opportunity for the application of low-code solutions and Cloud technologies to transform the pet insurance market, and, in turn, open the door to the future of embedded insurance, connecting insurance with smart-collars, vaccination and veterinary services, and customer information available 24/7 to pet owners and agents.
to deliver relevant coverage exactly when customers are most likely to recognise its value and the real-time experience it offers. Ultimately, the big change in mindset for insurers is that it’s not about the process of selling standalone insurance to a customer, it’s about providing the customer with a seamless experience when
70 per cent of dog and 84 per cent of cat owners do not have insurance cover for their pets in the UK
The benefits of getting it right at a central level are clear – allowing for a personalised customer experience on the front end while running a significantly higher volume of policy sales across the board, powered by streamlined workflows that have eliminated inconsistency, poor integration and lack of transparency.
TECHNOLOGY ENABLERS
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FAIRER FOR PETS AND OWNERS
with the customer. What the customer wants is a seamless service that covers all eventualities – not multiple products and touchpoints with their insurance provider. Using emerging technologies to automate processes provides this more streamlined experience.
While embedded insurance has been around as a concept for a while, realising the full benefits requires a different way of selling, innovative new products and a closer, more personalised relationship
One of the biggest challenges pet insurers face in attracting customers is dissatisfaction with rising premium costs, and lack of trust among consumers over the value that pet insurance actually brings.
So how can the embedded concept be extended to pet insurance, a market that has been identified as in sore need of a radicalEmbeddingshake-up?insurance into pet services provided at veterinary clinics or rescue
business interruption or physical damage payout within 24 hours, without having to pick up the phone or lodge a claim. Similarly, if you bought a new smart watch and accidentally dropped it onto a concrete floor six months later, the watch would immediately register itself as damaged beyond repair, and its owner would receive the insurance claim value into their bank account within 24 hours without you having to contact the insurer.
Embedded insurance has the potential they buy other products and services.
Deploying AI within underwriting can enable pricing for an individual pet to be based on historical factors for a similar risk
at the time of quoting. For claims settling, it can predict an accurate reserve, based on the type of illness, or even predict a possibleLow-code,litigation.Cloud-based modern core systems architecture, meanwhile, enables data-hungry applications like AI to run in the background, making data-powered decisions and drastically improving the efficiency of underwriting and administering high volumes of policies. Cloud architecture, enabling faster speed-to-market, now makes it possible for insurers to launch new coverage within a few weeks and not months, with single product definition toolsets allowing for quick additions or revisions to products using a single point of change for rating, rule, form and page modifications.
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FUTURE OF INSURANCE: ZEGO 30In
Catching the modern bus
and is available to anyone who earns a living by keeping things on the move, be that the driver of an Uber or a business managing a fleet of diesel trucks or, more likely,Parte-scooters.oftheeconomy of the Internet of Things, Zego collects 50 data points per second on its insureds, and currently bases its ultra-competitive, pay-for-what-you-use policies on what Saar claims is five times the amount of information per vehicle that rivals who use demographic risk profiles alone, or combined with telematics, amass.
Zego uses all those data inputs and working habits data, too. That’s the input. The output is usage-based cover, bespoke to the professional driver/rider, or attached to a vehicle in a fleet.
his futurist envisioning of the year 2040, CEO of insurer Zego, Stan Saar, laid out how the choices we make to get from A to B will affect the world we will live in.
For those that don’t start shapeshifting now, it could mean their complete irrelevance.But,since 2016, Zego has been on a mission to disrupt the commercial motor insurance industry with flexible policies available from one hour to one year, in preparation for just such a future.
Rush hour in 2040
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A THOROUGHLY M
“Data-ledproducts.telematics is making waves in the insurance market, particularly among fleets that are looking to reduce costs and regain control of their insurance policies. Being able to influence your insurance costs, whether you’re an individual or
North Africa, adoption of usage-based insurance (UBI) has been growing. And a UBI report released earlier this year by By Bits found that the average retention rate for such policies was five years, considerably higher than for traditional insurance
So how will that affect vehicle insurers?
Initially built around the growing UK gig economy of drivers and riders, it now protects 400,000 vehicles in nine countries
From Asia Pacific to the Middle East and
Single-person vehicles
Importantly, by reflecting that data back at the policyholder, the person who pays the premium can directly influence the price by altering the driver behaviour and/or usage, bringing down the cost to them and the environment.
