Insurtech: underwriting a revolution

The conservative insurance industry is set to be hit by a wave of technological disruption. Can tech restore consumer trust?

Sign Up

Get the New Statesman's Morning Call email.

Ranvir Saggu, CEO of Blocksure, is explaining the “four phases” of disruption. “We’re in the discovery phase at the moment. People are just trying to figure out how to use this tech and what it’s capable of.” Blocksure is an insurance operating system using blockchain technology, and the disruption being discussed is “insurtech”: the application of cutting-edge technology to the highly regulated insurance industry. The sheer size of the UK insurance industry means that disruption will have a substantial effect: it is the fourth largest in the world and contributed £35 billion to the UK economy in 2013; members of the Association of British Insurers handle £1.6 trillion of invested assets.

London has always been at the very centre of insurance. Lloyd’s of London is seen as the historical home of modern insurance and dates back to 1686. Even within the industry, it is not controversial to say that insurers are resented by their customers. “The insurance industry isn’t great at customer service” Saggu admits, “I’ve been in it for over 25 years and there have been many occasions where I have disagreed with how customers are treated.” A PwC survey conducted in 2014 found that less than a third of people trust insurance providers.

Saggu and other insurtech disruptors are hopeful that technology will benefit the consumer in two key ways: value and experience. The increasing use of data allows insurers to create policies that are tailored to individuals, and should bring down the cost for most people. The growth of artificial intelligence, the internet of things, and big data analysis allows for policies to be much more specific, rather than customers being lumped into risk groups by brokers, which Saggu points out means “you’re subsidising other people.” It opens up huge opportunities for micro policies and short-term claims, and will allow insurance to adapt to an increasingly complex consumer environment.    

Secondly, as in the emerging field of data-driven “open banking”, the unlocking of digital tools to enable price comparison and centralised online consumer platforms is expected to drastically improve the customer experience.

So far, insurtech start-ups have struggled to do more than improve customer experience, due to the capital required to underwrite even the smallest claims, and the scale of regulation within the industry. Blocksure, a “full-cycle insurance sales, administration and claims platform” is “making insurance mobile-phone capable from a buying and claims perspective”, Saggu explains. “What we’re doing is enabling insurance brokers to change the insurance industry from the inside” by creating “a single identity” for customers that they can share with multiple insurers, without having to re-input information. “The customer will provide a digital key to access their data. This provides permission to access their data so no data entry is required to buy insurance, and the insurer will get the data.”

Rob Moffat is a partner at Balderton Capital focusing on fintech and insurance. He recognises the struggles that disruptors can face. “Going the route of being an insurer yourself is going to be hard. That is going to be £15m-plus, before you can sell one policy. Or you need to partner up with someone else to provide the capital and the insurance licence, and that can really slow you down.” There is internal resistance to disruption, particularly from middle men, “a lot of the insurance tech is perceived as threatening the brokers,
so that’s a real challenge.”

Dylan Bourguignon is the CEO of So-sure, a mobile phone insurance company that claims to be “restoring trust of consumers in insurance”. His opinion of brokers, and the entire value chain structure, is not high. “You’ve got members making decent margins and their customers, are not getting the ‘peace of mind’ they purchased”. The company offers “social insurance” in that its customers can invite their friends to join. “If you and your friend don’t claim,” explains Bourguignon, “you can get up to 80% money back, every year.” It is unclear if this grouping strategy reduces the likelihood of claims, but the process is simple and efficient to attract customers. “When you buy our policy, it is a slick, painless, 21st-century digital experience and we are clear up front on what is covered or not.”

Like many startups, So-sure is struggling to provide the whole insurance package. “We are an insurance company that doesn’t take balance-sheet risk. We’re working with amazing partners who are providing us [with this] and we do everything else.” Bourguignon is not fazed, however, by the regulatory aspect of the industry, and views it as necessary to protect customers, “I feel our objectives and that of the regulator are aligned.” He is on a mission to correct what he perceives to be a fundamentally unfair process, “the issue we are addressing is a global problem, it’s not just a UK one, and so our ambition is to solve that problem for the consumers globally.”

Existing insurance giants are scrambling to react to this technological wake-up call. At the Aviva Digital Garage, an internal tech revolution is taking place. Having acquired staff from the likes of NASA, Activision and Facebook, the insurance giant is investing heavily in staying ahead. Andrew Brem, chief digital officer, sums up their mission in one word: “Engagement. Our industry suffers poor engagement with customers ... digital allows us to have a direct relationship.” 

The Digital Garage certainly doesn’t look like the offices of an insurance company. For a start, it’s in Hackney. Co-workers packed together onto wooden islands in an open-plan office decorate the walls with their ideas, share meals in the Google-esque canteen, and attend impromptu performances and talks in ‘the agora’, a small theatre space within the complex. Amid rough diagrams predicting artificial intelligence trends in 15 years’ time are vintage posters depicting the company’s Norwich roots, found in their headquarters. 

Aviva Vault is a recent example of a Digital Garage invention. “It can scan your emails to look for receipts, or you can just take a picture of something that you recently bought. It checks whether you’re covered under your current policy, and if you’re not, to allow you to top up or create a new micro policy for it”.  Aviva has the consumer base and the capital to back up its innovative ideas; can the industry truly be disrupted by start-ups? “It’s not an easy industry because actually to underwrite that risk first of all, that’s enormous capital. We can’t wish that away. I think the winners in insurance are going to be partnerships between innovators and large companies. I do think the industry is ripe for disruption.”

What does he hope insurance will look like in ten years’ time? “I would expect it to be totally frictionless, so none of these absurd endless questions that we torment you with before you get a quote. We know you already from data you’ve agreed to share with us; we can provide something that is tailored for you. And then you just have to activate it.”

Ranvir Saggu thinks that investors will be back for a second wave – the “adoption” period – which may overcome the major barrier of capital and move insurtech beyond small claims. “Businesses now have models which are rooted in the mobile, but they’ve really got to crack the mainstream products. The Amazons and the Googles of this world may say ‘you know what, we fancy a bit of this.’” Then will follow the “challenging phase”, “and the last one is the ‘new world’, where we will have an insurance industry that does not bear any resemblance to the current one.”

Culturally, Andrew Brem believes that tech pressure can only be positive for the industry, and the customer. “One of the things that our industry is infamous for is to reward new customers and penalise old. The more you choose us, the longer you stay with us, the better we should be making it for you from a value point of view as well as an experience point of view.”

Augusta Riddy is a Special Projects Writer at the New Statesman.