Artificial intelligence set to disrupt sector
Digital insurance platforms will give traditional insurance a run for its money
This year could go down in history as the year in which artificial intelligence disruption started in SA’S insurance industry. Many new insurtech start-ups have entered the market — in many cases funded by traditional insurers. But a new wave is also beginning to form. In October, digital insurance platform Click2sure got backing from a subsidiary of a Nasdaq-listed company. Self-funded start-ups are also becoming a norm. New gadgets insurer Granadilla. launched this month, was funded by its founder Jonathan Walker, though it is now backed by its underwriter Bryte Insurance, while Click2sure was also self-funded up to now.
Consulting firm Capgemini’s 2017 World Insurance Report showed that insurtech start-ups had attracted nearly a third of insurance industry customers in developed markets as well as emerging markets economies of Latin America and Asia.
The new players offer new and appealing propositions that allow customers digital touch points and more personalised cover at a more competitive cost. For instance, motor insurer Naked Insure, which launched eight months ago, allows customers to pause accident cover if their cars are not used for a day or more, reducing the premium for that time. Most of these insurers charge a flat underwriting fee to cover their costs.
This is important in two ways, because the insurer earns a flat fee, regardless of whether a customer’s claim is paid out or not, and consumers are likely to believe that they have no conflict of interest since they are not incentivised by their underwriters to not pay out claims. On the other hand, if underwriting profits are injected back to the claims pool, they can be redistributed in the form of lower premiums and decreasing excesses over time.
The rise in insurtech presents threats and opportunities to traditional insurers and those who have spotted the opportunities like Yellowwoods are marrying the two sides.