Zego, the UK’s first insurtech unicorn, took the road less travelled when it started offering usage-based vehicle insurance to gig workers. The market’s getting busier, but it’s still out in front – and plans to stay there, says COO Sonia Flynn
manager of drivers, is here to stay,” says Sonia Flynn, chief operating officer at Zego. It was the first UK insurtech to reach unicorn status, a year after the COVID outbreak had forced many to rethink their transport
Anotherchoices.yearon, and a cost of living crisis in the UK has led 78 per cent of drivers taking part in one lender’s survey to conclude that car ownership is unaffordable. The poll of nearly 2,000 people carried out for Go Car Credit, revealed that half of them
From autonomous single-person electric vehicles to self-driving vans with no human operators that deliver everything from our Amazon order to our lunch, movement will become more efficient and focussed around the individual, improving both sustainability and personal mobility. Cities will be greener, calmer, quieter and safer.
were leaving the car at home more often in a bid to save money.
“Commercial vehicles now account for over 13 per cent of the vehicles on our roads, the highest proportion ever recorded, and this number is rising, as technology continues to decentralise our shopping and travel
What will be of interest to fleet operators there as much as anywhere else, though, is figures from Zego that suggest aligning insurance premiums to driver behaviour can lead to a dramatic drop in road collisions and a potential reduction of up to 10 per cent in Speakingclaims.at the time of the Dutch launch, Saar commented: “Telematics and data science have proven that they can improve driving behaviour and, when combined with a financial incentive, they
31
ODERN MOBILITY
Customers already include many of the leading e-mobility providers, such as Zipp Mobility UK, Tier and Pony.
“We want to build long-lasting relationships with our customers… to live up to the promise that we’ve entered into.
We’re always thinking about what the best thing to do is now, and also how we can set ourselves up as a business and be relevant in what we offer to our customers in the future
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So, it was important, says Flynn, that ‘when we opened in the Netherlands, we would find people to join our team who understood what the market would need, what our gaps were, and what areas we could amplify’.
The insurer's long-term thinking extends not just to how far it will go in creating new product offers, but to how far it will go to sell them as well.
Meanwhile, sixty-two per cent of drivers are thinking they’ll drive less in the next five years, according to By Bits. That, combined with the sudden growth in the mobility-as-a-service (MaaS) industry as the market shifts towards on-demand access to both public and private transport networks and multiple modes of transport, would possibly indicate that Zego’s product strategy is spot on.
have great potential to make fleets safer and cheaper to run.
“What the 2040 Vision highlights for us is how these things will play out in the medium-to-longer term, and that we need to be thinking about that when we consider the choices we make now as a business,” continues Flynn.
what we offer to our customers in the future.”
“Forhabits.thepeople and businesses managing these fleets, flexibility and control are both highly sought-after, but driver behaviour remains a huge variable that is notoriously difficult to influence.”
Zego has been licensed to write its own insurance policies since 2019 and investment in underwriting and onboarding are key to ensuring its products are – and remain – fit for purpose, says Flynn.
“We’re always thinking about what the best thing to do is now, and how we can set ourselves up as a business and be relevant in
“When you enter into an agreement with the customer, whether an individual or fleet manager, it’s really important that everyone’s clear on what the agreement brings – so you always ask the right questions in advance and really assess what the business needs from an insurer.
Its fleet offering includes micro-mobility cover for businesses that manage e-bikes and e-scooters with fixed and flexi insurance plans, giving business owners the choice of paying by the vehicle or by the minute.
“To be really relevant in terms of what we offer in many, many years to come.”
Catching a autonomousfullyair taxi Zego’s vision for the future of mobility
This January, it motored into the Netherlands, which it sees as a ‘living lab’ for product innovation. Despite being famously flat, the country is not nearly as advanced a mixed mobility market as the UK, with half the number of users of e-scooters, for example, projected by 2026.
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So-called ‘cap-and-trade’ compliance carbon markets, such as the EU Emissions
Carbon offsetting has increased exponentially in the last five years. More than $1billion worth of carbon offsets were sold in 2021. The volume of credits required globally is expected to multiply 20-fold by 2035, or even higher if practices align with the goals set out by the Paris Agreement.
An entirely new cohort of providers has grown up to service that need, such as Native Energies’ Help Build™ Carbon Offsets, which is the offsetting scheme of choice for many big players, including eBay and Ben & Jerry’s.
