2021 in retrospect: how has the InsurTech industry fared?

The InsurTech industry thrived during what was still a very difficult year for many. However, companies have had to adapt to changing market conditions. FinTech Global takes a look back on some of the key trends of 2021, and what this might mean for the year to come.

Following the traumatic year that was 2020, this year represented somewhat of a light at the end of the tunnel. Many businesses had their hopes pinned to 2021 as the supposed recovery year, but the reality proved less straightforward.

Ben Potts, managing director at expansive cloud-based, insurance platform solution provider Novidea, said, “2021 was another challenging year for many, due to a range of issues, including increased regulation, major cat losses, the pandemic, and a hardening market. The latter has been tough for customers and all brokers have had to up their game to prove their value.”

Tim Nguyen, chief commercial officer at Cloud Insurance, an SaaS policy and claims solution provider, said some parts of the industry were hit worse by a change in consumer behaviour, such as less travelling, other insurers are also still being forced to adapt to the new normal caused by consequences of the pandemic.

Yet, on the whole, InsurTechs have had a good year with record funding gained and increased traction with forward-looking insurers and brokers, Potts said.

Customer experiences centred

One of the most prominent trends of 2021, is the increased importance of the customer experience. Likely a result of more time spent at home, consumers are demanding faster, more convenient, and more personalised online services.

Indeed, Cloud Insurance’s Nguyen observed that in the past 12-18 months, the industry has seen an accelerating shift towards customer-centricity. “The pandemic proved that a lot of insurance providers were lacking a fully digital customer experience,” he said.

Toon Vanparys, CEO of data science and behaviour change firm Sentiance, agreed, “Without a doubt, the biggest trend is in customer experience. InsurTechs want to bring customers safe, easy, and secure solutions. It’s all about being simple, fast, and digital.”

The drive to digitalise

A result of evolving consumer expectations was a drive to digitalise and adopt more technologies. Peter Reynolds, head of insurance, international at Earnix, said, “The best way to address these rapid sector-wide changes is to find the best technology solution that is compatible with enterprise-wide systems and implement solutions with fully personalised and dynamic rating and pricing capabilities. Doing so empowers insurers to increase customer satisfaction and retention and meet their business objectives.”

Reynolds proposed that usage-based insurance (UBI) provides a desirable and effective solution to understanding a consumer’s needs better.

Although it has been around since the 1990s, Reynolds said the pandemic acted as a catalyst for the increased adoption of UBI. In the context of auto insurance, for example, as consumers spent more time at home and less time driving, they demanded auto insurance coverage to reflect the changes in their driving habits. “Now, insurers recognise they must meet consumers where they are today and accurately predict future changes in their behaviour that are reflective of a dynamic market,” he added.

In July, Earnix acquired AI telematics provider Driveway Software’s assets to scale up its UBI and Behavior-Based Insurance (BBI) solutions. The offering was designed to enable auto insurers to manage the entire lifecycle for personalised telematics-based UBI/BBI through a mobile-centric engagement. Earnix’s UBI/BBI offering now boasts a full set of embedded capabilities necessary for carriers to anticipate and proactively address the needs of the changing market – data accuracy, driving risk models, driver engagement – resulting in more accurate pricing and more personalised offers.

Customer convenience

During the depths of lockdowns, consumers discovered the convenience of having their needs met from the comfort of their homes.

Insurance platform provider Novidea also saw a huge shift toward catering to the customer experience from insurance brokers, agencies and managing general agents (MGAs). Potts said, “In part, this is driven by changed customer expectations, shaped by their experiences outside of insurance, from booking a hotel room, to ordering food, to transferring money, to accessing what they want, 24/7, from Amazon.”

Forward-thinking brokers looking to differentiate their offering in a hard market are now offering customer portals. With Novidea’s portal solution, Potts explained, brokers can offer their customers a seamless self-service experience, with easy access to all their documentation and data, from anywhere at any time.

Cloud Insurance also experienced demand from companies for customer portals, designing a 100% digital health insurance product and customer portal for a client in Finland. “They [the client] can now disrupt their market by offering digital enrolment of new customers, with an online health questionnaire, smart pricing, and insurance documents in the customer portal,” said Nguyen.

Notable developments

Novidea saw an increased global demand for its ‘born-in-the-cloud’ insurance platform, which it said enables brokers to drive operational efficiencies across the entire distribution lifecycle. Its heightened demand was reflected by over 100% year-on-year growth and a doubling of its operations in 2021, as well as gaining Series B funding of $30 million, with a total raised so far being $50 million, to expand its operations in the USA, UK, and Europe, and to accelerate product innovation to meet increased global demand.  

The company also formed several partnerships, including one with ACORD Solutions Group, which is the standards-setting organisation for the global insurance industry. The partnership enabled Novidea to work closely with the ACORD community, as well as the rest of the insurance ecosystem, to share insights and engage with other leading market participants, including technology providers and incumbent businesses.

InsurTech100 company Earnix described 2021 as a “transformational year”. The Israel-based company continued its growth with a new London office, bolstering its presence to a total of seven global offices and clients spanning more than 30 countries. Notably, Earnix also earned the highly coveted unicorn status following a $75m funding round led by Insight Partners.

Sentiance also had a busy 2021, which it largely spent focussing on improving customer experiences. The company teamed up with Japan-based AI Base Technology to offer its behavioural insights into the company’s Fukurou AI platform, in a bid to optimise customer interaction and engagement.

Future challenges: demanding consumers

It is likely the trend of centring around the customer will persist, particularly as their demands continue to evolve. Looking to the future, Sentiance’s Vanparys said that profitability and the rising demand for ongoing customer experience improvement will be a future challenge for the InsurTech industry. “Customers are becoming demanding, and so creating non-stop engagement will be crucial,” he said.

According to Cloud Insurance’s Nguyen, meeting the challenge of customer-centricity presents an opportunity. For insurers to become truly and fully customer-centric, he said, they still need a push in the right direction. “This task will fall largely on the shoulders of InsurTech providers…”

Moreover, adapting to the constantly evolving economic landscape attracts the attention of InsurTechs, he said. “These are immense opportunities that exemplify why insurers and InsurTechs are complementary and will bring about great partnerships for many years.”

Novidea’s Potts said he also expects to see more mergers and acquisitions between InsurTechs, where scale, capital or complementary capabilities are needed. He pointed to Lemonade’s proposed acquisition of Metromile, or IncubEx’s acquisition of Insurwave. However, any early-stage InsurTechs may struggle to find funding, with most capital going to established firms with proven models and revenue streams.

Top talent to support technology

Earnix’s Reynolds warned of a talent gap, “The insurance industry is facing a talent gap and technology is only part of the solution. Insurance companies need to see themselves as high-tech companies to attract talent. Between the Great Resignation and the Silver Tsunami, all companies must approach hiring strategically.”

However, he continued, with insurance companies, they must also demonstrate the value of the industry as well as show that even mature industries can address modern demands such as work from home initiatives.

Novidea’s Potts added that he expects continued growth and digital transformation to accelerate well into 2022, including amongst the broking community, who are already starting to see the benefits of actions taken this year come through to their business.

“This will present many opportunities for InsurTechs who can add value to the market, however it will not be without its challenges. Issues will include sourcing and retaining top talent in a very competitive job market, particularly for those looking for advanced technology and data analytics skills.”

Copyright © 2021 FinTech Global

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