Insurance, Insurtech, Startup


Karl Heinz Passler


Insurance is an intangible product. Traditionally it was highly people-intensive in distribution, administration and claim adjustment. But with the introduction of electronic data processing, the industry became digitized in the 1980s.

’’Insurance is the Perfect Digital Product”

Insurance is the Simple Payment Promise

Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent uncertain loss.

In order to be insurable, the risk insured against must meet certain characteristics. Actuaries assess the financial risk of a particular situation, primarily by using mathematical models, probability and financial theory.

Insurance is about Administrating Policies

An insurance policy is a contract between the insurer and the insured, and determines the claims which the insurer is legally required to pay due to loss caused by the perils covered under the policy language.

Policy administration systems have been part of the insurance industry since the 80s. They are software applications that automate the entire policy administration process. They cover the entire insurance services-chain right from issuing a policy to settlement of claims.

Technology Connects the Digital and Real Worlds

The new challenge for traditional risk carriers is the digital connected (real) world, this is the new market force in the industry. It is driving massive change in consumer expectations and creates opportunities for the core competencies of risk carriers.

’’The challenge for incumbent insurers is the >connected< World – InsurTechTalk’’

Customers have 24/7 Access Points in their Pockets

Smartphones and tablets mean for insurers, that customers want to be able to access the right information or make a transaction at the right time in the right context. This has irrevocably changed the way that consumers engage and interact with carriers.

A good digital customer experience (#CX) requires products that are easy to comprehend and simple enough to enable e-applications, automated underwriting and direct issuance. These all help to deliver the type of instant gratification that consumers expect in this digitally connected world.

Data and Analytics Generate New Insights

The ability to leverage data and analytics means that insurers have to make use of the plentiful data stored in their legacy systems. Leaders started to, for example, underwrite better risks, detect frauds more often and increase up-/cross-selling ratios.

Acting on these new insights will improve profitability across the entire value chain (including product development, customer acquisition and service, and claim management). Data and analytics will emerge as the digital insurer’s primary competitive weapon.

Real-time Data is the Basis for Better Interaction

The availability of continuous data streams (e.g. usage-based and wearables) mean that insurers are able to differentiate themselves via customer experience and added value.

The data streams that allow insurers to better price risk also allows to better interact with customers. It’s about anticipating the customers needs and providing them with the experience and value they want, when they want it.

#INSURTECH Startups are the Agents of Change in Insurance

InsurTech startups make use of their talents by combining the ideal digital product (promise to pay) with connecting technology (access and service 24/7).

  • They create new customer experiences, like the InsurTech brokers Clark and Knip with their customer-centric approach by using mobile apps.
  • They bring new products to life, like friendsurance and Lemonade the first providers of P2P insurance.
  • They invent new business models like Massup with their plug-and-play platform for annex and niche insurance products.

The opportunities are so terrific, that a lot of InsurTech startups get founded with venture capital and start to invade the multi-trillion dollar insurance industry.