“The carbon markets are a complicated space,” says Natalia Dorfman, co-founder and CEO of Kita, a carbon insurance company. “The voluntary carbon markets are still new and evolving. There are challenges around lack of transparency and consistent risk management, and there are a lot of different types of carbon credits one can purchase.
Deriskingoffsetting
With still so much uncertainty surrounding the trade in voluntary carbon credits, Natalia Dorfman, Co-founder and CEO of startup Kita, believes insurance could be key to reaching net zero
“Given this lack of consistent metrics, it is difficult for a buyer of carbon credits to assess quality.”
reduced or avoided CO2 or greenhouse gas (GHG) equivalent, thereby, in theory, generating huge amounts of investment for the carbon-reducing technology and projects that are selling the credits to them.
But the challenges for the VCC market are extensive, not just in balancing supply and demand but also in determining the quality of the credits traded.
Offsetting is seen by some as a get-out-of-jail card for big polluters and by others as a pragmatic solution to avoid choking the planet before Millennials are old enough to claim their pensions. But, whatever the merits, the result has been to turn carbon into a commodity to be traded.
Trading System, are based on government-issued and regulated pollution permits or certified emissions reductions (CER) certificates. Regressive by design, the theory is that companies are incentivised to reduce their emissions in line with a declining carbon cap or be forced to buy expensive additional credits; if they reduce their emissions faster than the permits allow, they can sell that extra capacity to others who need it.
And yet, 2021 saw the amount of CO2 emissions rise to an historic high of 36.3 billion tonnes – a year-on-year increase of six per cent, according to the International Energy Agency. The main culprit was coal, and that was despite renewable energy generation recording its largest ever output.
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Do we despair? No. We offset… in the short-term at least.
In the VCC marketplace, businesses of all sizes can buy credits that each represent a certified metric tonne of removed,
Since the Paris Agreement in 2015, 192 countries and the European Union have signed up to the fight against climate change –aiming to reduce carbon emissions and limit the global temperature increase to below two degrees Celsius this century. In effect, that means the world must reach net zero emissions by 2050.
But many companies who don’t fall under mandatory schemes are being driven by stakeholders to make voluntary progress towards net zero. And a shortcut to that is by using the parallel voluntary carbon credits (VCC) market, which allows them to net off their CO2 emissions by investing in projects that contribute to climate goals.
A COMPLEX CARBON MARKET
“Right now, we’re working with one of those mentors as our lead capacity provider. And so the lab gave us everything we needed in terms of knowledge, connections, and an accelerated route to getting our first product to market.”
The real ambiguity of the market, and where insurance has yet to have an impact, is in its pricing. The report points out how there is not enough loss history or performance data for insurers to calculate credible loss expectations.
“Given that there is not a huge amount of historical data on under-delivery risk in this market, we have certain proxies that we use, and we’re also looking at it from a relative risk basis. It's an assessment of what would make a project a higher
Before founding Kita, Dorfman spent eight years at the insurance-focussed law firm Clyde & Co, where she helped to start and then led business development and strategy for the firm’s climate risk practice.
“Kita’s vision is to develop a portfolio of insurance products for the carbon removal space, because we see the need for insurance to de-risk and enable all the different parties in the chain, from the people developing the projects to the intermediaries trading, to the buyers. This will help the market scale to the levels the world needs,” says Dorfman.
In July, Kita completed its work in Lloyd’s Lab during the Cohort 8 programme, which focussed on decarbonisation and climate
While still a developing market, there are some clear areas where insurability is an obvious need. SwissRe’s 2021 report, The Insurance Rationale For Carbon Removal Solutions explained how insurance can be useful for risk management, long-term
But it was when she became involved in Carbon 13, a venture-building ecosystem of academics, entrepreneurs and researchers operating out of Cambridge, UK, that she clearly identified the challenges that carbon removal startups were inevitably going to face without the agency of insurance.
“What we insure is under-delivery,” says Dorfman. “Our assessment of under-delivery risk spans past performance, technical risk, location, and the carbon standard invalidation risk.
We see the need for insurance to de-risk and enable all the different parties in the chain, from the people developing the projects to the totradingintermediaries[carboncredits],thebuyers
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It was at Carbon 13 that Dorfman also met her future Kita co-founders, CTO Paul
investment, and buyers of green products and services to stimulate the market. Insurance could act as a partner to businesses in the VCC market to build further regulation and standards of integrity.
