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Insurance Going from Evil to Good: Is there an App for That?

Sixty-one years ago tomorrow, Sun Life Insurance took out an advertisement to provide high points of its annual report. In the ad, a box provided commentary, with the heading, “The Miracle of Life Insurance.” While this sounds arcane today, it might be making a reprise in P&C insurance, thanks to Insurance Technology (InsurTech).

Fintech is leading  the way Socially…

Over the past few years, financial services has seen the rise of technologies to streamline financial services’ transactions and processing.  The premise (stemming from Silicon Valley) seems to be that banking is too important to be left to the bankers.

An article in the Economist last May suggested “The T-shirt-wearing whizz-kids and their backers reckon that newcomers will do to JPMorgan Chase, HSBC and the rest what e-mail has done to post offices and Amazon to bookshops.”

From a business plan standpoint, the strategy of the new-comers is the Silicon Valley mantra “move fast and break things”.   Just as Uber has successfully navigated around and through regulations in a number of jurisdictions, largely by citing positive benefits to drivers, operators, and the cities themselves, the startups are promoting the good that the new fintech firms bring.

Reported in DCInno last week,  US Congressman Patrick McHenry told a group of his peers and fintech professonals,  “I have a real interest in fintech and the development of big data … I want to see how they help with social challenges like the unbanked and marginally banked.”

This is driven in no small part by the transparency of the new processes.  Customers and suppliers can see clearly how it works and where the cost and value points lie.  This leads to engagement (just ask a regular Uber user, and be prepared for a testimonial).

In short, it is a positive sum game. (Well, the taxi drivers and high-end wealth management advisers might have an issue.)

And insurers are following …

FinTech’s insurance cousin is InsurTech and, while InsurTech hasn’t had the same public exposure, it has gotten traction. Here’s an example.

In November, we posted on the rise of peer-to-peer insurance in various jurisdictions.  In early December, Insurance Journal reported on two tech entrepreneurs in the US who “raised $13 million in initial funding to launch a peer-to-peer online property/casualty insurance company, named Lemonade, which they promise will reinvent the insurance industry business model and make insurance a ‘delightful’ experience for consumers.”

While the two founders –  Daniel Schreiber and Shai Wininger – are not talking specifics, their plan is to “alter” the structure and bureaucracy of the existing insurance structure.  However, they are playing by the rules, and are working with regulators in New York to become a fully licensed  insurer.

Transparency driving trust

The structural ‘alteration’ will combine technology with a return to the basics of insurance, providing transparency to the claims payment process.  This will improve the trust that insureds have in the process (and, presumably, reduce claims inflation).

Wininger, president and CTO, said in an announcement, “We’re challenging the way insurance companies work, with a peer-to-peer business model fueled by self-serve technology.”

Schreiber said, “Most Americans view insurance as a necessary evil rather than a social good, and that’s something we’d like to change.”

Is this a Miracle?

We won’t be bothering the papacy for a formal ruling, but if we see consumers changing some habits, and viewing insurance as a social good, we think it a good thing.

Regardless, we see the rise of InsurTech as an important development.  If you would like more information, there will be several sessions relating to InsurTech and its components (digital, analytics, big data) at the 2016 Insurance-Canada.ca Technology Conference February 29, 2016.

What do you think?

 

 

 

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