8 insurtech trends for 2020

8 insurtech trends for 2020

This year will see the insurtech revolution accelerate, but in what directions?

By Rita Yates, Chief Executive Insurtech Australia

Last year was a good one for insurtech in Australia. We’ve seen strong growth in the number of insurtechs operating in Australia, along with a realisation of the impact that insurtech can have on the industry. We’re also seeing established insurers starting to embrace insurtech as part of their digital strategies. We expect this progress to continue through 2020, with several key trends to emerge.

1. Evolution of partnerships:

Partnerships between insurtechs and incumbents will become more abundant across many areas of the value chain, and those that are in the early stages will start to mature. We know the insurtech ecosystem is somewhat unique, in that the majority of insurtech organisations are looking to partner with insurers, while many of these incumbents don’t want to do everything internally and are now looking to find insurtechs to work with that can solve some of their pain points. These partnerships will also likely lead to more innovative ways to distribute insurance, including non-traditional avenues such as the recent partnership between Evari and Bunnings to offer insurance to tradies.

2. The continued rise of AI and machine learning:

Artificial intelligence (AI) is likely to become the leading piece of technology used by insurtechs and continues to be implemented or explored by insurers. AI and machine learning have the potential to impact every aspect of the way insurance businesses are run, making almost every process more efficient. AI will likely have a particular impact on underwriting and pricing, as well as helping to automate processes and enhance personalisation of insurance products. The 2019 Insurtech Ecosystem Report showed 24% of insurtech propositions are underpinned by AI and machine learning. Expect this percentage will grow.

3. Asian potential for Australian insurtechs:

Australian insurtechs will look globally for both partners and investors. To date some Australian insurtechs have found more success breaking into the US or UK markets for funding or partnerships compared to Asian countries. In 2020, InsureTech Connect, globally one of the biggest insurtech gatherings, will be held for the first time in Singapore along with other major global insurtech conferences looking to be hosted in Asia. This holds great potential for Australian insurtechs to start exploring and hopefully growing connections within Asia into something more substantial. Blue Zebra is one insurtech considering expansion into insurance centres like Singapore and Hong Kong. In light of this, in 2020 Insurtech Australia’s annual delegation will be developed around the Singapore gathering in June.

4. International entrants to Australia:

Last year saw a number of international insurance technology startups joining Insurtech Australia as members, including Socotra, Montoux, Merlynn and JRNY. Some are looking to scale into the Australian market, and we’re expecting this trend to continue. Australia is seen as a very attractive insurance landscape to work in when considering the size of the Australian market and the regulatory environment.

5. Health insurance exploration:

Traditionally insurtechs have focused more on opportunities to impact general and life insurance, but we now expect them to start exploring how they can influence and impact the health insurance industry as well. Those that work within data, wearables and prevention in particular will look at the opportunities in health. Government policy will be key here, and there’s a question mark around whether attempts at innovation will be hampered by the regulation and complex structure around Australia’s healthcare industry.

6. Ethical and legal issues:

The ethics discussion in insurance and insurtech will become more important and prevalent. In particular this will focus on the use of AI technology and how consumer data is used by the insurance industry. Insurers have access to an abundance of customer data and external data sources, and will need to navigate if and how they can ethically and legally use this information. Increasing privacy and consumer data regulation around the world will also be key to this discussion.

7. Prevention and mitigation:

There will be an increased focus on prevention and how this can become a value-add for insurance customers. Insurtechs such as FloodMapp are developing propositions in using predictive modelling to determine the risk of natural disasters and helping support the prevention of loss. This type of technology will be explored more commonly, particularly as the effects of climate change become more apparent. Other examples include the prevention of fraud through predictive modelling and data analytics and insurtechs focusing on prevention in the health insurance industry.

8. Payment tech developments:

Payments and data analysis tools will become more important. So far insurance innovation has focused more on the key value chain areas of claims, underwriting and distribution more broadly, but it will be interesting to see the area of payments in insurance take more focus. This will revolve around the opportunities of using tech to increase the efficiency and speed of payments to enhance customer experience in the event of a claim such as Cover Genius offers in certain situations. Parametric measures will play a part in this process to understand and manage the triggers for efficient claims payouts.

In summary:

We’re definitely optimistic about the outlook for Australia’s insurtech sector in 2020 and believe our ecosystem punches above its weight. There is still much work to do, but we’re looking forward to seeing what the year ahead will bring, with more openness and interest among incumbents in exploring the opportunities that insurtech holds for them alongside growing and developing insurtech propositions.

• Rita Yates is Chief Executive of Insurtech Australia, Australia’s leading not-for-profit industry association for insurtech and insurance innovation.