Kita will be working on a whole suite of insurance solutions to tackle the many issues in the market, but its first offering will focus primarily on the needs of the credit buyer.
THE CHALLENGE FOR STARTUPS
Its launch in January 2023 is the company's main goal for the present. For the rest of next year, Kita will be focussed on scaling that initial product and growing its operational structure to facilitate the offering. Over the next 24 months, the company hopes to expand its distribution strategy, moving beyond direct-to-clients, to an embedded channel in the carbon removal marketplace.
“I saw that these climate tech solutions were going to struggle to access insurance because they were dealing in new technology, new risk, and a new market. If you can’t access insurance, at some point you’re going to be blocked from scaling because you aren't going to be able to access the forms of capital you need.”
Young and CPO Thomas Merriman. Young has spent more than 24 years in hedge funds, and previously co-founded an AI company, Sybenetix, which was acquired by Nasdaq. Merriman has a fintech product development background and was head of product at Nasdaq for its buy-side compliance platform. With their respective views and expertise in the voluntary carbon market, the three decided to build an insurance company that would help climate removal solutions scale faster.
“Kita is taking an educated guess that via providing insurance to this market, insurance will be an enabler to help the market grow faster. And through being an early-mover in that market, Kita will gain the market share and the knowledge to be able to build out our portfolio of products to become the significant insurance company we plan to be by the end of the decade,” says Dorfman.
A NEW ORDER: CARBON TRADING 34
delivery risk than another project, helping with the directing of that pre-finance.
“Lloyd’schange.Labwas fantastic. We were fortunate to go through the lab at a formative stage in our process,” says Dorfman. “We had amazing mentors, and we learned a lot about the insurance industry, particularly how the structure of Lloyd's works. We went in with two insurance products, and our mentors helped direct our thinking as to which of those products would be best to get to market faster. Given that we want to become a managing general agent (MGA), we want to work with the larger insurance companies and we need to understand their risk appetite.
For the world to meet its climate change goal, the Taskforce for Scaling Voluntary Carbon Markets (TSVCM) estimates that the availability of voluntary carbon credits will have to increase 15-fold by 2030. And due to the shortage of carbon credits being issued, purchasers may resort to pre-buying credits where carbon offsets are promised, but not
“Thereguaranteed.isarealsupply shortage of carbon removal credits, and buyers are increasingly needing to pre-finance projects. So you’re paying for carbon credits before a tonne of carbon is removed from the atmosphere and stored away. And it is only at that point where it is removed and stored away, and verified as such, that you can use the credit,” explains Dorfman.
Such an approach carries a high level of risk for the investor, which could act as a disincentive for companies to engage with the market. And it’s that deficit of confidence that startup Kita seeks to address because insurance products built around these risks make it safer for investors to trade.
In the weeks leading up to COP 27 in November 2022, climate tech startups accumulated around $19billion in funding, 21 per cent less than last year's mid-year funding of Standardisation$23million.isneeded to secure confidence in these solutions and Dorfman passionately believes that insurance of carbon credits is one way to convince businesses to engage by giving them that confidence in their offsetting goals.
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MIS pioneered the use of high-frequency imaging data to solve complex business problems a decade ago. By 2015, it had delivered the first web-enabled before/after comparison of satellite imagery for the insurance industry within hours of a loss event. Two years later, it won the contract to build the
“We will be delivering to our insurers within 24 hours of the event occurring, and each line of their portfolio will be enriched with MIS Damage Assessment,” says Smith. “So, we will be telling them that ‘this location that you insure has suffered severe damage’, quickly enabling them to understand when claims are likely to come in, pre-first notice of loss (FNOL).”
From live feeds of global weather events to on-the-ground monitoring of political conflicts, every square inch of the planet can be observed, even as events unfold – a gift of intelligence that insurers cannot live without.
At the of eyestormthe
The GEO platform involves a two-step process. First, the intelligence team will open up all avenues to wholly understand a given event. This may start with checking the validity of open-source data
to deploy observational resources via drones or flights. The second part, the conclusions of which are made available in GEO, is collating the relevant information about an event that insurers need to know about, in the context of their exposure. This is configured in GEO’s Insights feature, which allows insurers to assess their entire portfolios against the event – even before it has fully played out.
