Insurtech: insurance companies go digital

For decades the insurance world has been immobile, unaffected by technological change. Today, perhaps influenced by banks’ increasing trust in fintech, things are beginning to change. The term insurtech has been around for years but only now is it starting to become a reality: there are 1800 start-ups in the industry at global level and in 2017 they benefitted from over 200 investments of an overall value of $200 billion (2017 Insurtech Almanac data, Ft Partners, January 2018). From venture capital firms, but also from major traditional insurance groups, which are beginning to believe in it.

Automotive: black boxes
One of the pioneering companies in the sector is Octo Telematics, which provides telematic and data analysis solutions for car insurance. Founded in 2002, Octo Telematics designs and produces black boxes for vehicles. Today it is the biggest insurance telematics company in the world and is involved in transforming car insurance thanks to the behavioural, contextual and driving data analysis it performs for its over 100 insurance partners. Black boxes record the driving habits of the user and accident dynamics. It is no coincidence that those who choose black box insurance (and get one installed in the car) receive discounts. Insurance premiums will gradually be aligned with real driving styles: insurance companies will set your premium according to how you drive, how much you drive, where you go and at what time. The use of black boxes connected with policies is on the rise all over the world.

Other types of insurance
As well as car insurance, the internet of things can be applied to house insurance and even personal insurance. Insurance packages have been trialled that involve the use of sensors in the home which prevent or keep the insurance company informed of insured events. As for health insurance, South African company Discovery, for example, has launched the Vitality programme which rewards the healthy lifestyles adopted by policyholders with discounts and promotions on gym memberships, purchases and travel. How? By monitoring the healthiness and activities of the policyholder with wearable connected devices. The concept is simple: if we allow ourselves to be “monitored” we will make savings.

Technology is also changing the way insurance companies and users interact: whereas until now policies were proposed by agents, today it is artificial intelligence based on data analysis that offers the right product at the right time. Registering baggage at the airport before embarking? The insurance company will be able to send you a push notification on your mobile to propose luggage insurance there and then: to activate it all you need to do is press a button. Just arrived at a skiing resort? Artificial intelligence will propose a policy for your skiing holiday in real time.

Smart contracts
But there is more: the new frontier of insurtech is blockchain which, through smart contracts, makes it possible to speed up processing times. Some companies are beginning to propose policies managed via blockchain: the user pays the premium directly on blockchain thanks to an app and, in the event of an incident, receives compensation automatically without any claim being opened. An insurance contract that uses blockchain is opened through the purchase of a smart contract with the payment of the premium via app and compensation awarded automatically on receipt of information on the insured event, merged via an external identification system called Oracolo. This system is particularly suitable for event-based insurance products such as flight delays or cancellations.