Lloyd’s market catastrophe intelligence platform, serving all 55 of the Lloyd’s market’s managing agencies.
“Anyone in exposure management will tell you that you’ll get a phone call while it's still raining, asking ‘how much is this going to cost us ?’,” says Rosina Smith, head of product at McKenzie Intelligence Services (MIS), a leading provider of intelligence data to re/insurers. And, thanks to the MIS Global Events Observer (GEO), co-funded by the European Space Agency and launched last year, it can now provide an accurate response to that question.
Rosina Smith, Head of Product at McKenzie Intelligence Services, reveals how its Global Events Observer is changing the way risk is perceived and managed, as catastrophic events become more common – and costly
MIS’ most recent case study analysed the development of Louisiana’s Hurricane Ida in late 2021, the second deadliest storm after Katrina, with heavy winds, flash floods and severe power outage. Within 24 hours, MIS published a report for exposure managers, collecting open-source and
But the GEO is a step-change for the company. It allows MIS to collect and analyse highly accurate, geotagged external data from a larger range of space and ground sources, compare it to data held in the GEO vault, which for some perils goes back to 1979, and then apply various intelligence techniques to interpret the information, based on MIS analysts’ detailed understanding of how exposure management works – and all in close-to real time.
CATASTROPHIC EVENTS: DATA INTELLIGENCE 36
“We built our intelligence collection plan based on our insurers’ exposure,” says Smith. “We know the properties our insurers care about and we can analyse those properties, collecting information on what is happening in our insurers’ portfolio.”
“Of course, there are other events which aren’t modelled. Take the conflict in Ukraine or the Texas Freeze event,” says Smith. “Previously, insurers have been left to work out how to exercise their approach on an event-by-event basis, whereas we can at least give them that starting point so that they can begin before their client list has told them they’ve suffered a loss.”
“If you look at the conflict in Ukraine, sources that we might deploy in other circumstances, like drones, would not be available, nor appropriate. We have to make sure we are using [other] reliable and accessible sources.
Speaking at the time, MIS founder and CEO Forbes McKenzie said it demonstrated how insurtechs working together could improve the resilience of people at risk of natural disasters. The incorporation of real-time intelligence into its services positions MIS as a facilitator for this type of insurance.
Smith sees a key role for MIS in helping insurers navigate the best use of geospatial and observational technology solutions as they hit the market. Meanwhile, MIS is embarking on capital fundraising as it expands into new territory.
MIS and its team are in a constant state of learning and adaptation. With every event, sources are robustly tested and refined, meaning insurers can rely on MIS to work with suppliers and data types that are effective and valuable in accurately determining damage. Natural perils are constantly observed, using live feeds that are stationed around the world. But for political and singular events, the team can call on specific datasets.
“With GEO, we have great traction in the London market, but we are expanding in late 2022 into North America,” says Smith. “We will be doing a targeted fundraise to support that expansion and other areas of focus, and to make sure we continue to answer the right questions.”
“That is where the intelligence discipline comes in,” says Smith. “We have a collection plan that is bespoke for each and every event, we work with numerous suppliers over a range of data types and territories to deliver the best geospatial representation of activity on the ground. Our approach varies by event, by territory, but our outputs are consistent. Our aim is to give our clients output they can rely on and be certain of, despite it being made up of varying inputs – we’re effectively managing noise, so our clients don’t need to. Because we’re data-provider agnostic, we will use the best tool for the job.
In October 2021, soon after the launch of GEO, MIS signed a partnership with Yokahu, the first specialist provider of parametric hurricane insurance in the Caribbean. A digital-first managing agent and approved cover holder at Lloyd’s, Yokahu provides cover to people and businesses in cyclone-vulnerable areas of the world. The partnership sees MIS become the sole trigger data provider for the product, using automated intelligence from GEO.
GEO’s potential in the growing parametric insurance industry – where pay outs within agreed parameters are triggered by forecast indicators (of, for example, critically low rainfall or high winds) – is obvious as the human and monetary cost of climate-related catastrophic events increases.
“Even when you take something like a hurricane, we can make use of aerial sources but we still need to corroborate the imagery with other datasets we can find on the ground as well.”
licensed data on wind speed and local emergency reports, building a fully verified picture of the catastrophe. A report for claims managers was available within 48 hours, allowing operational decisions as well as technical claims handling.
In the US alone, the total cost of billion-dollar disasters between 2017 and 2021 hit $742.1billion, according to the US government, setting a new record. And yet large swathes of the world’s population still have no financial protection against such disasters, making it likely that parametric-based products will continue their current 10 per cent, year-on-year market growth.
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Data view: Hurricane Ida made landfall in Louisiana – seen here within GEO
creating something special,” says Smith. “We have senior personnel within our business who have had extensive careers in the military and been through NATO imagery training. That influence is met by the insurance expertise that we have invested in for the last two years. Together, they’ve a unique view of the world, which makes up the beauty of our offering: trusted intelligence applied to the specific insurance use case of event response.”
Now is an exciting time for McKenzie Intelligence Services. It is gearing up for international expansion and adding more features to the GEO platform.
Two haveworldscollided in MIS… intelligencetrustedapplied to the specific use case of event response
37
“Two worlds have collided in MIS,
MIS is staffed by multi-skilled product and exposure management experts, but many – including its CEO – also have a history in military intelligence.
“We fill a very real gap in the event response process. Having filled this gap, MIS clients are making early calls on reserving, on triage of their loss-adjusting resource, and on setting their response,” says Smith. “They are doing this immediately, pre-FNOL, offering a better product and keeping senior stakeholders abreast of what is happening. We can finally give them the tools to put credibility behind those complex events.”
“The US represents a huge opportunity for wefox to deploy our indirect distribution model, backed by our technology,” says Tomaso Mansutti, its head of international partnerships. “Given the significant growth wefox has enjoyed in Europe with more
2021, of which around US$85billion were insured. Most events were on the coast.
But, as a federation of 50 states, the US isn’t like any other market and new entrants need to be aware of that, says Greg Murphy, executive vice president for North America at Instanda: “As an insurer, it can be incredibly difficult to expand your offering into a new state. Some are stricter than others, and rating requirements, billing and dunning timeline rules, policy forms and documents, and data protection rules can all vary. Insurers must know the differences and ensure they have flexible technology that can support these requirements.”
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than 100 per cent year-on-year growth, we feel we can achieve similar results in the US.”
Duck Creek Technologies from Chicago and Ethos Life from Texas are among the biggest success stories, having racked up mega-rounds in the last year, shooting their valuations to unicorn status. Fellow unicorn, Palo Alto-based Next Insurance, can boast the backing of industry giant Munich Re, which owns just over 25 per cent.
That’s precisely what Instanda seeks to provide, of course. But it’s not just about compliance. Business risk is a key factor when weighing up which states are the most cost-efficient to service. Startups might be attracted to California and New
York by the proximity of VC investors and abundant funding – VC investment is currently worth around $157billion in California alone – but it’s incredibly competitive and, for some, the battering they take from weather-related claims, makes launching there costly.
“Additionally, there is a strong broker infrastructure in the US, meaning that new players in the US insurance market can benefit from a soft landing if they identify the right partners,” he says.
Rock agrees that solutions can travel well across the Atlantic. Every insurance customer is looking for the same thing these days, after all: “A great customer experience from a low-cost provider. I see that as both a European and American goal,” he says.
According to Dealroom.io, four out of the five top global insurtech funding rounds last year were successful sought by companies in the States. And there is no shortage of European firms looking to take a slice of that great American pie.
UK-based insurance software provider Instanda is pursuing a $45million venture to expand its offering into North America. London-based life and health (L&H) startup YuLife, which recently secured $120million in its Series C funding round, is also planning to enter the US next year with the backing of prominent European VCs Creandum and Target Global. European digital insurance platform wefox, now valued at $4.5billion, plans to expand into the US by 2024.
Forty-one per cent of consumers were likely to switch from providers which lacked such digital capabilities, according to a 2020 PwC survey in the US – and a similar number favour digital delivery in Europe. So, beyond natural disasters and America’s infamously expensive healthcare, is there much to distinguish the two markets? No, says Sam Fromson, COO and co-founder of YuLife. It still has the same pain points, such as low levels of engagement and trust, that YuLife set out to resolve in the UK.
“There are hurricanes in Florida, and wildfires in California. Businesses are moving away because of the cost of insuring people there. Many would have to pursue reinsurance to make sure that they’re covered,” says Ron Rock, senior director of insurance/insurtech at investment organisation JobsOhio, which has seen its state benefit from the exodus.
Stars in their eyes
What’s the business landscape like in the US for intrepid insurtechs heading West?
“If you think about the Midwest, from the northern part of the US, right down through New York, weather-related catastrophes rarely occur there. So, it makes sense for them to launch in the Midwest. And Ohioans make for a great test market!”
The States suffered US$145billion of losses caused by climate events in
The US has the largest proportion (56.1 per cent) of the global insurance market, far exceeding densely populated Japan (7.4 per cent) and the UK (7.3 per cent), making it a honeypot for providers and their investors.
There is a strong broker infrastructure in the US, meaning that new players in the market can benefit from a soft landing if they identify the right partners Sam Fromson, YuLife
Beam Dental, Root Insurance and Bold Penguin, digital companies that have all found their homes in and around Columbus, would attest to that.
a range of different claims. Its systems include CLARA Triage, Litigation and Treatment, to name a few.
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“The concept of ‘delivery’ in workers’ compensation insurance is complex in that the policyholder (business) and the claimant (employee) have a multi-faceted relationship,” says Tom Warden, chief insurance and science officer at insurance AI-as-a-service provider CLARA Analytics.
CLARA offers a suite of products to manage and monitor risk and identify the services insurers need for
“CLARA Litigation helps carriers and self-insureds reduce claims costs by enabling the adjuster to act quickly and proactively with the injured worker when events occur that, left unaddressed, increase the likelihood that the worker will call an attorney to represent them,” Warden explains.
The cost per head to businesses of providing workers’ compensation insurance varies, depending on the company’s size. Indeed, some insurers stipulate a minimum policy amount because they find small companies too expensive to service.
In the US, healthcare is a divisive issue. From COVID-19 to the recent Roe v Wade ruling, which overturned universal access to abortion, those who can least afford medical assistance – often those who most need it – are priced out.
“Businesses want their employees to return to work quickly, premiums to be low and litigated claims to be minimal. Employees want to get and stay healthy. They are mostly concerned about the quality of care they receive. How they are treated throughout the claim process has a significant impact on their attitude toward their employer and their desire to return to working for them. Claim adjusters must navigate the injured worker through this landscape full of obstacles to achieve a resolution that is viewed as equitable by all parties.”
Warden highlights two important metrics that technology sets out to address, namely claim-handling time – can take 12-to-18 months to reach a settlement, according to John Foy and Associates – and costs.
“CLARA Treatment improves workers’ compensation by driving better outcomes for all parties: injured worker, insured business and insurance carrier. Our data shows when high-scoring physicians and clinics are used, back-to-work happens sooner, employers are less disrupted, the claims costs affecting their premiums are reduced and insurance carriers operate more efficiently and effectively.”
And considering that there are 2.7 million labourers and material movers, 968,760 construction workers, 1.16 million agricultural workers and 4.2 million registered nurses, all in physically demanding jobs that put them at risk of illness and injury every day, that’s a big bill.
For 49 per cent of the US population, workers’ compensation insurance is their only access to sponsored healthcare. It covers medical costs, ongoing care needs like physical therapy and funeral cover for employees who suffer accident, illness or fatality related to their work. And that protection was hard won. According to insurer The Hartford, it took 37 years for all states to pass laws putting obligations on
For the majority of people in the States who have it, their healthcare provision is tied to their occupation. Any accident, injury, or illness which could result in time off, is usually covered by workers’ compensation insurance, a commercial product provided by employers.
employers to carry workers’ compensation, with Wisconsin being the first in 1911, and Mississippi the last in 1948. Many governments even set up their own funds to enable companies to purchase workers’ compensation directly from the state. Only in Texas is this insurance still not compulsory.
Employment-based insurance is the most common private health coverage in the United States. And it’s where tech is proving key to bringing down premiums and improving benefits
A donewelljob
Our technologies help level the playing field between small and large carriers
costing a total $100.2billion as of 2021. While there might be a limit to how much they can do to control the number of claims made, employers and insurers are equally interested in reducing their cost.
“One of Omaha National’s distinctive characteristics is that, even though we are a relatively young company, we design and develop our software in-house,” says Reagan Pufall, president and CEO.
“Small businesses are more fragile, they don’t have as many cash reserves or the balance sheet that a larger business has to weather this type of environment,” says Swigart. “We insure a lot of service industries – transportation and janitorial businesses, painters and home healthcare workers – and it’s been a challenge during COVID. That said, we had a couple of months of uncertainty, and then we were right back to rapid growth, even while the market overall was still in turmoil. I think that speaks to the need we are filling. We continue to sign new agencies aggressively, and customer growth is doubling every year.”
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Pie Insurance started selling workers’ compensation policies four years ago, leveraging AI to give small businesses cover.
Making workers’ compensation insurance ‘as easy as Pie’ requires options. The company uses algorithms and AI to manage risk more effectively and faster,
Omaha National (ON) is another insurer with a focus on small businesses, working closely with agents and brokers. It provides a full suite of in-house services, including claims adjusting, medical management, and payroll services. Like Pie Insurance, tech is at the forefront of its operations.
We are a relationship,tocompany,sophisticatedhighlytechbuttechneedssupportthat[client]notreplaceit
While AI is a critical part of using data to improve workers’ compensation claim outcomes, the claims data it relies on is notoriously incomplete.
“Data mapping is extremely important for analytics so that teams creating models and other tools know exactly what data they have, what it means and where it comes from. Productionising these analytics requires accurate data mapping in order to run smoothly.”
Reagan Pufall, Omaha National algorithms, driven by different data elements and sources that allow us to efficiently price and underwrite the business,” says Swigart.
With a threatened economic downturn in the States and low unemployment, in-work benefits such as generous health and life cover could be a trump card for small businesses caught up in a talent contest. Their workers’ compensation policies therefore need to be both affordable and as comprehensive as possible.
Warden of CLARA Analytics. “We help smaller carriers further by building their models with their data and data from our contributory database that contains more than four million workers’ compensation and commercial auto claims.”
Tom Warden, CLARA Analytics
“We are trying to make their lives better through technology and sophisticated
“The small business market is under-served and over-charged,” says John Swigart, co-founder and CEO of Pie Insurance. “The traditional insurance industry is set up to serve medium-to-large accounts, because they deploy a relatively high-cost human underwriter model and lack digital enablement in the service and distribution, and that doesn’t stack up well with smaller businesses and their policy size. You get a lot of declines in coverage because the business is too small, or the insurer’s ability to assess a business’ risk characteristics efficiently is not there.”
Annually, 4.9 million US workers’ compensation claims are filed by both private and government employees,
“Our claim results have always been more favourable than the industry average, but as soon as we launched our ONCORE Claims module during 2021 we saw an immediate, dramatic further improvement.”
“One reason for this is that loss adjusters are mostly measured on time spent on each claim. They operate in a high-pressure, cost-conscious environment. These pressures lead them to take shortcuts when entering data, and skip many fields which are useful for analytics but not required to advance the claim,” explains Warden.
“We focus on developing operational software that supports and elevates the work done by our superb employees. The main need of the injured worker is a claims adjuster who cares about them, perceives them as an individual with unique needs, and provides them with the support to make it through a difficult experience. As far into the future as I can see, that will not
The small business market is underserved and overcharged John Swigart, Pie Insurance
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In time, he says, all the company‘s strategically important work will be performed within its proprietary software application, ONCORE, an all-in-one platform that brings claims handling into a single place for customers to select, adjust and access their insurance.
A survey for Safe Work Australia showed that a positive claims experience resulted in workers reporting for work sooner, while denied claims ultimately cost the industry more. A study by reinsurer Lockton found that 67 per cent of denied claims become paid claims within a year and cost, on average, 55 per cent more than if they had been approved first time. It’s these costs that predictive AI and algorithmic software such as that deployed by CLARA Analytics, Omaha National and Pie Insurance address. And, as Kevin Combes, a senior director with insurance giant Aon, acknowledged at a recent IBA Worker’s Comp Power Panel: “I have to say that the proliferation of bespoke and tech solutions are driving significant improvements in efficiency throughout the claims process.”
so that businesses can browse and buy a policy in one day. With this, customers are given a varied choice of payment methods and support, from self-service online portals or a human agent.
“Our technologies help level the playing field between small and large carriers, because there are scalable and cost-effective ways to build and implement them for companies of all sizes,” says Tom
In that respect ONCORE and CLARA Analytics share a common goal, to scale up the operations and communication processes for workers’ compensation insurance through AI and online solutions.
change,” says Pufall. “We are a highly sophisticated tech company, but know that, with workers’ compensation, tech needs to support that relationship, not replace it.”
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